In last three weeks, the major central banks in the world have gone in overdrive to stabilize the markets. Among other things, they are now buying junk bonds, highly rated bonds, MBS, sub-sovereign credits, apart from providing unlimited credit to their sovereigns, and refinancing SME loans. Markets are taking solace from this and are hoping for a […]

As the global economy stares at rapid descent into possibly worst depression ever recorded, US President Trump has been voicing concerns on iatrogenesis of the preventive measure of social distancing on the US economy. To think of iatrogenesis of the preventive measures is unthinkable for many, however it is to useful debate this point, but only in […]

Last Monday I wrote about the issues that ETFs will face due to the disruptions to real economy. I did not expect the problems to surface at the short-end of ETFs and so fast. Last week some of the short duration ETFs had a 30 plus-standard deviation move in one day. A thirty standard deviation move in […]

One measure of funding stress in dollar markets is how much liquidity is demanded by banks from NY Fed. The chart below shows the net liquidity demand / supply amanaged by NY Fed from 7th July 2000 till 17th March 2020. Positive numbers indicate that banks are short of liquidity; while negative numbers indicate that banks have […]

Let me set the tone first by briefly describing the folly of the 2004-09 Great Financial Crisis. It was believed, without stress test, that by combining a seemingly uncorrelated junk grade loans into a pool, some pixie dust magic will convert the pool of such loans into highly coveted low risk investment grade pool. We all know […]