It's Accelerating

Like I pointed out last night, the mistrust and the rumors, revisions and clarifications are head spinning.

LCH raised margin requirements to trade Italian bonds and rightly so, yet there are rumors already of LCH taking back some if not all of the margin hike after seeing what it has done to the bond market and market in general. Here's an article from the WSJ on the subject.

And here's the response from Peter Tchir in the article...

"I suspect LCH will retract some (if not all) of the margin hike on Italian debt.  That should give a brief spike to the market.  How much of this move is related to LCH’s move is debatable, but if they go back to original margin requirements and bonds don’t respond extremely well, then look out.  I actually don’t think bonds will do that well, because the damage has been done, and if the LCH reverts on margin, look for articles questioning how safe the LCH is.  There is a reason they have these margin requirements – to protect the people who trade on the platform.  If they cave, expect short term bounce, but longer term issues."

As is explained above, even if the margin hike is reversed, this causes trust issues that will have longer term damaging effects on the market.


This is the situation that I was trying to explain last night, trust and credibility are evaporating rapidly.