interested in this morning
Global bond markets are broken, with long-end yields blowing up even across the AAA space. That’s a nightmare for investors -- suddenly discovering that traditional haven securities are just as storm tossed as everything else, if not more. And it’s also tough on central banks as they discover that the financial crisis this time round is even harder than in 2008-9 as both conventional and unconventional tools struggle to get a grip on the system. The irony here is that the regulatory response to the GFC was to push banks out of the market-making role they once played. That was deemed to create dangers to financial institutions -- who could get stuck with worthless paper -- and for investors stung by the conflicts of interest. Now, no one is left to warehouse risk, so investors are piling into cash and leave no liquidity for 10- and 30-year debt. Until central banks can cut that Gordian knot, markets from stocks to credit to bonds and commodities will go on getting strangled.
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