Category: Gold

Financial Times/John Dizard/4-29-2022

“When the world’s biggest and most liquid market shows signs of stress, investors should take note. At the beginning of this month, major financial market participants trading in the US Treasury bond market had difficulty meeting the demands for collateral made by their counterparties.”

USAGOLD note: Dizard explores the inner workings of the bond market in his weekend column, and red flags some first signs of liquidity problems in the Treasuries market. One bond market expert told him that the current stresses are not at the level of 2008, but that “something is broken.” Attempting to decipher what Dizard is getting at in this somewhat complicated editorial, we come away with a sense that the problem reduces to meeting margin calls – a predicatment that crops up perennially in these highly leveraged markets. Trading houses devalued collateral (corporate bonds) held on margin forcing their counterparties to pony up. That is where the disruption begins, but the problem is much more complicated than this quick summary implies …… Consider Dizard’s column an early warning and a must-read.

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