Average daily volumes in US government bonds last month were down 27% on a year ago at $156 billion. Foreign exchange was off 23%. It’s only monthly data, which make for erratic readings, but anecdotal evidence points to firms devoting their efforts to preparing for the new Mifid II regulations rather than actually trading.
Mifid II starts rolling from January 3, yet many remain woefully unready and are now entering the panic phase of the process.
Not what trading desks need just as many banks start planning their annual bonus payments.
Pension perversity
As a testament to the insanity of how our nation funds its old age, look no further than the Purple Book.
The annual Pension Protection Fund analysis of retirement schemes shows the custodians of our savings are investing in assets they know will perform badly.
Everyone understands shares perform better than bonds over the decades. Yet fund managers in the year to March slashed the percentage of our pensions in equities from 61% to 29%, moving into bonds (up from 28% to 56%). Not that it matters over the lifespan of a pension, but the FTSE 100 gained 21% in that period while bonds went pretty much nowhere.
Is this just fund managers calling a top to the FTSE 100?
No, it’s a continuation of the trend where funds are encouraged to slash risks at every turn.
The only result is that more of the workforce will go short in retirement.
