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In Case You Needed Any More Proof That There Is No Bond Market Liquidity Left...
Here are just two anecdotes to confirm that not virtually nobody is left to trade bonds any more (as confirmed by the plunging FICC revenues reported by the big banks in Q2), but the reason for this is that there is no bond market liquidity left, a topic extensively covered here for the past 3 years.
First, Bloomberg reports that a startup platform for fixed-income trading which was launched just three months ago with funding from Deutsche Boerse, has promptly liquidated less than 100 days after going live.
A startup fixed-income platform called Bondcube has filed for liquidation just three months after its launch, a sign that entrepreneurs are finding it difficult to ease bond trading.
The London-based company was 30 percent owned by Deutsche Boerse AG, which provided two rounds of investment. It went live for fixed-income trading in the U.S. and Europe in April.
“Although Bondcube succeeded to launch its platform, over recent months sufficient business prospects failed to materialize and as a result the long-term financial viability of the business deteriorated,” Deutsche Boerse said in a statement. “In these circumstances, the shareholders decided not to provide further funding to Bondcube.”
Technology companies are trying to step into a gap in the market created by requirements on banks to hold more capital. Rule changes have restricted the banks’ ability to trade on their own account and have also made it more expensive -- and therefore less profitable -- for the firms to hold bonds in the expectation that clients will want to buy them.
Paul Reynolds, Bondcube’s chief executive officer, couldn’t immediately be reached for comment.
Perhaps the startup's backers could have done some research into the "depth" of the market, or total lack thereof, before dumping a couple million into a platform that nobody would need...
And second, also from Bloomberg, we learn that one of the world's biggest fixed income mutual funds, Fidelity, "plans to keep its exposure to Greek government bonds stable over summer months, sovereign credit analyst Dierk Brandenburg said in phone interview yday." Why? As it turns out Fidelity kept its exposure to Greece during the country’s negotiations with creditors because it could neither buy nor sell, as market then was very illiquid.
"Liquidity was so low that selling wasn’t really an option and it was very difficult to add" London-based Brandenburg says
Situation for Greece slightly better now; however, investors are unlikely to take any big positions as July and Aug. are very illiquid months for bonds.
Fidelity’s European high-yield fund based in Luxembourg is one of its flagship funds, according to Brandenburg. The fund is primarily exposed to Greek bonds maturing 2028; also holds GGBs with maturity 2019, 2029 2027 and 2025, Bloomberg data shows, or as Norway's sovereign wealth fund might say "it is investing for infinity."
According to Fidelity, negotiations on any haircut of Greek debts held by official sector may lead to some volatility. Then again if nobody can buy or sell as there is simply no bond market left, volatility should be subdued. Just look at how successfully China eliminated all market vol after the government took over its own stock market.
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Selling is sooooo 2008..
What difference does it make?
"July and Aug. are very illiquid months for bonds"
Other very illiquid months include September, October, November, December, January,February, March, April, May and June.
Oh there is plenty of liquidity and plenty of buyers for bonds.
Just not at these artificially low interest rates pushed by the FED.
I own zero treasuries/bonds today, but if rates go up to 20% as they did at the end of the last debt cycle in 1980, I'll consider buying some. But at today's 0.1% no thanks.
OMG. When this happens it is a sure sign that The English economy is going to crash to 666 and below!
OMG where is my cuddlebot I need a hug! I feel many of The English will die!
the world doesn't necessarily need more sovereign bonds to trade or pledge as collateral or rehypothecate
what the world needs is more AAA++ ratings
for things like municipal bonds and derivatives
just imagine
100 trillion in notional. triple A. pledged in order to borrow 100:1
that is what fuels growth. and prosperity. and peace.
Exactly. We all boycotted GM. GM went out of business. Bush resurrected them with the cash we saved by buying Toyotas.
NIRP soon on the world réserve currency. Go talk about bombs everywhere.
light 'em if ya got 'em...nuttin else to do
"launched just three months ago with funding from Deutsche Bank"
Deutsche Boerse is not Deutsche Bank
Bullshit, with all the central bank printers set to "eleven" there is no "liquidity" problem fucknuts!!!
Once again, this is a global solvency problem!!!!
I rather liked the poetic premise of the article that lack of Liquidity caused Liquidation. Kind of like drowning in a dry creekbed.
But your point is taken LOP
Bonds are slowly falling apart and all the big players are papering things over, but there are far too much HY bonds floating around with their fuses slowly burning away. The FED will be in deep shit because they'll be far behind the curve and since things are set up so any QE type bail out has to go through the mega-banks first as "loans" and those greedy fucks will, of course, rake off a big vig, I expect to hear an earth shattering kaboom as all the markets implode.....
sure, sure... somewhere there is a greek still waiting for the "kaboom" as Rome implodes too....
Life's too short, get busy living IMO.
I'm having a great time since I got all the way out of the markets a few years ago and I'm as ready as I'll ever be to ride things out. I'm just wanting my schadenfreude fix.......
I don't know much about bonds at all myself, but I did, just today, provide a rather rotund gentleman with a hamburger in exchange for the promise of payment Tuesday.
True story.
"I don't know much about bonds at all myself"
Don't worry, you're in good company:
"A startup fixed-income platform called Bondcube has filed for liquidation just three months after its launch"
"The fund is primarily exposed to Greek bonds"
The hamburger was delicious and I will pay you back on the Tuesday after all of the Greek debt is paid back.
Why would anyone want bonds when you make no money and risk has been completely removed from other "markets" through manipulation?
...not virtually nobody ...???
translation please
lots of actual bodies?
Actually every body?
Waaaaaay off topic, but stop being RACIST!! http://www.clarionledger.com/story/news/2015/07/20/memphis-man-dies-poli...
Failure to obey police instructions can result in severe injury or death, regardless of race. Incapacity is no excuse!
Agreed. Are you Ray Cyst?
Liquidity is a function of demand. Of course there is no demand now that the central banks have stopped their massive purchases. Another reason why intervention is bad. It breaks the market.
"...confirm that not virtually nobody is left ..."
Tylers, check out definition of "double negative".
use your imagination a bit. Not "virtual" "nobodies" as in virtual somebodies...
wait a minute the chinese are dumping these holdings on the belgian beard, and you tell me there is no liquidity? hmm i may have answered my own question
Well we were just told by ZH of China's incredibly huge Treasury sales. Who bought China's huge Treasury dump if there is no liquidity?
Or perhaps there is no liquidity because China are currently soaking it all up by selling their holdings at the fastest possible rate.
If so then the questiom has to be why? Either they are in serious financial difficulties, but it is hard to imagine that so many Chinese are sending their money abroad to create a rout while they still supposedly have a massive surplus. Or is the surplus only existing in government figures?
Or it is policy, if it is policy then I would expect things to heat up geopolitically once the risk from a US financial response is gone, but it seems hard to imagine that the Chinese would risk turning over the world order while it is keeping their country stable.
I suspect the issuers and that they will hold to maturity--just a guess--
This scenario is just screaming for raising the Fed. funds rate, the more the better, right?
"There is No bond market liquidity left.." (Sounds like a line out of The Terminator, when you say it in Arnie's accent.)
Or one of those Hitler videos.
We saw when the NYSE went down that stock market liquidity dried up. It makes me think that a lot of the apparent liquidity provided to the markets is just bank and HFT churn. Gotta make it look as if there is a market even if there is not.
Prohibiting the banks from trading bonds for their own account would dry up some churn and fake volume.
Using Greek bonds as an indicator of the bond market as a whole? Umm..yeah. And, of course Greek bonds are illiquid. They should be.
Many pundits (Max Keiser?) used the Cyprus template well,for what's coming:
A)The ECB forces the Cyprus Banks to load up on Greek Gov't Bonds.(Split the risk with those pesky Russian
mobsters).B). The Greek bonds tank,causing insolvency problems...
C). Have a week long Bank Holiday (accounts frozen),and re-open with wthdrawal limits and deposited funds
haircuts.
I think it is topical to remember that many British Empire troops died fighting for the Greeks and their Island
kingdom.The fact that their was some dissatisfaction with their "elected" gov't before WW2 led directly to
the Greek civil war after the war.(A similar issue happened in Belgium,where the locals did not want the old
system back,and the British had to use bayonets to force the return of an unpopular regime).
I do not see where this austerity stuff can be in any way productive and some form of haircut will need to
undertaken.Fortunately for NATO the Greeks are not like the North Vietnamese,or we really would have
problems.
The Greeks still have a lot to lose. Wait a couple years, after they've lost much more, then you'll see the Viet Kong spirit emerge.
I don't understand, there is always liquidity, what there isn't always is a price.
Sounds to me like the bond "markets" have gotten used to the Fed hoovering up garbage at a premium price, and now they're whining about it.
And yes, "liquidity" is less now because if rates are on the way up - and when they are this low the only way *is* up - nobody wants to hold. Of course those Euro-weenies went negative, but how's that working out for them?
So you're saying that, my friends and I, all died in the desert due to dehydration, not because we didn't drink from the water available in the oasis, but because there was no water available. Fine differentiation.