Liquidity in Italian debt “suddenly deteriorated to the worst since the euro crisis, maybe worse than the euro crisis,” said one hedge fund manager in New York. “The market really seized up. If you had a large position to unwind you were going to find it very hard to get out without moving the market a lot.”
While the prospect of Eurosceptic populists taking power in Italy rattled investors, the outsized swings in bond prices once again drew attention to the drawbacks of post-financial crisis regulation: namely that markets function very poorly when turmoil erupts.
“People are trying to sell and there isn’t a buyer on the other side and so the market gaps much wider,” said a senior investor at a major European asset manager.
While the prospect of Eurosceptic populists taking power in Italy rattled investors, the outsized swings in bond prices once again drew attention to the drawbacks of post-financial crisis regulation: namely that markets function very poorly when turmoil erupts.
“People are trying to sell and there isn’t a buyer on the other side and so the market gaps much wider,” said a senior investor at a major European asset manager.
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