“Interesting things have certainly been happening in the underpinnings of global markets – things that either run counter to long-standing financial logic, or represent an unusual dislocation in the “normal” state of market affairs, or were once rare occurrences but have been happening with increasing frequency.
Here’s a rundown.
1. Negative swap spreads
What’s new, and negative, and makes no sense? Swap spreads below zero, of course.
While the term may mean little to your average retail investor, swap spreads have become the talk of financial markets in recent weeks as they plumb historic lows and seemingly defy market logic,” wrote Tracy Alloway for The Globe and Mail on Thursday November 12, 2015.
Alloway continued, “4. Market moves that aren’t supposed to happen keep happening
Much of Wall Street runs on mathematical models that abhor statistical anomalies. Unfortunately for the Street, such statistical anomalies have been happening more frequently, with short-term moves in many assets exceeding historical norms.
Barnaby Martin, a credit strategist at Bank of America Merrill Lynch, made this point earlier this year. The number of assets registering large moves – four or more standard deviations away from their normal trading range – has been increasing. Such moves would normally be expected to happen once every 62 years.”
Read the full article here.
Raymond Matt, CFP, CLU, TEP, CHS
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