The hottest Market Liquidity Substack posts right now

Private credit is far more fragile than it’s marketed to be; many funds are highly leveraged and lightly regulated, so they can suffer big losses when conditions change.
Some funds have already taken large markdowns because borrowers and business models that depended on cheap debt are now failing, which translates into real capital destruction for investors.
The easy-money environment masked these weaknesses, and as borrowing costs rise more loans tied to fragile businesses will likely deteriorate, implying broader stress ahead for the private-credit market.

The Federal Reserve is slowing down quantitative tightening to avoid liquidity issues in financial markets.
Bitcoin is positioned to benefit from the Federal Reserve's monetary policy decisions.
Markets have been influenced by excess liquidity and are now facing potential liquidity constraints.

Liquidity is more than just central bank reserves; it's about the available cash for trading financial assets.
Global liquidity, different from traditional money supply measures, is crucial for funding transactions and rolling over debt in financial markets.
Increases in liquidity drive up prices of assets like equities, bonds, and cryptocurrencies as more dollars chase the same investments.

When Europe suffers a debt shock, international bond funds often sell assets abroad, so Asian bond markets get hit even if their fundamentals are fine.
Fund managers sell Asian bonds much more aggressively than European peripheral bonds—Asian holdings fell about three times as much after Eurozone credit shocks.
Liquid sovereign bonds are sold first, causing sovereign holdings to drop quickly and corporate holdings to fall later, leaving Asian bond portfolio weights roughly one percentage point lower after six months.

The U.S. Treasury has financial strategies in place to address debt ceiling concerns and maintain market liquidity.
The Treasury plans to issue new debt to refill its Treasury General Account (TGA) and may impact bank reserves depending on funding sources.
There is caution regarding the effectiveness of the plan as Treasury auctions are not selective, and market liquidity concerns persist despite RRP usage.

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All assets are considered illiquid, meaning they can't always be sold quickly at their current price without costs involved. This changes how we understand and measure the value of assets.
Illiquidity varies between different asset classes, like real estate being less liquid compared to stocks and bonds. Some stocks are also more liquid based on their size and price.
Investors care about liquidity because it affects asset prices and returns. Illiquid assets tend to have lower prices and higher expected returns, especially during market crises.

In illiquid markets, companies find it hard to access funds, which can limit their ability to take on new investments. Instead of focusing just on net present value, using a percentage return like IRR can help maximize their value.
The mixture of debt and equity that minimizes costs can change in illiquid markets. If the equity market is less liquid, companies may want to increase debt, but if the debt market is illiquid, they might choose to decrease debt.
Companies facing illiquidity may decide to keep more cash on hand instead of returning it to shareholders. This can lead to higher dividends and less reliance on stock buybacks, as investors favor cash during uncertain times.