2022 DEBT MARKETS LIQUIDITY DEVELOPMENTS AND OUTLOOK
In the next 12 months, central banks are expected to drain up to $2 trillion of global liquidity. The U.S. Fed will account for about half of this as it reduces the size of its balance sheet, but the Bank of Canada will also make a sizable drawdown. Removing excess liquidity, and significant capital requirements alongside ongoing interest rate hikes, pose undeniable headwinds for fixed income market liquidity as well as rich stock valuations, and create room for central banks to react and smooth future market disruptions.
Click here to read the IIAC’s paper titled Liquidity in Canadian Fixed Income Markets.