Notice: Trying to get property 'display_name' of non-object in /home/theproficientinv/public_html/wp-content/plugins/wordpress-seo/src/presenters/meta-author-presenter.php on line 40
Economy

Liquidity Exits $1.5 Trillion TIPS Market Amid Oil Upheaval

imageEconomy1 hour ago (Mar 11, 2020 04:32PM ET)

(C) Reuters. Liquidity Exits $1.5 Trillion TIPS Market Amid Oil Upheaval

(Bloomberg) — The wheels are off in the $1.5 trillion market for Treasury Inflation-Protected Securities.

These notes, which carry interest payments that are indexed to the U.S. consumer price index, normally outperform regular Treasuries when energy goes on a tear and vice versa. Yet after massively underperforming in tandem with oil’s worst slump since 1991, TIPS ignored crude’s bounce on Tuesday to slip further, and even stronger-than-forecast inflation data on Wednesday couldn’t stem the tide.

“Energy bounces and TIPS don’t?” said Com Crocker, an investment strategist at New Century Advisers and former TIPS market maker from 2002 to 2017. Dealers hedging with energy futures “lost money on both sides of that trade in a significant way,” he said, adding that liquidity is “as bad as I’ve seen, and I’m including 2008.”

A gauge of U.S. consumer prices rose in February at the fastest pace in five months, a release on Wednesday showed. Though a closely watched indicator of inflation, such reports are being discounted by investors focused on the potential fallout of the coronavirus pandemic.

The market “tried to rally a bit” on the data, which showed that inflation continued to run at underlying levels above 2%, said Michael Pond, head of inflation strategy at Barclays (LON:BARC) Plc. “But the market is already dysfunctional, and so breakevens declined yet again.”

An inflation-protected product that doesn’t benefit from inflationary signals is treacherous, Pond said.

“Unless you feel confident that you can hold a position to maturity regardless of what the market does, you have to tread very cautiously.”

Liquidity Exits $1.5 Trillion TIPS Market Amid Oil Upheaval

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Popular

Your daily news source covering investing ideas, market stocks, business, retirement tips from Wall St. to Silicon Valley.

Disclaimer:

TheProficientInvestor.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice.
The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 TheProficientInvestor. All Rights Reserved.

To Top