
In the New Bond Market, Bigger is Better – Wall St Journal
June 23, 2017 \
3 Comments
Full Article: Wall Street Journal
Postcrisis regulations have reshaped bond markets, with the largest asset managers gaining advantages over smaller competitors
Comments
Wow. Where to start on this masterpiece? Banks as wholesalers and big funds as big-box stores? Such tortured analogies and terrible analysis. Let’s just keep it simple. Bank balance sheet is more expensive because of Basel III, and other regulations also pile on to make it harder to hold inventory (e.g. Dodd-Frank). Ergo banks are no longer in the storing business, they are almost exclusively in the moving business (to add my own tortured analogy). And, since they don’t have much or any inventory to mark, and certainly not in anything that isn’t super liquid, they have much less of… Read more »
Seeing a lot of poor reporting on the bond market lately and this is no different. How someone can write an article about the advantages of being a large asset manager in the bond market, but NOT mention the new issue allocation process is beyond me. It is impossible to calculate, but the favoured nation status that large funds enjoy when it comes to handing out new bonds makes a real difference in performance. A large majority of new deals trade higher when they are freed to trade, so those that get bonds in the primary see a material P&L… Read more »
First, PLEASE take down that picture! It’s disturbing. I have to agree with Charlie and Jester. This isn’t an analysis worthy of the journal. The large buy side firms have had a transparency advantage over the dealers for years, and they were willing to benefit from the dealers’ wiliness to hold inventory and provide immediacy. I’m surprised that the majority of reporters who write about the bond market don’t take on a more macro view. We are experiencing persistently low rates in a low volatility environment. This is coincident with increasingly stringent regulatory pressures resulting from the EC08 (I’m tired… Read more »
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