A senior bond trader in London admitted something unusual to me the other day: he’s scared. It takes a lot to spook really seasoned bankers who have survived more than their fair share of market crises and who know better than to panic. But the current market environment is deeply unnerving for him, not because the financial system is in freefall, but because it’s not.
Markets are, of course, on edge. The US-Israeli war on Iran has cranked the oil price higher and knocked both stocks and government bonds off their perch. Some arcane corners of the market ecosystem, like Korean stocks and short-term European government debt, have taken heavy blows and at times, bond trading has faced small interruptions.
Still, the key thing is how orderly it all is. This is alarming, the trader said. “There’s a degree of complacency. My biggest fear is the market is still working under the assumption that this will not get out of control.”