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Global Bond Markets: Where Did All the Liquidity Go?

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Published : November 24th, 2015
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Category : Editorials

Why does the lack of liquidity in bond markets have many of the world’s top economic opinion-makers worried?  Ben Wright writing in the Telegraph reports on the voices in “the chorus of doom” and explains why the evaporation of this liquidity in the global fixed income market signals “a warning shot across the bow”.

24hGold - Global Bond Markets:...
Where did all the liquidity go? Photo: Ryan Brennecke

“Every market is a tug-of-war between buyers and sellers. Liquidity is a gauge of both the size of the market (the number of buyers and sellers) and its depth (the number of buyers and sellers of both small and large amounts of securities). Why is the depth of the market important? Because you’re sure to find plenty of willing buyers if you want to sell £10,000 of government bonds. But if you want to sell £100m-worth, it might be a touch harder.”

“The less liquidity there is, the greater the impact large trades will have. If lots of people are all trying to sell lots of stuff at once, it could get messy.”

24hGold - Global Bond Markets:...Since the financial crisis, global financial regulators have rightly been attempting to make banks safer. They have done this by, for example, banning proprietary trading, making it harder to lend government bonds in the repo market and, most importantly, forcing banks to deleverage.  One of the upshots is that it is now much more expensive for banks to hold securities on their own books and therefore provide liquidity in the market. Deutsche Bank recently noted that the amount of outstanding corporate bonds has doubled since 2001 but dealer inventories of these securities have fallen 90pc over the same period.

Read the full article “The world’s multi-trillion dollar bond market is circling the drain” in the Telegraph.

Ben Wright is Group Business Editor at The Telegraph. He was previously the City Correspondent at The Wall Street Journal and before that Editor of Financial News.  Follow him on Twitter.

Read also:
“As more investors pile into overvalued, increasingly illiquid assets – such as bonds – the risk of a long-term crash increases.  This is the paradoxical result of the policy response to the financial crisis. Macro liquidity is feeding booms and bubbles; but market illiquidity will eventually trigger a bust and collapse.”
Nouriel Roubini in “The Liquidity Time Bomb

DAILY PRICESToday’s Gold Prices: USD 1073.00, EUR 1008.32 and GBP 709.67 per ounce.
Yesterday’s Gold Prices: USD 1068.35, EUR 1005.90 and GBP 705.31 per ounce.
(LBMA AM)

24hGold - Global Bond Markets:...

Gold fell again yesterday, losing $8.50 to close the day at $1068.70.  Silver lost $0.04 closing at $14.11. Platinum lost $6 to $843.

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24hGold - Global Bond Markets:...

Download the Essential Guide to Storing Gold in Singapore

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Data and Statistics for these countries : Singapore | All
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Mark O'Byrne is executive and research director of www.GoldCore.com which he founded in 2003. GoldCore have become one of the leading gold brokers in the world and have over 4,000 clients in over 40 countries and with over $200 million in assets under management and storage.We offer mass affluent, HNW, UHNW and institutional investors including family offices, gold, silver, platinum and palladium bullion in London, Zurich, Singapore, Hong Kong, Dubai and Perth.
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