Great stress in the treasury market (msn.com) Great stress in the treasury market Article by Alex Wehnert • Yesterday at 20:03 Great stress in the treasury market© Provided by Börsen-Zeitung The recent turmoil in the US banking system is also shaking up the secondary market for government bonds. Liquidity in the treasury segment collapsed sharply after the collapse of Silicon Valley Bank – while volatility increased massively in mid-March, the high difference between buy and sell prices made it much more difficult for traders to execute trades. At the end of last week, the difference between buy and sell prices for two-year Treasuries was 30, according to the platform Tradeweb. %, which is a significantly higher level, but even a decline compared to the previous trading days. Similar liquidity problems have recently occurred with German government bonds. The difficult conditions for US and German government bonds, which are regarded as safe havens and are actually an important point of contact for investors, especially in times of crisis, are also having an impact on other asset classes such as corporate bonds and equities. Concerns about the liquidity of the Treasury secondary market have persisted since the 2008 financial crisis. But traders stress that the situation is currently more tense than it has been in the past decade. The level of market stress can be seen in an index by the Office of Financial Research, an office of the US Treasury. This is approaching the levels from September, when it marked the highest level since the corona crash in spring 2020. Also striking are the rises in market volatility sub-indices and safe-asset valuations. The ICE BofA Move Index, which tracks volatility in bond markets, has even shot above the levels recorded in March 2020 in the middle of this month. From traders' point of view, the Federal Reserve's tighter monetary policy has created the conditions for increased volatility. In the wake of interest rate hikes since last spring, Treasuries have come under considerable pressure, with the yield on the ten-year bond soaring above the 2008 mark in September for the first time since 4. % and has broken through it several times since then. Strong fluctuations In view of the low price levels, there is all the more potential for counter-movements, which take place in times of crisis under strong fluctuations. In mid-March, the current yield on ten-year Treasuries fell below 3.4 %, on Wednesday it was 3.57 %. At the beginning of the month, the yield of the two-year benchmark reached a closing level of more than 2007 for the first time since 5. %. The spread to the ten-year security was thus more than one percentage point at settlement, which was last the case in 1981. At midweek, however, the two-year Treasury yield was just above 4 %. The turbulence in the banking system has triggered further uncertainty about the monetary policy outlook. After the collapse of Silicon Valley Bank, as a result of which several medium-sized and regional US banks came under pressure, market participants hoped that the Fed would move away from its restrictive course. Most recently, however, the central bank raised its key interest rate by 25 basis points in the range of 4.75 to 5 %. According to analysts at private bank Hauck Aufhäuser Lampe, the monetary authorities are keeping an eye on financial stability, but are currently still giving priority to the fight against high inflation. Now market participants are still desperately looking for liquidity. The activity in index funds brings a certain relief. According to data service provider Refinitiv Lipper, exchange-traded funds on US government bonds have recently seen six consecutive weeks of inflows – reaching a record $8.4 billion between March 15 and 22. However, investors fear further distortions in the US banking system. Because in the securities portfolios of the financial institutions there are still huge government bond reserves. If other financial institutions wobbled, billions in volumes could reach the market at once – and volatility could thus continue to rise massively. ----- The ICE BofA Move Index, which tracks volatility in bond markets
And next week a new head of the BOJ who reportedly will do away with zero and negative rates killing a big chunk of the carry trade
%% WSJ has has article like that, 2022. Main question is not gov bonds but who is dumb enough to be ESG like SVB=woke broke; + 20% crypto cr*p banks like Signet. Of course if any agency or co would continue to do stupid stuff like woke= broke; ''satanic'' like S in E ''S'' G who in thier right mind would lend them money for 10 years??LOL!! Romanian ruler made so many goofy gasoline rules in Romnaia he ran out of gas himself\ + military shot him; so its hard to predict much.
you don't get it. the biggest fear is that no foreign buyers want to buy newly issued bonds anymore, and slowly liquidate their current holdings. all new issues will be bought by the fed, hence the slow death of us dollar.
Which is why metals have moved. Not because CBs see metals as good investment, but rather a place to put SOME chunks of money not directly tied to a government/currency. However, metals market is not big enough to absorb, so several stock and alternate markets are also buoyed. Alternate = inflation. And war = inflation. We ain't near the end. Through this lens, the recent currency agreements for payment between some nations also begins to make sense.
I am not a big fan of metal but I do buy physical gold over the years as a collection. De-Dollar has long been proposed as I mentioned in another thread. Once we got rid of Russian from SWIFT and Swiss banks are no longer neutral, the acceleration began. Consider Saudis are freaking out, everyone thinks about alternatives. Yellen wants 51 trillion debt by 2030, which is 2x GDP, on par with Japan.
that's if everything is run by a rather stable and predictable economic cycle, the world is now changing. other central banks are buying golds instead of dollars or usg bonds. https://www.reuters.com/markets/com...old-since-1967-last-year-wgc-says-2023-01-31/
%% WELL buying metal worked real well; Bunker Hunt did real well for while\ sorry he never had a sellin' plan, like he did with oil . I've done better with copper+steel which will rust to nothing if kept to many decades\LOL But i never buy those dealer sells\overpriced 1oz+ larger bars/ copper coins