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Bouts Of Extreme Volatility Have "Little Obvious Explanation," Citi Warns
Don’t get us wrong, we’re happy that the entire world has finally woken up to the fact that liquidity is rapidly disappearing from every corner of global capital markets. Indeed, the wholesale adoption of the illiquidity meme serves as a ringing endorsement of the arguments we’ve been making in these very pages for years.
And while we’ve grown accustomed to seeing tin foil hat conspiracy theories gradually metamorphose into undeniable conspiracy facts (much to the chagrin of the begrudging pundit echo chamber), the degree to which everyone from the mainstream financial news media to the C-suite is suddenly screaming about illiquid credit markets has surprised even us.
And while it’s not always clear that everyone talking about illiquid markets completely understands what it is they’re saying, they’ve undeniably picked up on the fact that somewhere deep inside the secondary market for govies and corporate credit, something sinister is amiss and they can’t afford to be the only ones not talking about it.
Having said all of that, one of the few people who, like us, began documenting the disappearance of liquidity long ago and who is generally quite adept when it comes to illustrating the problem is Citi’s Matt King, and for anyone still confused as to what exactly we mean when we discuss the admittedly amorphous concept of "liquidity", we present the following graphics from King's latest missive by way of explanation.
And here is what it looks like when liquidity dries up...
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Actually, I think there are plenty of obvious explanations, but no honest ones.
I thought T/A was VOODOO?
Most of these assclowns haven't traded anything over 0-15<>25 basis points, and the Bernanke/ Moe HowardMr. yellen PUT.
I do not believe Central Banks were buying US equities before about 2012-2013.
We are in “uncharted” territory now,
Since they can print their own fiat and commercial banks redeposit a substantial amount of CB loans back in the CB, who knows how far this can go?
It would seem to me that technical analysis that includes data that goes back before then is greatly hampered by this fact.
http://www.bloomberg.com/news/articles/2013-04-24/central-banks-load-up-on-equities-as-low-rates-kill-bond-yields
We are in "Uncharted Territory", Manthong.
Great post.
he Port Authority in Tianjin China released this construction update.
Construction of the new port is ahead of schedule. We managed to dredge out a massive new harbor and demolish the old docks in under a day. We have also leveled the surrounding hills to make way for new warehouses. Locals agreed and are quoted as saying "Everything is looking bright in the harbor area". In related news, healthcare employment is also on the rise. Local authorities are quoted as saying "We need more doctors, NOW!".
There's always a silver lining.
Too soon?
My wife and I were discussing the Yuan devaluation this morning ... she pointed out that several other major currencies had seen much more volatility in the past year without this degree of buzz or corresponding market disruption ... I heard myself say, "overreaction is the new norm" ... I think I was right but can't explain why.
Your wife has human intuition.
She's a keeper. :-)
I never could afford tuition.
You should make her a slice of toast while you are making yours.
why is it that over the last decade or so, graphs make no sense to reality....think about that, there is a reason, just too few know the answer.
Ever decreasing volume, HFT acting on bull shit news feed, real time world market changes pinging to act and react in milliseconds. It is the butterfly effect in ever quickening mega trades.
the explanation is that the bankers now have total temporary control and can do whatever they want. Decades ago, the true markets at least were some part of the graphs. Decades ago, the graphs actually held a bit of truth. We are not in kansas anymore toto.
Dont worry your pretty little head Citi, VIX has been crushed back under 13 and everything is awesome once more.
Just close your eyes and BTFD, the FED has your back.
oil is down another 50 cents...will it hit the 41 dollar number? taking bets :-)
WTI is only about 5 cents away form your target, my man.
That gold trade has rounded the corner.
There might be one more blow off "weekly candle" The ride up is easier, if you clear the weak longs to fill the book.
Just because rates are low, doesn't mean rates are low. The "risk premium" is at ATHall time highs
My salutations to you and Mrs Y alike, good sir.
Thank You, Knuks.
this too, is bullish
Sounds like a conclusion reached by the DoJ with respect to banks, the BLS with seasonals and the Fed with currency debasement, or even the economic research supplied by a bank that should have gone bust 5 times all over already but was bailed out by the goobermint. Or am I too optimistic?
Yeah - there's usually no real explanation when the stool you're sitting on suddenly gives way and your ass ends up on the fucking floor either. Maybe all four legs of this entire ponzi scheme are finally breaking away because of it's own dead weight.
I can explain. I cause all of it. I decided to quit spending on worthless shit. The people who depend on me to spend my work product on worthless shit were surprised when I quit spending on their worthless shit. I hope the learn how to survive without me spending my work on worthless shit..
Algo Anxiety Attack.
Becoming more sentient for your convenience.