Shadow Dealers

Market Analysis
Written By Curtis Winsor

MARCH 31, 2022

The SEC on March 28 [2022] announced that it would try to pull “shadow” government bond dealers (macro hedge funds, high frequency traders, algorithmic traders etc.) into the Dodd-Frank regulatory scheme covering primary government bond dealers.

[This could affect] not only the demand for new government bonds but also the liquidity of the treasury bill and note and mortgage market. These securities are essential for the vast amount of hedging that takes place. Regulatory requirements and hedging needs are part of the reason that institutions [have been willing to buy] securities that offer a negative real (inflation adjusted) yield.

China, Russia, & Japan

[The] Chin[ese]…financial system remains stratospherically leveraged. Bank debt at present is half of GDP and an unknown but large portion of it cannot be repaid….

Curtis Winsor
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