How Bond Market Liquidity Evaporated Following The Ukraine News

Tyler Durden's picture


It is no secret that bond market liquidity is horrendous: this is a topic we have been discussing since early 2013, and which gained major prominence most recently when Denmark’s biggest pension fund, ATP, said "the burden of regulatory restrictions designed to rein in risky trades has now led it to abandon its reliance on the longest-dated bonds." As Bloomberg reported, "the fund, based north of Copenhagen, said earlier this week it was shortening interest rate guarantees to savers amid a lack of liquid assets with maturities of 30 years and longer." As a result policy holders in the pension fund will now have the rates paid on their savings guaranteed for 15 years at a time, versus lifelong guarantees.

ATP warned that the change will help protect pensioners’ purchasing power.

And, as the TBAC explained one year ago, pensioners (first in Denmark, soon everywhere else) have the Fed and other monetizing central banks to thank for losing their "purchasing power" as a result of the central banks' sequestration of high quality collateral, i.e. bonds with duration to record levels, and the resulting collapse in bond market liquidity.

Well, things just got worse today, when as the following chart courtesy of Nanex showed, liquidity in the ZB future took a step function lower on the Russian news. Expect even further contraction in liquidity in the coming weeks and months, which in turn will mean that soon the world's "deepest" market may have all the liquidity of CYNK... and all the volatility as well.

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Fri, 08/15/2014 - 12:16 | 5098110 buzzsaw99
buzzsaw99's picture

must be why the yield on the 10y is down nine flipping bps

Fri, 08/15/2014 - 12:24 | 5098166 fonzannoon
fonzannoon's picture

by liquidity evaporating ironically they meant there were no bawnds to be found. it was a sellers strike, not a buyers strike.

does not fit the narrative around here too well eh?

Fri, 08/15/2014 - 12:25 | 5098177 TahoeBilly2012
TahoeBilly2012's picture

"deep State" "deep market" I get it...

Fri, 08/15/2014 - 12:32 | 5098205 B2u
B2u's picture

what about "deep throat"?

Fri, 08/15/2014 - 12:40 | 5098239 maskone909
maskone909's picture

thats hoqw the crash will happen imho

there will be a huge news event

the guys who manage the algos will switch them to short mode in attempt to scalp

volume will dry up for a short time

then someone will put in a large sell order in this no volume environment

BOOM down goes the market

Fri, 08/15/2014 - 12:41 | 5098245 Say What Again
Say What Again's picture

Dear Mr Henry,


Remember when we told you there would be a day when we do NOT want you to sell VIX Futures because we're going to go long, since no one expects that anymore.  Today is that day.


Jamie Diamond

p.s. Our buddies at Goldman are in on the joke too


Fri, 08/15/2014 - 12:35 | 5098219 buzzsaw99
buzzsaw99's picture

you're probably right. shit's fucked up and bass ackwards these days. the maggot speculators went full retard. never go full retard.

Fri, 08/15/2014 - 12:24 | 5098172 Say What Again
Say What Again's picture

I hope some of the algo's were quote-stuffing when the $hit hit the fan, and got caught in real closed transactions.

Well, we can always dream -- right?

Fri, 08/15/2014 - 12:31 | 5098196 Iriestx
Iriestx's picture

Why?  So my tax dollars can bail them out?

Fri, 08/15/2014 - 14:11 | 5098743 Babaloo
Babaloo's picture

I just talked to a salesman whose trader wouldn't bid some short, high-quality bonds.  Just wouldn't do it on a Friday pm with the currrent global backdrop.

fits with the picture shown above.

Fri, 08/15/2014 - 16:51 | 5099659 SAT 800
SAT 800's picture

Verrry interesting. I'm down $2,000 overnight on ZB; I don't care what's wrong with it; if it doesn't get fixed on Monday, I'm outa here.

Fri, 08/15/2014 - 12:17 | 5098128 FuzzyDunlop21
FuzzyDunlop21's picture

But PBS told me HFT provide liquidity?

Fri, 08/15/2014 - 12:30 | 5098133 dressguard
dressguard's picture


Fri, 08/15/2014 - 12:21 | 5098149 madbraz
madbraz's picture

Odd article, CNBC-like.


Futures are nothing more than a tool to manipulate products in a certain direction with low volumes compared to cash markets.  Treasury futures were a one-way manipulation train last year for dealers and hedgies who tore yields apart in May and June - the biggest move in yields in the last 25 years.


I guarantee you that absent the corrupted futures market, treasury yields would already be much lower.  It is no coincidence that our yields and those in the UK are much, much higher than everywhere else in the developed world.  Illusions of GDP growth aside, it is all manipulation - which has a finite life.


The cash market for treasuries is enormous, $300-$500 billion a day.  Futures is chicken sh*t.

Fri, 08/15/2014 - 12:25 | 5098176 Tyler Durden
Tyler Durden's picture

Of course futures are a tool for manipulation: after all that's how the primary dealers put the Fed's excess reserves to use - by using them as collateral for marginable positions such as ZB because they can't use them directly to purchase assets. That said, futures are where the marginal trading happens, as few dealers have the actual funds to purchase underlying. As such, liquidity collapse in futures will be the first real warning sign that the Fed is finally losing control (see the JGB market in April/May 2013).

Fri, 08/15/2014 - 12:29 | 5098190 ekm1
ekm1's picture

How could NSA lose control of digits on computers?

Fri, 08/15/2014 - 12:30 | 5098194 fonzannoon
fonzannoon's picture

you need to see someone professionally.

Fri, 08/15/2014 - 12:44 | 5098211 ekm1
ekm1's picture



Look at what the system is, just digits on computers


This is not even news any longer. It's widely available information

Fri, 08/15/2014 - 12:38 | 5098233 Loucleve
Loucleve's picture

Tyler, I dont know if you care, but my Tips are no longer getting through. is blocked (adrephia is roadrunner)

Insana just has a piece at CNBC noting crashing commodity prices, threat to growth, warning, warning.

He then goes on to say the US is a self sustaining economy and thus immune.  Complete bollocks.

I am if you wanna unblock.

Fri, 08/15/2014 - 12:41 | 5098246 Loucleve
Loucleve's picture

>>> (after RCPT TO): 554 5.7.1 Service unavailable;

>>> Client host [] blocked using;

>>> NET is UCEPROTECT-Level2 listed because 7 abusers

>>> are hosted by ADELPHIA-AS2 - Road Runner HoldCo LLC/AS14065 there.

>>> See:

Fri, 08/15/2014 - 12:47 | 5098279 madbraz
madbraz's picture

JGB market, 2013 losing control? What? There was nothing there, yields are lower than where they were before May 2013...

The Fed wants higher yields, higher interest rate spreads, as long as risk assets can survive. There is no growth, yields go down - end of story.

Fri, 08/15/2014 - 12:23 | 5098160 ekm1
ekm1's picture

Dear zerohedge


Let me repeat this again



There is no market. Nobody significant is buying or selling.

NY fed just overrides the system at the end of the day with NSA technical assistance

Fri, 08/15/2014 - 12:35 | 5098221 Loucleve
Loucleve's picture

I agree.  This is not a normal market.

When the market goes up 50, 75, 80 points in the morning and then just SITS THERE all day, something is wrong.

However, this also means they can move it whenever they want.  Never short a dull market, and this one isnt just dull, its dead.

Dont forget: 

Through a trustee, the central bank purchased a combined ¥92.4 billion ($904.2 million) in ETFs over the first six business days of August. That's the BOJ's longest and largest consecutive buying streak since it started purchasing ETFs in December 2010.


Many traders suspect that it may not be a coincidence that the central bank is scooping up ETFs at a time when both the Nikkei and the Topix are spending considerable amounts of time in negative territory. Speculation is rife that the BOJ is following an unwritten rule, called "the 1% rule" by traders, where it buys ETFs after the Topix index falls around 1% in the morning session

Fri, 08/15/2014 - 12:46 | 5098272 ekm1
Fri, 08/15/2014 - 12:24 | 5098169 Dr. Richard Head
Dr. Richard Head's picture

When the market collapses they are only following the WTC7 model.  Carry on...

Fri, 08/15/2014 - 12:24 | 5098173 Ness.
Ness.'s picture

Yield curve spread traders pulling ZB offers because the UST market went offerless.


Poof!  And just like that, it (he) was gone.


Expect more of the same in the future(s).

Fri, 08/15/2014 - 12:51 | 5098296 Boston
Boston's picture

I just sold a bunch to UST's when the 10 yr reached a 2.30 handle. I will almost certainly be buying them back, as I've always done in 2014, at a higher yield.

Fri, 08/15/2014 - 12:29 | 5098183 NOTaREALmerican
NOTaREALmerican's picture

This is NOT the black-swan you are looking for.

BtFD, young Skywalker.

Fri, 08/15/2014 - 12:34 | 5098213 fonzannoon
fonzannoon's picture

palladium is pretty badass

Fri, 08/15/2014 - 13:02 | 5098356's picture

Yeah and a hefty premium right now if you want delivery of physical.  Actually, it has been that way for a few months now.  

Fri, 08/15/2014 - 13:41 | 5098604 nosoeawe
nosoeawe's picture

Hope and Change


I hope this weekend that useless filthy fucking cunt and ox of a woman yellen has a stroke that paralizes her fucking filthy lying pie hole. 


while the grim reaper is making his rounds, hopefully he'll catch the slimy cunt of cunts and the cloven hooved bitch pelosi


lastly, nuland the useless, grimy, racist filthy burqua bitch is found with stage 4 cancer of the uterus and is given 3 months to live


hope and change - its what hussien and i live for



Fri, 08/15/2014 - 14:07 | 5098723 Babaloo
Babaloo's picture

You might want to consider cutting back on whatever it is you're either smoking, injecting or drinking.

Do NOT follow this link or you will be banned from the site!