We have been covering the collapse in bond market liquidity since 2013 [6]. Some, and we envision mostly those residing at the Marriner Eccles building, still don't get it. So for their benefit, here is the problem with "liquidity gap" as explained in a one Barclays infographic.
From the bank: "The decline of fixed income liquidity in 2015 can be seen as a gap between supply and demand. Banks are supplying less liquidity, yet investors are still demanding more of it. The result? Potentially severe losses in fixed income."
This, in pictures:
[7]
[8]
[9]
[10]
Barclays' implied message? Bonds are risky, but stocks are safe, so please "rotate greatly" finally, and sell your bonds using the proceeds to buy risk free stocks. After all, the 0.1% - aka Barclays' clients - has about $20 trillion in stocks and they are quite desperate to liquidate them now that a global recession ist just around the corner.
