US Bond Market is FAILING. BADLY. $2 trillion fails to deliver???

Excerpts from:
http://www.euromoney.com/Article/2054070/The-US-treasury-market-reaches-breaking-point.html?LS=EMS224393


"There is an even more pressing concern for many participants in this increasingly swollen market: the settlement system has broken down. Following the collapse of Lehman Brothers in September, fails to deliver among the 17 primary dealers in the US treasury market have rocketed to more than $2 trillion over a period of weeks and still lie above $1.3 trillion. Broker/dealers have stopped delivering bonds. Holders of US treasuries are now scared to lend into the repo market in case their bonds are not returned, and potential buyers sit on the sidelines fearful of handing over their money to a counterparty that at best might not deliver a bond on time, and at worst might go under. "

"Fails to deliver in the treasury markets are not a new phenomenon. There is data for fails for treasuries, agencies and mortgage-backed securities as far back as 1990, says Susanne Trimbath, an economist, and former employee of the Depository Trust Co, a subsidiary of Depository Trust and Clearing Corp. "

"Back then, though, there would be $50 billion of fails in a whole year, she says. That figure has grown enormously. Failures in US treasuries were 8.6% of all treasuries outstanding in the first five months of this year, compared with 1.2% in the first five months of 2007. That has ballooned further over the past three months, hitting more than $2 trillion for almost the entire month of October – more than 20% of the daily treasuries trading volume"


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Failure of the Bonds market?

I know that most Malaysian have never touched a bond in their life. So let me just sum it up: The bond market is more integral to the world financial system than the stock market. It ranks right up there with the much talked about credit market. (not surprising since they basically deal with the same thing: financing debt. And they are both rather ridiculously huge)

Fails among 17 primary dealers in US treasury market shot to 2 trillion... That brings up a very important question: how about the OTHER dealers? How many failures among the smaller dealers? ... possibly higher? I mean, considering that these 17 primary dealers are the big guys, the ones who presumably would be in better shape than the little guys... what sort of fails to deliver are occuring amongst the smaller dealers?

What sort of fails are occuring in the non-US Treasury bonds?

The worst case scenario here is that the entire bond market seizes up. No rollovers??? Heaven forbid! ... seriously, I cannot even imagine what damage would be caused by this sort of chaos.

Why do some people think that there is any possibility that the crisis has been solved?

Credit market is still not working properly whatsoever... interbank credit might be looser, but it's still even TIGHTER at the consumer level!

Bond market is at it's worst level ever, as seen above.

Global Trade is frozen. Look at the BDI, or visit the docks one day. Goods are not moving. Part of this is due to tight credit. Part of this is due to lower demand for goods.
Those Pirates are not helping either. Who wants to ship stuff if there's a higher chance that you'll make huge losses from paying ransoms?

Property is dropping. In fact it is only beginning to drop in the less developed nations, who think they might be spared... understand guys. Events unfold slower for underdeveloped nations, but they eventually do hit you too. I'm looking at you Malaysia!

Employment and consumer spending are going into a vicious circle spiralling downwards. For Malaysia, our local consumption is nowhere near enough to sustain our production, so our factories are going to get killed by UK and US unemployment figures.

To make matters worse, terrorists have proven themselves to be smart and are acting at the worst(for us) /best(for them) possible moment. I am unsure what their real objectives are, but what they have managed to accomplish is they've caused political tension between a number of nations.

The only good news? Well, fuel prices are dropping. Housing prices are falling too. That means: this is a good time to look at relocating. Tired of your current neighbourhood? This might not be a bad time for a total change in lifestyle.