MarketsMuse Editor Note: Our editorial team leader has spent more than 15 minutes across the capital markets throughout almost 30 years and in the course of hearing and reading about all of the most recent initiatives to electronify the corporate bond markets so as to ‘get in front’ of the next liquidity crisis, our inspiring commander pointed us to this extract from last night’s edition of “Sight Beyond Sight”
Liquidity Satire
Following last week’s price action where the lack of liquidity was a dominant theme in the credit markets we were reminded of the June 17th edition of Sight Beyond Sight.
At the time a Financial Times article stated that “Federal Reserve officials have discussed imposing exit fees on bond funds to avert a potential run by investors, underlining regulators’ concern about the vulnerability of the $10tn corporate bond market.”
We thought we would reprint a fictitious exchange between the CEO of a large bank historically known for taking risk and the CIO of the world’s largest asset manager here given what is unfolding in credit currently.
Please forgive our attempt at satire; we mean to inform, and hopefully amuse, not insult.
Rick at Blackrock: Hi Lloyd. Our “Yellen Index” is flashing imminent Fed tightening. We can’t tell you the inputs but this is our internally used proprietary index and is made up of the economic statistics she most favors and right now it is saying the Fed should already be tightening.”
Lloyd at GS: So what does that mean to me Rick? We are an M&A and asset management shop now.
Rick at Blackrock: Whatever helps you sleep at night, Lloyd. I need a bid on a 16 billion corporate bond portfolio ASAP.
Lloyd at GS: We are not in that business anymore due to new capital requirements, balance sheet constraints and regulation.
Rick at Blackrock: Lloyd, we go back a long-time and we pay your firm nine figures per year. I need a bid now.
Lloyd at GS: What do you think this is Rick? The 2004 interest cycle? Send over a list and we will work it on an agency basis.
Rick at Blackrock: Screw you Lloyd. I am calling my friends at Bank of America.
One hour later and a repeat of the same call… Continue reading