Will lack of bond liquidity be the 'straw that breaks the camel's back'?

Banks forced to scale back role

Hardeep Tawakley  Hardeep Tawakley
clock • 4 min read

Mark Carney fired several warning shots to fund groups about it, while Janus Capital's Bill Gross admitted it "scared the hell" out of him. But how worried should investors be about bond liquidity issues?

As the world of finance commemorates the seventh anniversary of the collapse of Lehmans and the 2008 global crisis, liquidity concerns are once again high on the agenda for investors. The RBS liquid-o-meter, which is built from trading volumes, dealer inventories and bid-ask spreads, indicates liquidity has fallen by around 70% in the US; a situation that has likely been mirrored across global markets (see chart). As interest rate rises loom in the US and UK, Peter Geikie-Cobb, managing director of Charles Stanley's fund division Matterley, warned of a "dangerous" combination of fixed...

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