Fixed Income Update – Beware of Collateral Crunch
The result is an increasing risk of a ‘Collateral Crunch’.
My colleague, Ulrik Silberg, has analysed the situation.
In short he concludes:
Insufficient quality collateral and funding turning secured is causing risk of a collateral crunch
Need for high quality collateral is an important factor for current pricing of safe-haven assets
If the collateral squeeze worsens, expect rich pricing of e.g. AAA bonds to get even richer