‘Volatility vortex’ slams into $24tn US government bond market
The $24tn US Treasury market has been hit with its most severe bout of turbulence since the coronavirus crisis, underscoring how big swings in international bonds and currencies and jitters over US rate rises have spooked investors. The Ice BofA Move index, which tracks fixed income market volatility, has reached its highest level since March 2020, a time when deep uncertainty about how the pandemic would affect the world economy set off massive fluctuations in US government bonds. (Financial Times | Sep 29)
US is growing worried about UK market turmoil, working with IMF
The US is alarmed over the market turmoil triggered by the new UK government’s economic program and is seeking ways to encourage Prime Minister Liz Truss’s team to dial back its dramatic tax cuts. Officials inside the US Treasury Department are concerned at the volatility in financial markets and potential spillovers to the broader economy, and are working through the IMF to apply pressure on Truss’s government, according to people familiar with the matter. (Bloomberg Politics | Sep 28)
Fed reverse repo use hits fresh record as investors hide in cash
The amount of money that investors are parking at a major Federal Reserve facility climbed to yet another all-time high as funds sought out places to stash short-term cash. Some 101 participants on Wednesday put a total of $2.367 trillion at the Fed’s overnight reverse repurchase agreement facility, in which counterparties like money-market funds can place cash with the central bank. The previous record was $2.359 trillion set on Sept. 22. (Bloomberg Markets | Sep 28)
Nasdaq divides business into three units to streamline operations
Nasdaq Inc said on Wednesday it was reorganizing its business into three divisions to focus on major growth areas as competition among trading exchanges was intensifying. It said Market Platforms, Capital Access Platforms and Anti-Financial Crime will be the new units that will focus on digital assets, carbon markets, providing investment intelligence apart from U.S. equities. The New York-based stock exchange, which competes with CBOE Global Markets, NYSE and its parent Intercontinental Exchange Inc and BATS Global Markets, said the fourth quarter and full year 2022 results will reflect the changes. (Reuters | Sep 28)
A reckoning has begun for corporate debt monsters
When investment bankers agreed in January to underwrite the leveraged buy-out of Citrix, a software company, by a group of private-equity firms, returns on safe assets like government bonds were piffling. Yield-hungry investors were desperate to get their hands on any meaningful return, which the $16.5bn Citrix deal promised. Lenders including Credit Suisse and Goldman Sachs were happy to dole out $15bn to finance the transaction. Inflation would pass, central bankers insisted. Russia hadn’t invaded Ukraine, energy markets were placid and the world’s economies were growing. Nine months later the banks tried to offload the debt in a market gripped not by greed but by dread — of stubborn inflation, war and recession. Struggling to find takers, they palmed off $8.6bn of the debt at a discount, incurring a $600m loss. They are still nursing the remaining $6.4bn on their balance-sheets. (The Economist | Sep 27)
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