The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Liquidity: When the flood subsides

Fund managers are pouring into primary bond issues because of lack of secondary liquidity. But what happens if that herd mentality remains, or even grows, when the market turns?

If the events of 2007 and 2008 taught the market anything, it is how quickly liquidity can disappear when panic sets in. Even as the credit markets wrestle with the implications of the current central bank-induced surfeit of liquidity, many are becoming increasingly concerned about how that liquidity will react when interest rates eventually rise. 

“The market was in a high state of alert about funding rates increasing in April to May and October to November last year. This gave a good idea how markets would react if surprised,” says Scott Thiel, deputy chief investment officer of fixed income, fundamental portfolios, and head of European and global bonds at BlackRock. 

flood car wreck envelope
'The Street holds 75% fewer bonds and if we do get outflows it is going to be very ugly'

“The selling of positions was met with very poor liquidity.

Take out a complimentary trial

Take out a 7 day trial to gain unlimited access to Euromoney.com and Asiamoney.com analysis and receive expertly-curated updates direct to your inbox.

 

Already a user?

Login now

 

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree