Week InReview

Bond market liquidity woes

"Get ready for a rocky ride in bond markets. The price of a safer banking system is more danger for investment institutions.

"U.S. and U.K. regulators last week sounded warnings about the knock-on effects for corporate debt markets when large institutional investors face demands for liquidity. These demands could cause more turmoil than in the past because investors now provide much more corporate funding and are more exposed to collateral calls from derivatives.

"The Fed is also concerned about the potential for runs from open-ended mutual funds. A drop in corporate debt prices could prompt a rush to redeem funds, sparking further falls and so on."

- Liberty Street Economics

Friday | Dec 7, 2018
Nothing's working, not large or small-cap stocks in the U.S., not international or emerging equities, not Treasuries, investment-grade bonds, commodities or real estate. That's all but unique in history. Normally when something falls, something else gains. Amid the financial catastrophe of 2008, Treasuries rallied. In 1974, commodities were a bright spot. In 2002, it was REITs. In 2018, there's nowhere to run. (Bloomberg Markets | Dec 5)

Inverted yield curves aren't a crystal ball
Even if the full curve does flip, investors shouldn't confuse cause for effect: inverted yield curves don't cause recessions, nor provide new information about the economy. They simply reflect a market assumption that growth will slow, based on how long the expansion has been going on and what data is available. (The Wall Street Journal | Dec 4)
 
Banks may be safer in a debt crisis, but investors aren't
Get ready for a rocky ride in bond markets. The price of a safer banking system is more danger for investment institutions. Regulators are worried about what happens in bond markets when institutional investors face a liquidity crunch.  (The Wall Street Journal | Dec 4)
 
The flattening yield curve just produced its first inversion in more than a decade
The spread between 3- and 5-year yields fell to negative 1.4 basis points Monday, dropping below zero for the first time since 2007, and the 2- to 5-year gap soon followed. The 2- to 10-year is more closely watched as a potential indicator of pending recessions. But Monday's move could be the first signal that the market is putting the Federal Reserve on notice that the end of its tightening cycle is approaching. (Bloomberg Markets | Dec 3)
 
Inexplicable spikes still imperil Treasury market: Fed's Brainard
Concerns persist about high-speed trading and use of algorithms as the Federal Reserve has begun collecting and analyzing data which showed the impact of the growth of proprietary trading firms and high-frequency trading in the $15 trillion Treasury market. (Reuters | Dec 3)
Best interest rule & proxy process 'plumbing'
SEC's Clayton vows progress
(Dec 6) -- A new best interest standard for broker-dealers and overhauling the proxy process's "plumbing" will be among the SEC's top priorities in the coming year, Securities and Exchange Commission Chair Jay Clayton said Dec. 6. Clayton said in a New York speech that the SEC would work to complete several high-profile rules in 2019 and continue its focus on cryptocurrency innovations, including regulation of initial coin offerings. Also high on the SEC agenda is changes to proxy access and other shareholder proposals.
The Cyber Cafe
Cybersecurity news every Friday
Cyber security: Hackers step out of the shadows with bigger, bolder attacks
Successful hacking campaigns used to be all about keeping under the radar. But increasingly, cyber attacks are now carried out in fully public view, and many attackers don't appear to worry so much about keeping under the radar. Some even seem to go out of their way to make sure they are spotted.
- ZDNet

Dozens of signatories added to Paris cyber agreement
The "Paris Call for Trust and Security in Cyberspace," unveiled by French President Emmanuel Macron during the Paris Peace Forum on Nov. 13, has now earned more than 450 signatories. But the U.S is not among them, despite the role Microsoft played in the agreement.
The Hill

Is your company ready for a cyberattack?
Many companies are putting themselves through military-inspired games to beef up their cyber resilience, since they face many of the same cyber risks as military and government agencies.
Binge reading disorder
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25 questions about Hanukkah, answered
From proper spellings and whether to call it a menorah or hanukkiah, to how to celebrate in space and where you can find a competitive dreidel game, we have the answers to 25 pressing questions about the Festival of Lights.

Your phone is listening and it's not paranoia
Here's how one reporter got to bottom of the ads-coinciding-with-conversations mystery.
Vice

Travel hacks from A to Z: Tips to beat jet lag, lines, theft, hangovers
Celebrities, industry professionals, and million milers recommend clever tips to ease your trips.
Bloomberg Travel