Market Depth: Friday March 17, 2023
Amidst turmoil in the US regional bank sector, Weston Nakamura takes a look back at a week of highly unusual (if not record setting) price swings across asset classes, including non-US megacap banks indices in Europe and Japan, Credit Suisse shares, bonds and CDS divergences, and DM rates markets - specifically US 2Y Treasury yields, German 2Y bund yields, and Japan 10Y JGB yields.
Weston ties all of the erratic movements occurring in assets that should otherwise be liquid and stable back to a common theme - years of heavy-handed central bank interventions that have altered, if not damaged, market functioning and stability, resulting in volatility and illiquidity that only exposes itself in real time moments of crisis.
For the most extreme example of this dynamic currently underway, Weston points towards the JGB market, for which the Bank of Japan's unprecedented intervention has killed market functioning, as a potential look into the future for the other sovereign rate markets.
For further insights- Weston discusses the Bank of Japan and their impact on the JGB market in depth in the previous episode of Market Depth, as well as On The Margin with Michael Ippolito.
Governor Kuroda: The Decade’s Most Consequential Central Banker
https://www.youtube.com/watch?v=C6_y_bOcBx4&t=2124s
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Disclaimer: Nothing discussed on Market Depth should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.
