Liquidity Crisis: The Bond Market Has Frozen

[bendog]

This is a textbook financial crisis. The Fed needs to act immediately.

The Fed is the reason for it. Why pour gasoline on a fire? Why not just put the fire out?

And how would you put the fire out? We are looking at a serious crash if something isn't done quickly.

There is no one out there capable of injecting that much liquidity other than the Fed.

And the Fed is not the reason for it. It is government spending which is largely responsible.

That's the thing. The fed is low on bullets, and it may be that they simply cannot inject enough liquidity in to keep money and credit markets working. Not to be doom and gloom, but the Fed may see its only course as "restarting."

 

[BuckToothMoron]

Bond market breakdown sees historic spread between buyers and sellers

“I’ve been doing this 40 years. I’ve never seen that before,” Michele told CNBC’s Steve Liesman, who inquired about half-point difference in what buyers were willing to pay and sellers were willing to sell for, referred to as the bid-ask spread.

In fact, Michele said that at one point he received a call from JP Morgan Asset Management’s London office to say that there were no offers on the 30-year bond.

“I’ve never seen that before,” he said. “These are uncharted times for sure.”

Should I withdraw my money from the bank?

Only if you have more than $250,000 in any single bank.

Aren't Treasury bonds government bonds? If they're going belly up, do you think my money will actually be covered? That's what I'm worried about.

 

[Natural Citizen]

And the Fed is not the reason for it.

You are in dire need of reeducation, my friend. Dire need.

People have been sounding warnings of the inevitable for years. And they got laughed at. These bubbles were patently predictable by anyone with even a rudimentary understanding of economics and monetary policy. Well...here we are. Take your medicine. You got in that bed. So sleep in it.

 

[g5000]

It's weird no one wants to buy older bonds. It's always been that way to some degree, but its worse now.

However, older bonds have higher yields. You come out ahead if you hold onto them. The problem with traders is they feel like they always need to be moving freight. They hate parking stuff.

Could it be that investors fear default on bonds that were issued, and risk assessed, before the global econ essentially comes to a standstill, an effect made more likely by Trump's banning of travel from countries he doesn't care for, while maintaining travel with the UK and Ireland? That's not to blame Trump, but if you think he helped with the speech I think you may be buying a Hoax.

It just strikes me a that its oddly similar to when moneymarkets broke the buck in 2008

Well, I have been talking about Treasury bonds. That market is freezing up. I doubt anyone is worried about defaults on T-bills.

However, you do raise an interesting point if one is thinking about corporate junk bonds. The junk bond market has astronomically exploded since the Great Recession. The debt load is far, far bigger than before the last crash.

So it is possible bond traders are worried about corporate debt defaults.

That is what always worries me. Leverage.

 

[g5000]

And the Fed is not the reason for it.

You are in dire need of reeducation, my friend. Dire need.

People have been sounding warnings of the inevitable for years. And they got laughed at. These bubbles were patently predictable by anyone with even a rudimentary understanding of economics and monetary policy. Well...here we are. Take your medicine. You got in that bed. So sleep in it.

*cough*

The Fed's Bond Bubble Doomsday Machine <--- Note who the author is

There would be no bond bubble if there was no government overspending. That's basic, and it is a shame you don't get that.

You still have not answered my question. How would you put the fire out right now?

 

[Natural Citizen]

There would be no bond bubble if there was no government overspending. That's basic, and it is a shame you don't get that.

You still have not answered my question. How would you put the fire out right now?

No, I get that spending is a problem. In fact, I think I'm the only one around here who has even uttered a peep about that 4.8 trillion dollar 2021 fiscal budget. The largest fiscal budget in American history, btw. So, spare me. I certainly haven't seen anyone else mention a word about it. People don't appear to be too genuinely concerned about it if you ask me.

But the Fed is not the answer.

The market itself will ultimately decide fate. Not the government. And not the Fed. This is the nature of things in the real world.

There's a 17 trilllion dollar global bond bubble. The largest in world history. Global debt has topped $188,000,000,000,000. It is officially the biggest debt bubble the world has ever seen. It's ready to pop.

Lowering interest rates below the market level and then creating new credit is how bubbles are created.

 

[g5000]

And the Fed is not the reason for it.

You are in dire need of reeducation, my friend. Dire need.

People have been sounding warnings of the inevitable for years. And they got laughed at. These bubbles were patently predictable by anyone with even a rudimentary understanding of economics and monetary policy. Well...here we are. Take your medicine. You got in that bed. So sleep in it.

*cough*

The Fed's Bond Bubble Doomsday Machine

There would be no bond bubble if there was no government overspending. That's basic, and it is a shame you don't get that.

You still have not answered my question. How would you put the fire out right now?

No, I get that spending is a problem. But the Fed is not the answer.

Again, what would you do?

 

[bendog]

It's weird no one wants to buy older bonds. It's always been that way to some degree, but its worse now.

However, older bonds have higher yields. You come out ahead if you hold onto them. The problem with traders is they feel like they always need to be moving freight. They hate parking stuff.

Could it be that investors fear default on bonds that were issued, and risk assessed, before the global econ essentially comes to a standstill, an effect made more likely by Trump's banning of travel from countries he doesn't care for, while maintaining travel with the UK and Ireland? That's not to blame Trump, but if you think he helped with the speech I think you may be buying a Hoax.

It just strikes me a that its oddly similar to when moneymarkets broke the buck in 2008

Well, I have been talking about Treasury bonds. That market is freezing up. I doubt anyone is worried about defaults on T-bills.

However, you do raise an interesting point if one is thinking about corporate junk bonds. The junk bond market has astronomically exploded since the Great Recession. The debt load is far, far bigger than before the last crash.

So it is possible bond traders are worried about corporate debt defaults.

That is what always worries me. Leverage.

I was talking not just corporate junk (I think there's 600 billion in the petroleum corp bonds) but just regular corporate bonds. I personally wouldn't touch a corp bond of any kind right now. Of course my retirement fund is full of them.

Treasuries, hmmm. We both know that Trump's appetite for low rates has caused Powell to keep rates lower than they normally should be. I mean we have NO unemployment and corps have/had all the capital they could consume … but Trump needed to finance his deftcits, and even with low rates he had to have the Fed eat them. Could it be investors are sort of playing the Belafonte Limba of how low can you go? That might not explain why older bonds aren't selling (I was never a bonds fan) but as you say they hate the older stuff. Back in the day, my wife just bought her Krogers bonds and sat on them till they hatched.

 

[Natural Citizen]

Here's a question. Which I ask because we're heading in that direction.

How do you sell a bond that has a negative interest rate? With so many different currencies in negative interest rates, this will crush the global economy. Will it not? If not, then, why not?

 

[Natural Citizen]

Again, what would you do?

The disintegration of the current system is necessary.

The solution is simple. Return to free markets where the market tells the government what to do versus what we have now where the government tells the market what to do.

 

[Natural Citizen]

Ah well. The Blue Jays are calling. I'm gonna go feed em some peanuts. Have a good afternoon, all.

Iiit's a wonderful day in the neighborhood....wonderful day in the neighborhood...hmm hmm hm...hm hm hm.

 

[BuckToothMoron]

And the Fed is not the reason for it.

You are in dire need of reeducation, my friend. Dire need.

People have been sounding warnings of the inevitable for years. And they got laughed at. These bubbles were patently predictable by anyone with even a rudimentary understanding of economics and monetary policy. Well...here we are. Take your medicine. You got in that bed. So sleep in it.

G5000H is a Central Bank disciple. He thinks they can avoid recessions and crashes thru monetary policy. And it works until the market realizes that the Fed is giving mixed singles. They say everything is great and then they cut rates. Look what happened when the Fed did the emergency 50 basis point cut. The market went down further because the market has realized the Fed is trapped. And now they have lost complete control of the bond market and G5000 thinks they can fix. How? Negative rates. Ask Japan how well that works.
He’s desperate because he is losing money.

 

[Natural Citizen]

G5000H is a Central Bank disciple. He thinks they can avoid recessions and crashes thru monetary policy. And it works until the market realizes that the Fed is giving mixed singles. They say everything is great and then they cut rates. Look what happened when the Fed did the emergency 50 basis point cut. The market went down further because the market has realized the Fed is trapped. And now they have lost complete control of the bond market and G5000 thinks they can fix. How? Negative rates. Ask Japan how well that works.
He’s desperate because he is losing money.

I don't really know G5's views too well, I only see his/her postings once in a while. Mainly in the market threads where they're all shitting bricks once they finally realize what we've been telling them is going to happen. A lot of people on both theoretical sides of the party of one seem to believe the solution is to accelerate the very same inflationary policies which cause the bubbles. It's the darndest thing. The chaos we're witnessing is a predictable phenomenon of gradually drifting away from a limited government philosophy over the last hundred years. I have read your postings, so I know you agree. The natural solution is, as always, liberty. And that groundwork has been laid. The current failed system is morally and financially bankrupt. As more and more people see the evidence of this as it plays out, perhaps we'll see a growing interest in the cause of liberty. That's really my only interest in it, truth be told.

And, yeah, the movement toward neg rates is gonna be a hoot. You know what they say. You can lead a horse to water. But there's nothing anybody can do when the river runs dry. Or something like that. Heh heh.

I've got no economic stake in it anymore. My retirement isn't dependent upon this clusterfudge.

 

[g5000]

G5000H is a Central Bank disciple. He thinks they can avoid recessions and crashes thru monetary policy. And it works until the market realizes that the Fed is giving mixed singles. They say everything is great and then they cut rates. Look what happened when the Fed did the emergency 50 basis point cut. The market went down further because the market has realized the Fed is trapped. And now they have lost complete control of the bond market and G5000 thinks they can fix. How? Negative rates. Ask Japan how well that works.
He’s desperate because he is losing money.

I don't really know G5's views too well, I only see his/her postings once in a while. Mainly in the market threads where they're all shitting bricks once they finally realize what we've been telling them is going to happen. A lot of people on both theoretical sides of the party of one seem to believe the solution is to accelerate the very same inflationary policies which cause the bubbles. It's the darndest thing. The chaos we're witnessing is a predictable phenomenon of gradually drifting away from a limited government philosophy over the last hundred years. I have read your postings, so I know you agree. The natural solution is, as always, liberty. And that groundwork has been laid. The current failed system is morally and financially bankrupt. As more and more people see the evidence of this as it plays out, perhaps we'll see a growing interest in the cause of liberty. That's really my only interest in it, truth be told.

And, yeah, the movement toward neg rates is gonna be a hoot. You know what they say. You can lead a horse to water. But there's nothing anybody can do when the river runs dry. Or something like that. Heh heh.

I've got no economic stake in it anymore. My retirement isn't dependent upon this clusterfudge.

You really need to read my Fed bond bubble topic.

 

[g5000]

BOOM!

Stocks cut losses dramatically after giant market intervention by Fed, Dow was down 9.5%

The Fed announced it will ramp up its overnight funding operations to more than $500 billion.


.

 

[bendog]

And the Fed is not the reason for it.

You are in dire need of reeducation, my friend. Dire need.

People have been sounding warnings of the inevitable for years. And they got laughed at. These bubbles were patently predictable by anyone with even a rudimentary understanding of economics and monetary policy. Well...here we are. Take your medicine. You got in that bed. So sleep in it.

G5000H is a Central Bank disciple. He thinks they can avoid recessions and crashes thru monetary policy. And it works until the market realizes that the Fed is giving mixed singles. They say everything is great and then they cut rates. Look what happened when the Fed did the emergency 50 basis point cut. The market went down further because the market has realized the Fed is trapped. And now they have lost complete control of the bond market and G5000 thinks they can fix. How? Negative rates. Ask Japan how well that works.
He’s desperate because he is losing money.

I don't know any mainstream econ thought that suggests a central bank can prevent all recessions. Back in the Clinton years, I thought a well managed Fed could do it, but it'd be dependent on human error, and Clinton fucked up by renominating Greenspan. And the Fed did not nothing about bogus lending and risk capitalization.

One reason to possibly vote for Biden is if he adopts some of Warren's more mainstream ideas on forcing Wall St to capitalize its risk with just money from investors and not people depositing their life savings into mutal fund type investments that supposedly don't take on as much risk.

 

[g5000]

Instant results from the Fed announcement:

 

[g5000]

The Fed's announcement does not look like it is holding.

We may all be hostage to fricking algorithms right now.

 

[BluesLegend]

Throw more government at the problem? That won't end well. I see in the news today the government California high speed rail project that was supposed to cost $33B has ballooned to $80B and is collapsing in a pile of FUBAR.

 

[Richard-H]