The Financial Times’ Michael MacKenzie, Nicole Bullock & Tracy Alloway report on a recent emergency meeting that took place between Wall Street’s top Banks and Asset Managers in Boston. This was aimed to tackle the $8trillion gap in the corporate debt market – dubbed the “liquidity crunch” – and to set out the implications Basel III and pending Volcker Rule will have on the industry.
The “liquidity crunch” is deemed by the article as being one of the biggest obstacles facing the US. However in order to combat this, one solution to the deficit is the idea of a creation of an open exchange-like platform where buyers and sellers of bonds find each other directly.
Large investors, however, are sceptical that an electronic market could function without the banks acting as a middleman to provide the capital, and the article goes on to speculate how the meeting in Boston may indicate that the industry is preparing for how best to contend with a shakeup of the landscape or decline in capital.
GreySpark agrees, and is of the opinion that in reality the market has already dried up and all that remains is for the larger dealers to try to squeeze the last few drops out of the market. GreySpark’s Managing Partner, Frederic Ponzo, pointedly comments, “You’re living the last few days of the Roman Empire. It’s actually ended, but there’s still a bit of money to be made. Big dealers will try to milk it until it dies.”