I suppose sometimes things happen which one does not at all expect. We put an order in last night for a new corporate bond issue in the United States and I arrived this morning to find that we must have been mistaken by some hapless junior syndicate manager for a hedge fund for we not only received a full allocation in the issue but I also found a follow-up message which I had sadly missed – I hadn’t expected to be given any paper – asking whether I’d like to flip half the position back to them at a neat profit.
It might prove to have been a lucky miss as the issue is trading tighter yet and I’m sure we – that’s our client – will do even better later on in the session.
Calling upon my humble counsel
The other unexpected surprise is a proper result. It appears that a number of my more recent columns which have dealt with the systemic problems which are building up as a result of some of the single-minded changes to the way markets work have been picked up by our regulator and I have been asked whether I can join a number of its smarter thinkers for a briefing meeting today for them to canvass my humble opinion, both on what might occur in the event of a sharp sell-off in the credit markets and on how some of the regulatory changes might be reversed in order to re-establish equilibrium in the way they are traded.
I understand that some of the more senior bods at the regulator have finally taken on board that, in credit markets, liquidity and transparency are not, as they had previously assumed, the happy bed-fellows they wanted to believe. Given some of the concerns which the asset management industry has recently been expressing with respect to the build-up of miss-priced risk in its bond portfolios, the regulator now seems to be wondering whether all the changes it has brought about in the way banks trade bonds – or not, as the case may be – are all that smart and effective and of a sudden it want to talk to me in order to find out what the climate really is like at the coal-face.
I shall shortly be hopping back home to change out of my jeans and jumper and into a suit and tie so that I can attend the emergency consultation meeting later on this morning. The cheeky blighters advised that they will provide the coffee but that if I wanted any biscuits I should please be kind enough to bring my own. They went even further and intimated that if I did, they wouldn’t mind if I brought extra fig rolls for them too. I wonder how they knew that fig rolls are my favourite but I guess that’s a side-effect of them performing detailed oversight of my day to day activity. I wonder whether they also know that I prefer brown sugar in coffee but white sugar in tea?
The draft agenda looks to be covering such issues as banks’ endless transmission of “runs” which fill our screens with two-way price indications for thousands of bonds which the respective traders have no intention of either bidding for or offering and of two way electronic trading platform prices which are equally meaningless and which feign liquidity which isn’t there.
There is also, somewhat to my surprise, an item which will look at removing the name of the counterparty asking dealers for bids and offers over platforms so that prices are made and trades closed on the merit of the bond and the market timing and which are not based on who is asking for the price and whether they like the cut of their jib.
Likewise, they are thinking of clamping down on the recent practice of dealers asking clients to reveal not only whether they are buyers or sellers but also their intended position sizes and price targets before replying that they are not axed either way, thus collecting free information so that they might have an opportunity, if they so choose, to front-run the unwitting customer. Talk of transparency without liquidity!
After a number of years during which regulators have behaved as though they were nothing other than the wise parents of a bunch of long-haired, unwashed and unruly (but vastly overpaid) teenagers who hadn’t got a clue what they were doing and who needed to be curtailed in all their activities, irrespective, they are beginning to understand that the world is a dynamic place and that the lessons learnt by the US government in the 1920s, namely that prohibition can generate more problems than it resolves, should not be entirely dismissed as irrelevant historic clap-trap.
Sure, the bond price bubble is not of the regulators’ making but while busily trying to write rules which would have been useful in 2007 and 2008, they have so far failed to address what might be ahead of us. This, finally, is to be rectified and that have slated little old me to part of the consultation.
What a lovely find…
Finally, I hear that a team of navy divers has found the remains of an armada of sunken ships off the coast of the Peloponnese which must have been carrying a significant cargo of gold from Tyre to Civitavecchia around the time of Caesar.
The find is valued in the billions and the EU Council for Historic Finds in Brussels has ruled that it belongs solely to Athens and that its content can be freely added to Syriza government’s fiscal calculations. The Italians have agreed to this in exchange for the Greeks dropping their claims for huge monetary compensation for the loss to the Romans of Syracuse and its surrounding in 212 BC.
Oh… Did I say… Happy April 1…
