There’s really only one thing anyone involved in the US American capital markets needs to do right now. Wake up. We may not “have maps”, or “such as ..the Iraq” but the hallucinatory dream state of wonderful possible outcomes is bumping up against the hard reality of time. Not the faux default bounce off the pavement saves we’ve become accustomed to, but the cold harsh reality that you just splattered all over the street.
Thousands of former Treasury Note traders have systematically been culled from the operations of the handful of post crisis propped up Banks who have exited the business of playing in Uncle Sam’s IOU’s. While Washington gas bags play politics, few recognize the real problem is no one actually sits in a 5 Year T Seat. If no one sits there, who sits in the corporate, God forbid, Junk seat? The answer is No ONE.
The Street is a 3 Trillion dollar reserve depository. Slap a 6% capital charge on the Fed forced fed reserves and a single conclusion is evident. They don’t need or want the money. We’ve always said There Will Be Debt – what we are warning here is the infrastructure behind its trading is gone. The deepest, widest, most resilient best credit in the world exists in QE induced cryogenic slumber only. And yet, the memories of movement and price discovery and market feedback persist. What happens, after the politics, after the posturing, after the absolute ignorance ? What happens when the Bond begins to stir and Mr. Market nudges your consciousness to WAKE UP ?