ECON [FINANCE] First Deathburger Thread of the 2023 Banking Crisis. ALL welcome (hall passes at the door). Have At It.

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SmithJ

SmithJ

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treasuries-liquidity-dwindles-as-svb-crisis-muddies-fed-outlook

Treasuries Liquidity Dwindles as SVB Crisis Muddies Fed Outlook​

Bid-ask spreads jumped to the highest in at least six months Too early to think US bank turmoil is over: MUFJ Kokusai​

Masaki KondoMarch 14, 2023 at 11:03 PM CDT
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Still Seeing Potential for More Fed Hikes to Come: Kotecha
Still Seeing Potential for More Fed Hikes to Come: Kotecha
Liquidity in the world’s largest bond market is evaporating as the US banking crisis muddies the outlook for the Federal Reserve’s monetary policy.
Bid-ask spreads on two-, 10- and 30-year US government bonds jumped to the highest level in at least in six months on Tuesday, according to data compiled by Bloomberg. The 10-year yield swung in a 34-basis point range on Monday, the biggest gap since the onset of the pandemic in 2020.
 
D

Dozdoats

On TB every waking moment

Of Two Minds - Chart of the Month: Any Questions?

www.oftwominds.com www.oftwominds.com

Chart of the Month: Any Questions?
March 11, 2023

The next Bull Market will start when everyone has given up on the stock market as the means to "get rich quick" or even "get rich slowly."

Here's the chart of the month: a weekly chart of the S&P 500 (SPX) showing the giant wedge going back to January 2022 has broken decisively down.



Any questions? Wow, so many have raised their hands, we'll try to answer as many as we can in our allotted time.

Isn't there a "bull flag," i.e. a technical pattern that projects a continuation of the Bull move higher?

No.

Isn't there a "Bullish breakout" that projects a continuation of the Bull move higher?

No.

Isn't the economy going to avoid a recession due to a strong job market, i.e. "no landing"?

No.

Isn't the economy going to have a "soft landing" due to the strong job market?

Maybe "soft" for some but "hard" for others. "Recession" is somebody else losing their job and/or losing their shirt in the stock market / bank failure / crypto meltdown, etc., a "depression" is losing your job and/or losing your shirt in the market / bank failure, etc.

Won't the Federal Reserve "pivot" to lowering interest rates and restarting stimulus (QE) because Silicon Valley Bank failed?

No.

Won't the Fed "pivot" once a recession becomes undeniable?

No.

Won't the strong job market inoculate the economy and market from bad things?

No. Neither full employment nor high unemployment can unwind 23 years of financial distortion, corruption and moral hazard.

What's the new hot sector that will power the next speculative frenzy that will push the market to breathtaking new highs?

Digital currencies backed by bat guano or quatloos issued by the Central Bank of Mars.

When will the next Bull Market start?

Overlay the past 40 years of the stock market's rise to dominance on this chart of the 1950s to the 1980s. We are at the point equivalent to Q4 1972. The next Bull Market will start when everyone has given up on the stock market as the means to "get rich quick" or even "get rich slowly."




New Podcast: Turmoil Ahead As We Enter The New Era Of 'Scarcity' (53 min)
 
SmithJ

SmithJ

Veteran Member
www.wsj.com

Market Stress Snarls Trading in U.S. Treasurys

Liquidity, the capacity to trade quickly at quoted prices, has fallen sharply.
www.wsj.com www.wsj.com



Market Stress Snarls Treasury Trading​

Traders say it is as hard to make a deal as it was in the early stages of Covid​

By Gunjan Banerji
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and Anna Hirtenstein
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March 15, 2023 at 10:14 am ET
im-743809

Liquidity, the capacity to trade quickly at quoted prices, has fallen sharply in two of the keystone markets, those for U.S. Treasurys and German bunds, traders said. Difficulties in trading are now spreading to many other markets, including those for derivatives that firms and traders use to lock in prices and hedge risks weeks and months ahead of time, such as options, futures and swaps.

The ICE BofA Move Index, a measure of volatility in the bond market, spiked to the highest levels in at least three years, surpassing levels recorded during the March 2020 market crash.

Concerns about Treasury liquidity have been perennial since the 2008-09 financial crisis, reflecting changes in market rules and a reduced role in many areas for large banks. But several traders and investors said the action Wednesday was as strained as they have seen in recent years.
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“A trade that should take seconds took minutes,” said Jon Jonsson, a fixed income portfolio manager at Neuberger Berman.

One factor driving the disruption has been the massive flows into and out of Treasurys and bunds. Demand for these so-called haven assets typically rises in times of stress in markets, but prices for safe bonds have been under pressure for much of the past year as the Federal Reserve and other global central banks sharply raised interest rates in a bid to fend off inflation.

After a year of heavy selling, bonds rallied powerfully over the past week as the U.S. government took over two troubled banks, marking the second- and third-largest bank failures on record, and Swiss bank Credit Suisse Group AG cameunder attack in the market on Wednesday. The repeated reversals of flows have added to existing stress, traders said.

“You can’t have a conversation with Treasury traders without them going on a rant about Treasury liquidity,” said Hani Redha, a multiasset portfolio manager at PineBridge Investments. “That just means that moves get amplified. You’re going to get overshoots in both directions.”

On Wednesday, the 10-year U.S. Treasury yield fell to 3.41% and the German bund of the same maturity dropped to 2.14%. Global stock indexes were down more than 1%.

On Monday, the two-year Treasury yield dropped to 4.028%, the biggest one-day fall since 1987 around the Black Monday market crash. Meanwhile, the yield curve inversion—the bond market’s classic recession indicator—unwound at a record clip this week.

Liquidity in the market for 10-year Treasury futures has been less than half the levels recorded before the Silicon Valley Bank collapse, according to data from Quantitative Brokers. The firm looked at average prices at which traders offer to buy and sell contracts, a proxy for the ability to move in and out of markets quickly.

JPMorgan Chase & Co. analysts recently said that liquidity in the Treasury market has fallen to the lowest levels since March 2020, during the pandemic market crash. “Treasury market functioning is severely impaired, similar to what unfolded this time three years ago,” the firm’s analysts wrote in a note to clients.
 
The Hammer

The Hammer

Has No Life - Lives on TB
SmithJ said:
The dow seems to be reluctant to turn north. Could we actually see it accelerate toward a 1000 point drop today?

Psychologically, it will take something like that to get peoples attention
Click to expand...
Yep, fast approaching -700.

Even though 1000 points is not the dramatic percentage drop it would have been 2008-2009, the average Joe's ears would perk up when hearing that nice round number on the news...
 
vector7

vector7

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