Ritchie and the bond markets

But why the shift in rates, representing a significant fall in bond prices? Some are suggesting that this is a simple market reaction: bonds have been overpriced and an adjustment is necessary. This, however, makes little sense. The market is also illiquid at present precisely because there appears to be a shortage of available government bonds to meet investor demand. When it is reported that the largest 50 US companies holding cash have, between them, more than $1 trillion on deposit because their collected entrepreneurial expertise can find no use for it it is unsurprising that there is a significant demand for bonds, which has in itself created the negative interest-rate phenomenon. If anything the price of bonds should still be rising precisely because there are not enough of them: the paradox that governments are not running big enough deficits to meet market demand for their debt is one we should not miss. How long these contradictory positions can last is hard to tell but the implication is that instability is possible unless there are changes in policy, to which point I return below.

Do leaqve aside the point that of course that $1 trillion in corporate money is in fact invested in government bonds. That’s where those companies are parking it all.

Marvel, instead, at the logic.

Government bonds prices are falling. This proves that governments aren’t issuing enough bonds, there must be a shortage of them.

Err, yes.

15 comments on “Ritchie and the bond markets

  1. Dave

    I have not jumped the shark. Do you have any evidence for your claim?

    Candidly, neoliberal economic orthodoxies may try to show that I jumped the shark. However, as a friend of the truth I must actually point out that my position is unchanged. The shark dived underneath me as a result of right-wing policies.

    Serious people agree with me.

    You are wasting my time and future replies will be dealt with appropriately.

  2. He was recommending that everybody should buy bonds a little while ago. Time to instruct the lawyers methinks, especially given that he was offering his advice without any licence or qualification to do so. Damn fortune he might have cost me.

    GD – There’s a word to describe him that escapes. Any help ?

  3. GlenDorran

    ‘respectfully, you are talking nonsense’

    ‘Shall we deal with reality here?’

    ‘Andrew and Ivan have already explained the issue – have you no understanding of nuance?’

    ‘Please don’t call again’

    ‘That’s your last contribution here’

  4. Oh god, I just read that article and my head is still trying to decipher it. His writing is, as usual, impenetrable. It must be a mirror to the confusion he has in his mind.

    The bond market is illiquid. Really?

    Presumably he thinks illiquidity is a bad thing….in which case why does he support a FTT which will make markets even more illiquid?

    There really is no point in trying to string together all of the opposing points that he makes.

    The one thing you can guarantee is that every article he writes about finance will end up with him pushing Green Quantitative Easing.

    Every. Fucking. Time.

  5. Copy/paste error in the above; the “Really?” shouldn’t be in there – kind of changes my point unfortunately!

    Still need an edit function……

  6. Glendorran

    I read it. The word is gobbledegook. Gobbledegook from an untrained idiot with no reading.

  7. Worzel, there’s not a word that describes him but a macromicoroneoliberaltechnicaleconomic phrase

    “A fucking waste of a skin”

    Hope this helps

    The butler

  8. Let us suspend disbelief just long enough to identify *where* the excrescence that spoils what would be a pleasant town (we visited Downham Market last month) has got it pi (180 degrees) wrong.
    The parsley (ante-sage) claims that prices fell because demand exceeds supply. And in the Murphy-verse gravity makes our heads stick to the ceiling.

  9. Let’s face it, anyone that invests in Government Bonds knows what the inside of the windows on the short, white bus with yellow wheels tastes like …

    In other words, certifiably, batshit fucking insane.

  10. @GD

    “However, as a friend of the truth I must actually point out that my position is unchanged. The shark dived underneath me as a result of right-wing policies.”

    You, sir, are a fucking poet.

  11. GlenDorran/Ironman

    The article is sufficiently poor and unfocused I would expect a bond market analyst with a month’s experience to be able to tear it to pieces. Sadly life is too short to pontificate to too great a degree on the musings of someone who, as Ironman suggests is ‘an untrained idiot with no reading’ (An excellent summation) Suffice it to say as bloke in Northern Germany posits on the sister thread here (and the relative lack of shares of his drivel on FB or Twitter) his influence is on the wane. Chief economic advisor to a party with one MP who are likely to lose votes as the recovery kicks into higher gear? – not exactly where someone with an ego as monstrous as his yearns to be…

  12. 1. Zero interest rate policy and QE seems to reduce secondary market trading. Happened in Japan, happening in Eurozone. The central bank basically becomes ‘the market’. Nothing to do with government deficits being too small.

    2. Reduced liquidity in government bond markets is in part due to increased regulation (Basel III, Dodd Frank, Sol II) which i) encourage banks, insurers and pension funds to buy-and-hold government bonds and ii) makes it costlier for banks and hedge funds to provide liquidity.

  13. I should have added that the way securities lending is done by the ESCB (European System of Central Banks) under the ECB’s “PSPP” (Public Sector Purchase Program, i.e. QE) is likely also reducing liquidity in Eurozone government bonds. Another regulatory/policy failure.

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