Market Liquidity Fear

The ECB, market liquidity fear and an expandable shopping list. The ECB did stuff last week, namely it cut rates while downplaying further cuts, tried to protect the banks under its care from negative rates and pledged to boost its balance sheet due to its fear of market liquidity reduction. That was considered, after some confusion, impressive by markets, amongst other things because of the ECB’s shift to buying up private assets — “investment-grade euro-denominated bonds issued by non-bank corporations established in the euro area are to be inccluded in QE,” as Deutsche summarised while others wondered aloud about…

JPMorgan Has New Theory About What Really Caused the Flash Rally

Some 16 months after the “flash rally” in U.S. Treasuries blindsided Wall Street traders, little about what exactly went wrong has been resolved. The most common, albeit tenuous, explanation is that the futures market seized up that morning, creating a spillover effect into cash bonds that led to a frenetic 12-minute spike in prices. JPMorgan Chase & Co. analysts are now advancing a new theory, one they contend is a key to how to trade most effectively in today’s volatile Treasuries market. The problems on Oct. 15, 2014, actually began in…