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Another Investor Calls Illiquidity a Myth to Repeal Rules 

August 10, 2015

Mary Childs, Bloomberg Business

Warnings of a liquidity crisis in the bond market are a myth created by Wall Street in hopes of repealing regulation, said Krishna Memani, the chief investment officer of OppenheimerFunds.

Bond buyers, who currently have no incentive to buy, will eventually step up when the market declines and owning debt becomes more lucrative again, Memani, whose firm oversees $235 billion, said in an interview.

It’s a view that’s gaining traction among money managers and even some bankers, as the Federal Reserve prepares to raise interest rates as early as next month. Memani has been preaching for months that volatility in bond markets is misunderstood and that price swings reflect changes in monetary policy, not illiquid markets.

“Everyone is talking about it as if the whole world will come apart because there are billions that have gone into this market, so all of a sudden billions will leave,” said Memani, whose firm is based in New York. “Spreads will widen, but it doesn’t mean the market won’t function. There will be investors available in the marketplace who will provide the other side of the trade.”

Read more: Bloomberg Business

 
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