Why the ‘broken’ corporate bond market needs an overhaul

[LuckyTheDog]

Don't let your eyes glaze over. This is important.

First of all, while some of you might not have heard of BlackRock, its an incredibly important institution that manages trillions of dollars -- mostly on behalf of large, institutional investors like pension funds and endowments. Second, the real "money shot" in all of this, IMO, is that BlackRock is willing to publicly state that big banks have too much power and that the concentration of power is a danger to the economy.

BlackRock Inc., which has more than US$4.5-trillion in assets under management, released a report this week outlining the changes it wants to see in the bond market, such as loosening the reign the big banks hold on the market and shifting trading to more electronic platforms.

"We believe the secondary trading environment for corporate bonds today is broken, and the extent of the breakage is masked by the current environment of low interest rates and low volatility, coupled with the positive impact of QE on credit markets," BlackRock said in the report.

The criticism comes a week after Daniel Gallagher, a commissioner at the U.S. Securities and Exchange Commission, called for reforms in fixed-income markets, saying that too much focus is being placed on reforming the stock market.

Unlike the stock market, the bond market is mainly concentrated in the hands of banks, which serve as middlemen, or dealmakers, for the buying and selling of bonds. But rules introduced by the Basel Committee on Banking Supervision following the financial crisis have limited the amount of risky corporate debt banks can hold, creating liquidity concerns.

MORE HERE: http://wonkynewsnerd.com/broken-corporate-bond-market-needs-overhaul/

[liberal_at_heart]

1. Corporate bonds will probably get federal help while municipal bonds will just be allowed to fail.

Same s**t different day.