Posted on 11/05/2022 9:45:55 AM PDT by EBH
MARKET EXTRA The Federal Reserve on Friday confirmed what many investors were saying for some time: the $24 trillion Treasury market has been experiencing low levels of market liquidity in recent months.
The central bank has been rapidly increasing interest rates since March as part of a fight to bring inflation down from a 40-year high. The hope has been that such steps can cool consumer demand enough to tame prices, without throwing the economy into a painful recession, or spark a financial crisis.
But since May, cracks in liquidity in Treasurys, the biggest, deepest part of the U.S. bond market, have begun to emerge as both the 2-year Treasury and the 10-year Treasury rates have shot above 4%, highs last seen around 2008.
“Liquidity metrics, such as market depth, suggest that Treasury market liquidity has remained below historical norms,” the Fed said Friday, in its latest financial stability report. “Low liquidity amplifies the volatility of asset prices and may ultimately impair market functioning.”
Liquidity woes “could also increase funding risks to financial intermediaries that rely on marketable securities as collateral,” the report said, while pointing to potential ripple effects that could amply financial stability risks.
(Excerpt) Read more at msn.com ...
Nobody wants to buy debt if they are at risk of taking a haircut.
There comes a point when no amount of interest rates could interest me if I think I won’t be paid back.
Rising yields lower bond prices. Many pension funds hold boatloads of bonds. Pension crisis in the making.
Good point!
Nobody wants to buy debt if they are at risk of taking a haircut.
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Look at the rate of inflation, and consider that the headline number understates the real rate, as we all know.
Who wants to purchase a 4% security when interest rates and inflation are soaring? Its pretty much a guaranteed loss.
You’re right on that.
The best they can offer is a holding of the value, if that.
So basically the markets are a paper tiger right now???
Translation for us small-fry: taking your credit card to the cash machine at the casino in order to wager more after losing hands and no more "liquidity." And then when the ATM account is drained....
Treasuries are exempt from state and local taxes, so there’s a small benefit there for some folks.
This is why America needs a wake-up call, or perhaps a starvation event. All of our economic news revolves around “markets,” - i.e. Wall St.
Right now “markets” like unemployment, because when people start losing their lives, that means the fed may lower interest rates and give them more monopoly money.
“Markets” loved it when oil went up 5% yesterday - anyone notice that?
We may need to starve and scuttle or vehicles, but modern “markets” like that - just as they liked when we were getting fleeced during QE.
These “markets” are zombie markets that work against us.... yet control most of the nation’s money.
That can’t end well - which is why I’m in hard assets.
Low market liquidity equals fewer buyers.
For me, 4% in one year Ts verses loosing 20% on some Nascrap stock sounds great!
The oils still have a run to go but the rest of market needs a rest in my view. That employment report was a ginned up masterpiece. Cannot believe the government numbers.
They took our wealth and treasure and ran it thru the Ukraine “laundry mat”, drained our strategic oil reserves and gave it to foreign entities etc. There’s a long, long list of what they’ve done to the economy.
These corrupt communist jackasses couldn’t run a neighborhood lemonade stand, let alone a country, and then they stand around scratching their arses wondering why no one wants to buy their crap.
Never buy a bond. Never feed the pig.
The FED playing God(Which also enabled DEBT) is responsible for this mess in the first place. If the country just rode the highs and lows as they came naturally then we would be well off overall. The Fed is evil.
Air accidents generally happen when a pilot runs out of altitude, airspeed and ideas all at the same time. Looks like the Fed is experiencing the same brain f-rt.
This was widely predicted over a year ago, and is easily predicted by anybody who passed an Econ 101 class not taught by a Socialist.
I’m an old man and my horizon is not very far off so for me liquidity is primary, so that 4+% return on 13 week T bills is the answer. Staggered weekly purchases/renewals instead of using my <1% MM acct as a parking lot for my money is a no brainer.
Now if only I could learn how to spend......lol
It is true…markets love pain for people. Because at its most basic level, a market is how some can get ahead - get rich - at the expense of others. The more unscrupulous and perverted a society is, the more this is represented in markets.
In balance, a market can provide a good or service for a fair value and everyone is satisfied with the exchange. However, when an entire society or civilization becomes corrupt - and human nature dictates that eventually this will inevitably occur - the markets become a great mechanism to magnify that corruption.
Our civilization has reached the end of the line, which is why we are seeing the things you are noting here. We have hit our end phase.
Marx thought he had a solution to this. But he was an air-head (and likely deeply corrupt himself). He merely shortened up the time required to install corruption and destruction into a society.
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