New York (HedgeCo.Net) The majority of the time, the stock market is at center stage in most investors eyes. The tickers at the bottom of the screen on CNBC, Bloomberg and Fox Business News are a testament to that. Yes the networks tend to provide updates on the different treasury offerings, but they certainly aren’t as prevalent as the updates on stocks and stock indices.
Recently the credit markets have been garnering more attention and that isn’t likely to change this week for several reasons. First, when the negotiations between Greece and their creditors broke down on Sunday, S&P futures dropped sharply and when the markets opened on Monday, most indices fell immediately.
The second driver behind credit markets remaining in the spotlight is the two-day Fed meeting Tuesday and Wednesday with the rate decision and accompanying statement coming at 2:00 PM Eastern Time. At the beginning of 2015, this particular Fed meeting was one many analysts targeted for a possible rate hike, but circumstances have changed and most are expecting the earliest a possible rate hike would come in September.
Over the last two or three months, the credit markets have been unusually volatile and that has some investors and investment management firms concerned. One such firm is BlackRock, the world’s largest asset manager with $4.8 trillion in assets. Due to the extreme volatility in the bond market, the company is re-evaluating and reworking their risk measurements for their debt holdings. BlackRock isn’t the only firm to make changes either. J.P. Morgan Chase, have starting calculating a liquidity premium for certain bonds in the European market.
Many investors and analysts are concerned with the bond market becoming illiquid and potentially creating the next financial crisis. The likes of Steve Schwarzman and Nouriel Roubini are hard to ignore when it comes to financial matters and with BlackRock and J.P. Morgan changing their risk evaluations and pricing calculations, it seems the credit markets are a growing concern for everyone. With the events of this week, Greece and the Fed, don’t count on the credit markets settling down any.
Rick Pendergraft
Research Analyst
HedgeCoVest
