Why does the bond market see volatility like the 2008 financial crisis?

Good morning team. I’m Phil Rosen.

The long-awaited Ethereum consolidation event, which experts say will increase the energy efficiency of the blockchain by 99%, has completed. Vitalik Buterin said in a tweet on Twitter.

Top funders spoke about it all week at the SALT conference in New York.

One macro investor said the merger parallels the corporate governance structure seen in securities, Written by Laila Maidan from InsiderAnother executive said the event could spark mass confusion.

Read our reporter’s details here.

Meanwhile, the stock market is still recovering from Tuesday’s attack, with the S&P 500 barely making gains after… Biggest one-day drop in two years.

But it’s not just stocks and cryptocurrencies that are rocking this week.

Below, I break down what you want to know about the bond market – and why it’s experiencing some of the most dramatic volatility since the 2008 financial crisis.


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Federal Reserve Chairman Jerome Powell testifies before the House Financial Services Committee.

Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System, testifies before the House Committee on Financial Services on June 23, 2022 in Washington, D.C.

Wayne McNamee / Getty Images


1. Most investors are watching the interest rate hike by the Fed, But policymakers’ balance sheet plans may have a greater impact on markets.

The central bank is committed to Shrink its balance sheetMostly US Treasuries and mortgage-backed securities.

During a pandemic, the Fed Purchases of these bonds and securities escalatedas well as corporate debt, in an effort to keep credit markets open.

At the time, the move worked — but it swelled the Federal Reserve’s balance sheet from about $4 trillion to about $9 trillion today.

Now, while Jerome Powell moves to get rid of those collectiblesLiquidity of trading in government bonds has decreased significantly since April.

Bloomberg’s US Government Securities Liquidity Index Currently Shows “Tense” Conditions, And It Already Perilous levels It was last seen at the height of the pandemic and on a par with the 2008 crisis.

“The Fed may be creating different problems this time around. Trade liquidity is getting worse throughout the year and competitors The worst period in March 2020. “Corporate distress has also increased,” Ned Davis Research said in a note.

Bond market volatility begins To bleed into the stock market, according to analysts.

“Realized volatility is seven percentage points above its historical average, while implied nearly four points above its mean,” the NDR newspaper said. “You have to go back to The Great Financial Crisis and the European Sovereign Debt Crisis to find similar levels before the pandemic.”

Last week, Bank of America said that the decrease in liquidity in the Treasury market represents The biggest systemic risk for the financial markets.

Bank of America said the decline in liquidity and the resilience of the US Treasury could be a reason Bigger risks to stocks than the 2007 housing bubble.

How do you adjust your investments to take into account market fluctuations? E-mail prosen@insider.com or tweet Tweet embed.


In other news:

Instrumentation view of the Jauniunai gas compressor station, near Vilnius, Lithuania, Thursday, May 5, 2022.

The European Union gets about 45% of its gas imports from Russia.

AP


2. US stock futures struggled for direction early Thursday, Investors are waiting for new economic data and considering the possibility that the Federal Reserve will raise interest rates significantly. Below are the latest market moves.

3. On the agenda: Adobe Inc. and Ryanair and more Reports. Additionally, keep an eye out for the weekly unemployment insurance claims report, import and export price indices and the advance report on retail sales, all due later this morning.

4. Here are six places to invest your money after the August inflation reading shocked the stock market. The S&P 500 fell 4.3% on Tuesday after a hotter-than-expected CPI report. Three market experts explained their bets on where to store your money.

5. Huge floating gas stations are heading to Europe to help solve its energy crisis. Dozens of ships pumping natural gas are on their way to the continent as energy-strapped nations continue to search for alternative supplies. Check out these pictures of huge ships.

6. The European Union wants to collect $140 billion in windfall taxes from energy companies. The aim is to mitigate the harm consumers suffer from higher prices. As the President of the European Commission said: “It is wrong to receive extraordinary record profits profiting from the war and at the expense of consumers.”

7. Jeremy Siegel said that inflation is “overrated”. The Wharton professor said the Fed is likely to make a policy mistake and get too hard if it doesn’t correct its view on higher rates. In his view, inflation lags official statistics by 18 months and prices are already falling.

8. Goldman Sachs just revealed a new stock market and economic growth forecast. Analysts included a pessimistic “recession scenario” for the S&P 500, as well as what the index was likely to do in two potential areas. The bank recommends these 12 stocks if the darker scenario materializes.

9. This 33-year-old has paid off $45,000 in debt and is now teaching women how to take control of their finances. Focus on spending better instead of just spending less, according to Laurie Annie King. I explained how the “coordinated money method” can help get out of debt.

Wood


Market Insider


10. Sawnwood prices fell on Wednesday after rising earlier in the week. The possibility of rail strikes has raised fears of supply disruptions to the key commodity – Mortgage rates topped 6% for the first time in 14 years, causing housing demand problem.


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Curated by Phil Rosen in New York. (Notes or tips? prosen@insider.com or tweet Tweet embed).

Edited by Max Adams (Tweet embed) in New York and Hallam Bullock )Tweet embed) in London.

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