Bonds Are Screaming A Big Warning; PBoC and Fed See-Saw but Little Change Elsewhere; Global Policy Liquidity Remains Tight

Credit Markets Flash a Liquidity Warning That Pimco Saw Coming

  • Bid-offer spread shows trading costs approaching December zone
  • Pimco says ‘challenging liquidity conditions’ here to stay

Pimco’s fund managers are concerned that liquidity in corporate bonds is drying up when investors need it the most. They’re right.

A key gauge of trading conditions in riskier bonds is close to reprising December levels, belying the relative calm in global credit markets, according to data on bid-offer spreads compiled by Bloomberg. It shows the cost to cash out of corporate bonds keeps getting bigger during sell-offs, when funds often face redemptions.

It all helps to explain why Pacific Investment Management Co. said this week that “challenging liquidity conditions’’ aren’t going away anytime soon, according to the latest outlook from the $1.76 trillion asset manager.

 

 

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