Blackrock’s Richard Prager: The Liquidity Is Out There – Institutional Investor
March 18, 2016 \ 11 Comments
Full Article: Brightcove Video
“At Blackrock we don’t believe there is a liquidity crisis whatsoever. We say that based on our own observations.” CLICK HERE FOR VIDEO
Blackrock believes there is no liquidity problem “whatsoever”. Then why all the white papers from Blackrock? Other key comments from this video: “When you look at the investment grade corporate market as a proxy of invest-able assets its doubled since the crisis, so clearly there is no shortage of capital” – But, the dealers are hurting to provide liquidity given their balance sheet constraints. Blackrock calls for other trading mechanisms besides RFQ, etc… to help increase liquidity. All to all trading doesn’t solve the problem. MarketAxess open trading in roughly 13% of their trade volume. For Investment Grade, MarketAxess does… Read more »
Interesting point on all to all volumes. With the benefit of regulated pre trade transparency and homogeneous securities, I think aggregate (30+) equity dark pool volumes check in around 15% of overall volume.
Blackrock presents a clear and compelling explanation of the migration toward a new model of blending principal and agency trading for the dealers who have heretofore acted primarily as liquidity providers taking principal risk. Whilst the problem is more acute with credit, it is becoming increasingly apparent in the more liquid rates products like off the run Treasuries. This is not something all dealers can accommodate equally and there is a growing concern among the second and third-tier dealers that the industry will consolidate further rewarding those who have invested most heavily in technology. As with all projections, they fall… Read more »
When only 5% of a position can be sold in the secondary market, a month after primary subscription – through whatever methodology – the market is broken. Only a few years ago trading 50-100% of that position in secondary was the normal situation. Large buyside firms benefit from attention not given to the smaller market participants but even then, it’s insufficient to overcome the reduction in secondary depth. The appearance of liquidity may be out there with tens of electronic prices for each bond – useful for marking positions – but the real thing isn’t there. The test will only… Read more »
Cougar, what I find interesting are the claims of all especially new Credit platforms regarding the ‘liquidity’ they have & posting increasing volumes. As you say just posting a price & some size does not that position a tradeable position. Having asked those I know at the main platforms their emplyees are doing a bang-up job in defending the bosses position in saying ‘we are doing good & volumes are up!’. Wel maybe in IRS were the DOdds_Frank dictate says so, but I do not believe so in credits throught he curve or rating. Why then are the large investment… Read more »
So here we have Blackrock telling us “Blackrock doesn’t believe there is a liquidity problem whatsoever”, points to the growth of the IG market as proof that there is plenty of capital available and that the corporate bond market’s issue is a simple plumbing problem. Really? This Blackrock infomercial on how smart they are does a 180 regarding their long held positions regarding DETERIORATING corporate bond liquidity, a BROKEN corporate bond market and a DIRE need for change. Check out the three links below: http://www.blackrock.com/corporate/en-mx/literature/whitepaper/bii-the-liquidity-challenge-us-version.pdf http://www.blackrock.com/corporate/en-pt/literature/whitepaper/viewpoint-addressing-market-liquidity-july-2015.pdf https://www.blackrock.com/corporate/en-mx/literature/whitepaper/viewpoint-corporate-bond-market-structure-september-2014.pdf Blackrock has been one of the more vocal asset managers out there regarding… Read more »
Well, this certainly seems like a 180 vs. what we have heard from Blackrock the last few years!! “There’s more of a plumbing problem” and not a liquidity problem in the market. If you quadruple? the size of your hotel while still tied to the same water suppliers, you are going to need more water. Sure, more efficient plumbing and do it yourself fixes can help water go further in normal times of operation. but your pressure will materially lower during those times of DEMAND when a lot of guests need water, and it will slow to a drop if… Read more »
Hold on. Take a look at one of the non-feature articles in this weeks newsletter:
“BlackRock is betting on millennials to help fix the market’s biggest weakness”
I admire Blackrock for many of their accomplishments over the years but this Richie Praeger promo for Blackrock is clearly being motivated by something Blackrock doesn’t want to see happen. SIFI ????
“We don’t believe there is a liquidity crisis whatsoever”: Of course not. Well at least not today anyways. Blackrock sees an outsized share of the inflows and is also able to soak up its inflows with an outsized portion of new issues. Sure, maybe they can’t access all the liquidity they need in secondary markets, but based on today’s large primary flows, their liquidity needs are largely served. I also wonder if Blackrock traders told Richie to quit playing up the liquidity crisis stuff. Makes it kinda hard for them to play the ol’ “I don’t like your bid, so… Read more »
The punchline from this entire interview is: “based on our own observations” Yes, from a certain “observation” there is absolutely nothing wrong with the corporate bond market provided that: A) You are always a net buyer of bonds B) There is a consistently active calendar of new issue deals C) You consistently receive the lion’s share of allocations on new deals If that’s your world, then why complain? Just keep chuckling all the way to the bank….. Oh, one last thing. That “shrill noise” Prager hears is NOT from people that don’t want the market to change. Actually, it is… Read more »
‘Based on our own observations’ is the key to this paper. From there onwards there isn’t really much to add. It’s just an advert.
Everyone is Worried About the Thing Markets Need Most, But They’re Not Asking the Right Questions – Business InsiderMarch 25, 2016
US Companies Overpaying for Bonds; Banks May Be to Blame – ReutersMarch 31, 2016
The Difference Between Price Makers and Market Makers – Greenwich Associates BlogApril 7, 2016