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* From a Neil Irwin NYT column entitled “Something Weird Is Happening on Wall Street, and Not Just the Stock Sell-Off”…
Bond prices and stock prices have moved together, not in opposite directions as they usually do. On a day when major economic disruptions resulting from the coronavirus pandemic appeared to become likelier — which might be expected to make typical market safe havens more popular — many of them fell instead Wednesday. That included bonds of all sorts and gold.
And there were reports from trading desks that many assets that are normally liquid — easy to buy and sell — were freezing up, with securities not trading widely. This was true of the bonds issued by municipalities and major corporations but, more curiously, also of Treasury bonds, normally the bedrock of the global financial system.
People, it is fair to say, are worried about bond market liquidity.
Any one of these moves on its own wouldn’t really matter. Markets can move for all kinds of reasons, most of which affect only the investors and traders involved. But these types of swings give experienced financial market watchers a sinking feeling, the kind last felt widely during the global financial crisis when all kinds of obscure financial markets went haywire.
* The normally staid Bond Buyer is also hugely alarmed…
Municipal bond market participants are calling the COVID-19-led sell-off worse for the market than the aftermath of September 11th and the 2008 financial crisis combined.
The sell-off continued in the municipal market Thursday, with AAA benchmarks down by more than a half percentage point. The primary market was held at a standstill. Lipper reported more than $1.76 billion of outflows Thursday.
What is transpiring has career-long veterans of the space saying the muni market has been put in a position they’ve never seen before.
Participants don’t have room to breathe in this rapidly changing landscape and investment grade munis are suffering, being dragged down by the overall panicking in the market, with several noting that this is a liquidity-driven crisis.
“There is forced selling, impossible hedging and a pandemic,” said one Southern trader. “Uncertainty is breeding uncertainty and as usual, the bond market solution to these problems is much higher yields. This is the craziest market that I have seen — way different and way worse than 2008.”
posted by Rich Miller
Friday, Mar 13, 20 @ 9:12 am
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With dropping revenues and scant reserves, we are about to see how the State of Illinois, Cook County and the City of Chicago can maintain its current state of affairs while attempting to catch up on paying off massive pension debt.
Being flat broke in the midst of a global financial crisis may have real life unexpected consequences.
Comment by Be Prepared Friday, Mar 13, 20 @ 9:30 am
The market collapse created liquidity problems that then worsened the crash.
I expect many businesses to have cash flow problems the next three months. Laid off individuals too.
Here is where government can step up with low cost loans.
Comment by Last Bull Moose Friday, Mar 13, 20 @ 9:47 am
=== The pensions are finished. This will become a police powers issue at the federal level.===
“We’ll see”
This idea that things are finished is wishing for more damage to our economy, and with the $1.5 trillion that is the want to boost the economy, by a Republican administration, we are going to see how that will right the ship.
Comment by Oswego Willy Friday, Mar 13, 20 @ 9:53 am
=== Again, at the federal level.===
Friend, I know you want this, but we’re a bit further away then you want it to be.
It’s dire, and at the same time, the worst seen.
And yet, the feds are still looking to pump the economy.
Wanting to watch the world burn down seems fun, I’m hearing how it’s awful, but they’re trying to solve this crisis.
Comment by Oswego Willy Friday, Mar 13, 20 @ 9:57 am
It is pretty clear that No Way has No Understanding of how federalism works. The federal government has no general police power. Instead it’s authority to act is limited to what is provided in the constitution.
Comment by TominChicago Friday, Mar 13, 20 @ 9:59 am
This is a forced correction on a vastly overheated market that was begging for any excuse to correct. It will rebound, that’s what it does. May take a less impetuous POTUS to give the market confidence sooner though.
Comment by Proud Sucker Friday, Mar 13, 20 @ 9:59 am
What is needed for small businesses and consumers is elimination of exorbitant credit card interest rates, compounded interest assessments, late penalties and other fees. Fastest way to help out the struggling.
Comment by dd Friday, Mar 13, 20 @ 10:01 am
=== This virus will be around for years.===
Is this your medical opinion?
Further, with your medical opinion in tow, your fiscal acumen married to that still has the “let it burn” opinion.
===The pensions are finished===
I know… “Sayz youse”
Comment by Oswego Willy Friday, Mar 13, 20 @ 10:02 am
===People aren’t going to to be dying in the streets===
And yet the White House gives an opinion often it’s no worse than a cold…
Are you hoping for global death?
This is Katrina McQueary, but on a global thinking.
Comment by Oswego Willy Friday, Mar 13, 20 @ 10:05 am
We are in perilous times as the Bible foretold.
Comment by Real Friday, Mar 13, 20 @ 10:05 am
I think the troll is strong in that one.
Comment by Proud Sucker Friday, Mar 13, 20 @ 10:06 am
== Bye bye world economy.==
Stop already. The markets are tanking because people are trying to time the market. The value of these companies did not suddenly decline that much overnight. Once we’re on the downhill side of this pandemic the markets will come back as people move back in. They always do. I’ve resisted looking at my retirement accounts because I know they’re going to be down, but there’s nothing I can do about it anyway. Timing the markets just doesn’t work. So I’m going to just sit tight, let it go, and watch that video at the top of this blog a couple more times.
Comment by Occasional Quipper Friday, Mar 13, 20 @ 10:07 am
If the Fed can feed trillions in liquidity to save the financial system, the regulators of the credit system can provide equal immediate relief to the citizenry via credit cards. Loan processing will take too long.
Comment by dd Friday, Mar 13, 20 @ 10:07 am
=== I think the troll is strong in that one.===
I’ve had my fun. Apologies.
It’s like Donald Sutherland in “Backdraft” negativity;
“Burn it all”
America, by every measure, is in a recession now, and a Bull Market is where stocks are. The bonds? It’s as though you imagine the worst, pair to what was worst before, now double it.
I don’t have any idea how these next 3-6 weeks will be, let alone the next 3-6 hours. The federal government, our state government is dealing with a crisis, a health crisis compounded with a lack of trust in leadership in America, and looking at things globally, a fear of the unknown.
Those wanting the world to burn, they’re easy to spot. They’re cheering.
The troll can move on.
Comment by Oswego Willy Friday, Mar 13, 20 @ 10:13 am
Please, now is not the time to forecast what is going to happen to Illinois, or any other state.
The crisis you are in today always seems to be worse than those in the past.
When an event such as this happens, the government will work to take mitigating steps to prevent the exact things you say will occur. Now is not the time to revel in the misery you want to cause. You know nothing with certainty, and you don’t make the decisions.
Comment by SSL Friday, Mar 13, 20 @ 10:14 am
The Bond buyer said it looked like forced selling . I am more concerned about Private Fund blow ups. It’s a wild west. Google private Funds SEC report and you will see the extent of non regulation in this multi trillion market.
Comment by Not a Billionaire Friday, Mar 13, 20 @ 11:16 am
The Dow Jones is up somewhat today, thankfully. What elected officials do at every level of government, and the private sector, should be geared toward mitigating financial problems and stabilizing markets.
“We are in perilous times as the Bible foretold.”
How many times has this been said in history, with all our calamities? Hopefully more people will embrace rational, science-based thinking and not ancient superstitions.
Comment by Grandson of Man Friday, Mar 13, 20 @ 11:40 am
Another example of elections have consequences
Comment by A 400 lbs. Guy on a bedw Friday, Mar 13, 20 @ 11:44 am
In the 2008 downturn, the German government,implemented their federal program that supplemented employees paychecks as their employers reduced hours. Instead of pumping money into its economy via the banks and businesses, they delivered money directly into the hands of the population. During the following two years, the German economy produced some the best results in its history. Unfortunatley, the trillions of debt run up by the billionaire tax cut severely hampers our ability to help ourselves now. Getting enough money to survive into the hands of most Amerocans is the key to navigating the recession the pandemic is causing. Elections do indeed have consequences.
Comment by Froganon Friday, Mar 13, 20 @ 12:44 pm
“”forced selling”" is the best case explanation.
Comment by walker Friday, Mar 13, 20 @ 12:52 pm
It would be better if the leaders would just admit how big of a hole they are in instead of saying everything is fine, we’ll look at it later. Looks pretty dire to realists.
Comment by Sure thing Friday, Mar 13, 20 @ 1:13 pm
Will my new Real ID be honored by the State of New Illinois or do I have to wait another 2.5 hours for another one?
Comment by DES Friday, Mar 13, 20 @ 1:23 pm
“We are in perilous times as the Bible foretold.”
Has there ever been a difficult event when this statement has not come out?
Comment by zatoichi Friday, Mar 13, 20 @ 1:37 pm