The fixed income market is too illiquid, and it’s scaring Janus Capital Management.
Fixed income’s lack of liquidity is “without a doubt” a “real problem right now,” Janus CIO Gibson Smith told CNBC. Liquidity tells a firm how fast it can exit or enter a position in the marketplace.
“Over the last 10 years, we’ve been able to freely trade $25, $50, $100 million positions in the market but today those positions have shrunk to $1, $2, $3 million on the bid offer,” he said.
Issues with Greece aren’t helping, as Thursday’s meetings just moved to “kick the can down the road,” says Smith. But, he says, “it’s in the best interest of markets just to let this go, let it have some time on it, try and work out a better resolution that is acceptable for not just the European union but for overall markets.”
Smith isn’t the only nervous one. J.P. Morgan CEO Jamie Dimon and former U.S. Treasury Secretary Larry Summers have both cautioned that post-crisis regulations have dried up liquidity, hurting the market.
Photo: Ary Chst via Flickr.