Liquidity Crisis: The Bond Market Has Frozen

[g5000]

The Fed needs to act, bigly.

$50 Trillion in Question as U.S. Treasury Liquidity Dries Up

One key gauge of Treasury liquidity -- market depth, or the ability to trade without substantially moving prices -- has plunged to levels last seen during the 2008 financial crisis, according to data compiled by JPMorgan. That liquidity shortfall, JPMorgan says, is most profound in long-term Treasuries.


Troubles Percolate in the Plumbing of Wall Street

Yields swung wildly. There were few sellers and buyers for older bonds, and a huge gap between what they were asking for and offering. And while it was difficult to point to the root cause of the sudden lack of liquidity — the ability to buy and sell securities at a reasonable value — calls for help were widespread.

“Liquidity conditions in the Treasury market look troublingly poor” and “repo markets are now showing signs of serious strain,” economists at Evercore ISI wrote in a research note. “We think the Fed needs to act now.”



The Dow is currently at 21,783.

When Trump took office, it was at 19,804.

 

[g5000]

Bond market breakdown sees historic spread between buyers and sellers

“I’ve been doing this 40 years. I’ve never seen that before,” Michele told CNBC’s Steve Liesman, who inquired about half-point difference in what buyers were willing to pay and sellers were willing to sell for, referred to as the bid-ask spread.

In fact, Michele said that at one point he received a call from JP Morgan Asset Management’s London office to say that there were no offers on the 30-year bond.

“I’ve never seen that before,” he said. “These are uncharted times for sure.”

 

[g5000]

Market Extra: Oil market crash exposes liquidity drought in corporate debt trading - Oil & Gas 360

“Bid-ask spreads are blowing out for the worst companies, especially in the energy space,” said Michael DePalma, managing director at MacKay Shields, who oversees the HYLD exchange-traded fund.

“Credit’s just getting creamed.”

Falling prices for sub-investment grade corporate debt, or “junk” pushed their yields higher, increasing the premium investors paid to own such risky debt over equivalent Treasurys.

This premium, or credit spread, surged to 6.68 percentage points at the end of Monday from a recent low of 3.49 percentage point on Jan.6, according to an index tracked by ICE Data Services. For investment-grade, this spread shot up to 2.05 percentage points from around 1.20 percentage points at the start of the year.

 

[OldLady]

Bond market breakdown sees historic spread between buyers and sellers

“I’ve been doing this 40 years. I’ve never seen that before,” Michele told CNBC’s Steve Liesman, who inquired about half-point difference in what buyers were willing to pay and sellers were willing to sell for, referred to as the bid-ask spread.

In fact, Michele said that at one point he received a call from JP Morgan Asset Management’s London office to say that there were no offers on the 30-year bond.

“I’ve never seen that before,” he said. “These are uncharted times for sure.”

Should I withdraw my money from the bank?

 

[kyzr]

Are the big money boys holding their breath until the Fed and Congress start throwing money around?
This is not a financial crisis, so WTF?

 

[Natural Citizen]

Bond market breakdown sees historic spread between buyers and sellers

“I’ve been doing this 40 years. I’ve never seen that before,” Michele told CNBC’s Steve Liesman, who inquired about half-point difference in what buyers were willing to pay and sellers were willing to sell for, referred to as the bid-ask spread.

In fact, Michele said that at one point he received a call from JP Morgan Asset Management’s London office to say that there were no offers on the 30-year bond.

“I’ve never seen that before,” he said. “These are uncharted times for sure.”

I dunno how a guy doing this for 40 years can be so surprised about it, I said this exact thing was gonna happen like 6 months ago and I'm just a regular dolt.

 

[g5000]

Bond market breakdown sees historic spread between buyers and sellers

“I’ve been doing this 40 years. I’ve never seen that before,” Michele told CNBC’s Steve Liesman, who inquired about half-point difference in what buyers were willing to pay and sellers were willing to sell for, referred to as the bid-ask spread.

In fact, Michele said that at one point he received a call from JP Morgan Asset Management’s London office to say that there were no offers on the 30-year bond.

“I’ve never seen that before,” he said. “These are uncharted times for sure.”

Should I withdraw my money from the bank?

Only if you have more than $250,000 in any single bank.

 

[g5000]

Are the big money boys holding their breath until the Fed and Congress start throwing money around?
This is not a financial crisis, so WTF?

This is a textbook financial crisis. The Fed needs to act immediately.

 

[OldLady]

Bond market breakdown sees historic spread between buyers and sellers

“I’ve been doing this 40 years. I’ve never seen that before,” Michele told CNBC’s Steve Liesman, who inquired about half-point difference in what buyers were willing to pay and sellers were willing to sell for, referred to as the bid-ask spread.

In fact, Michele said that at one point he received a call from JP Morgan Asset Management’s London office to say that there were no offers on the 30-year bond.

“I’ve never seen that before,” he said. “These are uncharted times for sure.”

Should I withdraw my money from the bank?

Only if you have more than $250,000 in any single bank.

Aren't Treasury bonds government bonds? If they're going belly up, do you think my money will actually be covered? That's what I'm worried about.

 

[martybegan]

Are the big money boys holding their breath until the Fed and Congress start throwing money around?
This is not a financial crisis, so WTF?

This is a textbook financial crisis. The Fed needs to act immediately.

By doing what? is this a "just do something!" moment? And more importantly, even if Trump asks them to do something, will your hatred of him allow you to accept anything he tells them to do?

 

[bendog]

Are the big money boys holding their breath until the Fed and Congress start throwing money around?
This is not a financial crisis, so WTF?

Well it is now. Assuming we don't have a spike in illnesses that swap hospitals, I'd guess we might see a return to intl travel and social gatherings in a couple of months.

 

[g5000]

Bond market breakdown sees historic spread between buyers and sellers

“I’ve been doing this 40 years. I’ve never seen that before,” Michele told CNBC’s Steve Liesman, who inquired about half-point difference in what buyers were willing to pay and sellers were willing to sell for, referred to as the bid-ask spread.

In fact, Michele said that at one point he received a call from JP Morgan Asset Management’s London office to say that there were no offers on the 30-year bond.

“I’ve never seen that before,” he said. “These are uncharted times for sure.”

Should I withdraw my money from the bank?

Only if you have more than $250,000 in any single bank.

Aren't Treasury bonds government bonds? If they're going belly up, do you think my money will actually be covered? That's what I'm worried about.

A Treasury bond is an IOU from the government to the owner of the bond. Not really connected to whether or not the FDIC can cover your money if a bank goes belly up.

I don't think we are looking at bank failures...yet.

There just isn't any way to know what kind of leverage or what kind of bond derivatives are involved and affected by these drastic swings and spreads. I'm actually very worried about that as I have a lot of money involved in bonds which is not insured.

As I said the other day, there could be a hedge fund out there somewhere sitting on a thermonuclear explosion which could turn out to be into a systemic risk.

But if worst comes to worst, the US Treasury will print money to cover your FDIC insured cash.

We are nowhere near that point.

 

[g5000]

Are the big money boys holding their breath until the Fed and Congress start throwing money around?
This is not a financial crisis, so WTF?

This is a textbook financial crisis. The Fed needs to act immediately.

By doing what? is this a "just do something!" moment? And more importantly, even if Trump asks them to do something, will your hatred of him allow you to accept anything he tells them to do?

The Fed needs to inject liquidity in a big way. Specifically, they need to start buying bonds to close the widening spread between buy and ask.

 

[martybegan]

Are the big money boys holding their breath until the Fed and Congress start throwing money around?
This is not a financial crisis, so WTF?

This is a textbook financial crisis. The Fed needs to act immediately.

By doing what? is this a "just do something!" moment? And more importantly, even if Trump asks them to do something, will your hatred of him allow you to accept anything he tells them to do?

The Fed needs to inject liquidity in a big way. Specifically, they need to start buying bonds to close the widening spread between buy and ask.

Thanks for an actual answer. During times like this that is difficult to come by.

 

[g5000]

It's weird no one wants to buy older bonds. It's always been that way to some degree, but its worse now.

However, older bonds have higher yields. You come out ahead if you hold onto them. The problem with traders is they feel like they always need to be moving freight. They hate parking stuff.

 

[g5000]

Trump is probably foaming at the mouth at the Fed's slowness to act.

He is probably looking to fire Powell right now, using Powell's slowness to act and the impact on the markets as cause.

 

[Natural Citizen]

This is a textbook financial crisis. The Fed needs to act immediately.

The Fed is the reason for it. Why pour gasoline on a fire? Why not just put the fire out?

 

[g5000]

This is a textbook financial crisis. The Fed needs to act immediately.

The Fed is the reason for it. Why pour gasoline on a fire? Why not just put the fire out?

And how would you put the fire out? We are looking at a serious crash if something isn't done quickly.

There is no one out there capable of injecting that much liquidity other than the Fed.

And the Fed is not the reason for it. It is government spending which is largely responsible.

 

[bendog]

It's weird no one wants to buy older bonds. It's always been that way to some degree, but its worse now.

However, older bonds have higher yields. You come out ahead if you hold onto them. The problem with traders is they feel like they always need to be moving freight. They hate parking stuff.

Could it be that investors fear default on bonds that were issued, and risk assessed, before the global econ essentially comes to a standstill, an effect made more likely by Trump's banning of travel from countries he doesn't care for, while maintaining travel with the UK and Ireland? That's not to blame Trump, but if you think he helped with the speech I think you may be buying a Hoax.

It just strikes me a that its oddly similar to when moneymarkets broke the buck in 2008

 

[BuckToothMoron]

Are the big money boys holding their breath until the Fed and Congress start throwing money around?
This is not a financial crisis, so WTF?

This is a textbook financial crisis. The Fed needs to act immediately.

The Fed created this mess. They encouraged malinvestment in equities with low rates and QE when there was no demand for growth. Companies borrowed money to buy back already overpriced stocks, and now it is all being unwound......quickly.

Just imagine if companies were able to short their own stock rather than buy it back with all that cheap money. They would have sold shares short at higher prices, and now they would be buying it back at lower prices while simultaneously putting in a floor in the price at which they buy it back.