“If you distort markets for long periods of time and then you remove those distortions, you’re subject to unanticipated volatility,” TCW’s Jerry Cudzil tells Bloomberg, adding that the firm is “as defensive as [it’s] been since pre-crisis.”
from Zero Hedge:
Recently, it’s become readily apparent that some of the world’s top money managers are getting concerned about what might happen when a mass exodus from bond funds collides head on with a completely illiquid secondary market for corporate credit.
Indeed, bond market illiquidity is the topic du jour and has almost become something of a cliche among pundits and mainstream financial media outlets years after we first raised the issue in these pages. But just because something has become fashionable to discuss doesn’t mean it’s not worth discussing and indeed, we’re at least pleased to see that the world is suddenly awake to the fact that a primary market supply bonanza catalyzed by rock-bottom borrowing costs and yield-starved investors could spell disaster when paired with shrinking dealer inventories.
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