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.

Millennial markets: Nothing to fear but fear itself

Credit and swap spreads have already risen in anticipation of the world's financial markets clamming shut this December. Borrowers and bankers talk nervously about the disappearance of liquidity and short-term funding in the run-up to year 2000. Central banks are on standby. So are some traders who hope to take advantage of illiquidity and mispricing. The frustration for many is that it is their own contingency plans, not their computers, that threaten chaos. But no-one knows how fierce the full millennium effect will be. Marcus Walker reports

millennium.gif

The real millennium bug isn't digital, it's psychological. It's not Y2K itself but everyone's perceptions of it. And in the world's capital markets - where traders sell on rumour and buy on fact - the countdown to the end of the year is already proving to be a jittery one.

At first sight this would appear strange. Overall, most financial markets professionals think computer systems will suffer hiccups rather than breakdowns over the new year. Perhaps the glitches will be worse than those accompanying the birth of the euro, but they will be far from unmanageable.

Trades may fail to settle, back-office systems may spew out corrupted data, but this shouldn't bring business shuddering to a halt. "Manual intervention is a viable alternative in almost every situation," says Jeffrey Werner, treasurer of GE Capital, one of the biggest borrowers in world capital markets.

But despite the likely modesty of the IT problem, virtually all players - investors, borrowers, and brokers - are changing their behaviour, either because the millennium is an unknown quantity, or because they expect that others will behave abnormally too.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

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