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What No One Ever Says About Bond Market Liquidity – Bloomberg

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All these solutions miss the point, however. None focus on the real reason behind deteriorating liquidity, which is that vast swaths of the corporate bond market have simply been cornered.   FULL ARTICLE

Comments
  • Sundown
    SundownJuly 31, 2015"I agree with Merlin regarding the ugliness of the articles coming out from the mainstream press. The largest players have been doing this for years, it's no secret to anyone involved in the process. There have been many notable examples- large mega-deals in the early 2000's and the issuance of the bank debentures as a result of the funding of the system immediately post- crisis are just two. Large asset managers continuously strong-armed the dealers in giving them a d…"
  • Charlie
    CharlieJuly 31, 2015"Benchmarks and 'Fixes' continue to encourage greedy behavior, but never irrational! This time its all about pursuing Alpha that is really fictitious as the Alpha gained is purely about timing. Should the market structure conversation be extended to cover new issue procedures? There are plenty of auction platforms available that would provide an open transparent process ensuring issuers got the best possible deal. The auction idea is far from original I believe GS had…"
  • Goose
    GooseJuly 31, 2015"In the current conversation, the market making community has been the favored whipping boy for the media when talking about liquidity in the markets. It’s good to see an article focusing on a very large piece to the puzzle. Blackrock’s viewpoint paper proposals have had a “white knight” feel to them, but their behavior is a large part of the issue. Broadening the conversation around the role the buy side is playing will help to temper opinions, and form more equitable…"
  • Merlin
    MerlinJuly 30, 2015"Cornering. These articles are getting uglier and gloomier. Is it possible that Blackrocks paper can now actually be interpreted as a self serving act of desperation as they try to figure out how they are going to untangle themselves from the mess they have helped create? They are the biggest fish in a shrinking pond of liquidity...what are their choices but cry for help for the 'good of the market'? Writing a paper is a nice way to try and harangue others into helping…"

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5 Comments on "What No One Ever Says About Bond Market Liquidity – Bloomberg"

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Hollywood
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BlackRock’s July 2015 piece entitled “Addressing Market Liquidity” suggested reducing the number of bonds and creating more, large, liquid benchmark issues. Funny, however, how they did not address the new issue liquidity premium, as discussed in this week’s feature article. Perhaps, BlackRock should disclose their new issue advantage under the “Enhanced disclosure regarding liquidity risks associated with a particular fund” segment of their “Toolkit”. It would be even better if the “Toolkit” worked liked Batman’s Belt.

Merlin
Guest
Cornering. These articles are getting uglier and gloomier. Is it possible that Blackrocks paper can now actually be interpreted as a self serving act of desperation as they try to figure out how they are going to untangle themselves from the mess they have helped create? They are the biggest fish in a shrinking pond of liquidity…what are their choices but cry for help for the ‘good of the market’? Writing a paper is a nice way to try and harangue others into helping you solve your problem, and there may even be some good ideas floated, but the fact… Read more »
Goose
Guest

In the current conversation, the market making community has been the favored whipping boy for the media when talking about liquidity in the markets. It’s good to see an article focusing on a very large piece to the puzzle. Blackrock’s viewpoint paper proposals have had a “white knight” feel to them, but their behavior is a large part of the issue. Broadening the conversation around the role the buy side is playing will help to temper opinions, and form more equitable market solutions.

Charlie
Guest
Benchmarks and ‘Fixes’ continue to encourage greedy behavior, but never irrational! This time its all about pursuing Alpha that is really fictitious as the Alpha gained is purely about timing. Should the market structure conversation be extended to cover new issue procedures? There are plenty of auction platforms available that would provide an open transparent process ensuring issuers got the best possible deal. The auction idea is far from original I believe GS had such a platform in 2000, perhaps it is time to try again? If the bonds were distributed differently at issue perhaps that would avoid the fictitious… Read more »
Sundown
Guest
I agree with Merlin regarding the ugliness of the articles coming out from the mainstream press. The largest players have been doing this for years, it’s no secret to anyone involved in the process. There have been many notable examples- large mega-deals in the early 2000’s and the issuance of the bank debentures as a result of the funding of the system immediately post- crisis are just two. Large asset managers continuously strong-armed the dealers in giving them a disproportionate amount of those securities as they immediately realized outside “alpha” once the issues broke and entered the indices. This is… Read more »
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