World
The Structure of the US Treasury Market
An interview with Mohsen Fahmi
In the following interview, seasoned fixed-income portfolio manager Mohsen Fahmi questions this assumption. Fahmi is a veteran multi-asset fund manager with extensive experience managing fixed-income funds, including PIMCO Dynamic Bond, PIMCO GIS Dynamic Bond, and PIMCO Multi-Strategy Alternative Fund. After…
A Safe Haven for Hidden Risks
Inside the Treasury market
Perceptions are shifting regarding the US fixed-income market. In September 2019, interest rates on overnight repos unexpectedly spiked, leading the Federal Reserve Bank of New York to inject $75 billion in liquidity. In March 2020, the Covid-19 pandemic triggered a…
Swap Structure
An interview with Ralph Axel
Have interest rate swaps become the modern repos? In the latest essay in the ongoing series on Market Microstructures, I argue that shifts in the liquidity market have fundamentally altered the function of interest rate swaps (IRS) in the global…
Rate Transformation
Interest rate swaps are modern repos
On September 28, 2023, the Bank of England opened permanent liquidity facilities to nonbanking financial entities—such as pension funds, insurers, and investment funds— many of whom have a role in the interest rate swap market. The move is unprecedented. Historically,…
Working Capital
Tim van Bijsterveldt on transformations in the global payments system
The Federal Reserve has provided payment and settlement services for more than a century. But FedNow, the instant payments service rolled out in late June 2023, is the first new Fed payments rail in 50 years. Though payment and settlement…
Global Payments
Systemic risk and the end of LIBOR
The last day of June marked the final printing of the London Inter-Bank Offered Rate (LIBOR)—an average of anticipated interest rates among London banks which has thus far served as the benchmark for short term and off-shore lending around the…
Making Markets
An interview with Douglas Cifu on the SEC
The Gamestop bubble of 2021—where the value of the company’s stocks increased more than a hundred times over in just a few months—exemplified the rising trend of the meme stock frenzy. The event shed light on the role of retail…
Best Execution?
SEC regulations and the future of retail trading
Recent years have seen the rise of the meme stock frenzy—a wave of stock purchases driven by social media trends. This tendency culminated with the Gamestop bubble of 2021, in which the value of the company’s stocks increased more than…
Inside the Black Box
Examining the microstructures of the financial system
We live in a period of unparalleled financial complexity, and, as the history of recent decades has demonstrated, unparalleled financial risk. The recurring crises which plague the global economy have brought theorists of systemic instability to the fore. Key among…
April 1, 2023
AnalysisBanks as Hedge Funds?
The failure of Silicon Valley Bank
Silicon Valley Bank’s (SVB) short lifespan—from October 17, 1983 to March 10, 2023—has been witness to crucial transformations in the world of modern banking. The bank’s collapse has sparked wide ranging reflections on the roots of the crisis, the utility…
April 6, 2021
AnalysisRisks and Crises
On market makers and risk managers post-2008.
For a long time, Bagehot’s rule, “lend freely, against good collateral, but at a high rate,” restored the Fed’s control over the money market and helped end banking panics and systemic banking crises. This control evaporated on September 15, 2008,…