Traders are torn between betting on rates continuing historic rise to battle inflation, and effects of regional bank failures spawning a bigger economic crisis and downward trend
Even the Great Financial Crisis failed to generate the level of chaos embroiling global bond markets today.
They cannot do both, and that unprecedented level of indecision is creating volatility the likes of which Andrew Becker has never seen during nearly two decades in debt markets. “On the Street, there has been less liquidity because there is the unknown of where the market is and where trades will clear,” Mr. Becker said. “It has been highly volatile and there is a lot of time and caution [taken] before every trading movement.”
“That was one-way risk – there was no way those events were going to lead to inflation. But now, we are coming into this with really high inflation and, up until barely a week ago, that was the main risk for investors to worry about,” he said. One factor that makes the current situation different from 2008, according to Tiffany Wilding, North American economist at Pacific Investment Management Co. , is that “at least for right now we understand the animal we’re dealing with.”
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