Concentration of RISK

5 Banks control 51% of the market

We highlighted the Bond Market Volatility index also known as the MOVE Index last week as we started to notice a break out there. Well that Index is now some 50 points higher and as you can see all this Bank bailout business has certainly left a few participants scrambling. We don’t like to see government interventions, especially as Austrian Economists, but none the less, it is the system that we find ourselves confined to.

The MOVE Index highlights the extreme panic that has gripped the interest rate markets, which saw the Implied Fed Funds Rate approaching 5.7% last week, do a full tilt reversal to expecting the FED to now cut rates by July!

Source: Zerohedge.com

It shows you that there is a complete disconnect between what the FOMC/USTreasury are saying and what the global bond markets seem to be seeing from their trading desks:

We can’t help but think that the overall complacency is well entrenched to the point where a whole generation of asset managers, probably have never seen a real market pullback that didn’t bounce back after a few months. Now with the FOMC/US Treasury implicit backing for all money that ever exists (not sure how) it seems as if we are back to the same story, where real data doesn’t matter, all that matters is that nobody sells, nobody does anything, that they merely keep their capital in the system.