3 ms·
Liquidity has to flow somwhere and in the instant case its likely to treasuries if other bond classes crash. As destabilizing as that would be for holders of t
by rrggrr 11y ago
Liquidity has to flow somwhere and in the instant case its likely to treasuries if other bond classes crash. As destabilizing as that would be for holders of the distressed bonds, and for borrowers who need to raise capital, its arguably very stabilizing for treasuries and offers the Fed its long-term exit from unprecedented balance sheet inflation. Treasury holders will be paying the cost for the Fed to retire debt as I see it.
- bcg1 11y agoI agree I think that dynamic could definitely play out... I'm less sanguine about how orderly such a shift would be in practice however, and the level of complexity in financial markets today I am skeptical that destabilization would be limited to holders of distressed bonds (even if it was, those bondholders are probably major institutions whose problems could lead to more bailouts, derivatives being triggered, etc)