Trading Treasuries keeps getting tougher and tougher.

For decades, the $12.5 trillion market for U.S. government debt was renowned for its "depth," Wall Street's way of talking about a market's ability to handle large trades without big moves in prices. But lately, that resiliency has practically vanished—and that's a big worry.

Less depth has meant greater volatility. So Treasuries—the world's haven asset during turmoil—may be prone to more disruptions, particularly as the Federal Reserve prepares to raise interest rates. And if investors begin to doubt whether they'll still be able to buy and sell on a moment's notice, that has the potential to elevate the U.S.'s cost to borrow.

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