My colleague Joe Calhoun noted that the Wall Street Journal has documented further anecdotes about the credit market illiquidity this week. Corporate-bond investors have struggled this week to find trading partners for some large orders, causing unusual price drops and raising concerns that trading could freeze in future market turmoil. “Buyers just disappeared” early Thursday for many low-grade bonds and [...]
An unbelievable morning of credit market trading has at least seen some semblance of “market” forces return by the afternoon. One aspect is certain, that the open was about as illiquid as the treasury market has seen in a long, long time. We should not make the mistake of illiquidity being only associated with selling, particularly since today’s volatility was [...]
In looking at policy expectations, I continue to believe the shift in the Fed is both dramatic and durable. On the one hand, QE without Bernanke is toast, as the growing consensus appears to be that the economy is running here and now at or above “potential” (explaining in an orthodox manner why the unemployment rate is falling so precipitously [...]
I could probably file this as Understanding Eurodollars, Part 4 as an extension of my earlier series on the subject, but, since this is intended more for analysis than discovery of the underlying dynamics, its seclusion is at least warranted. Because the eurodollar market is mostly a mystery, assuming people have heard of it at all, there is an assumption [...]
There is definitely some disturbance in swaps markets as spreads have been far more volatile lately than at any point since the dramatic shift in March. While most of the action had been concentrated in the 10-year, there has also been a noticeable change in 5-year spread volatility. I don’t think there is much doubt that recent volatility in treasury [...]
Our long wait is nearly over. The Fed meets this week and is widely expected to announce a reduction in their purchases of Treasuries and Mortgage Backed Securities. The consensus seems to be that the Fed will reduce its purchases by $10-20 billion per month with the emphasis on reducing Treasury purchases. The reasoning is that with the reduction in [...]
Stay In Touch