market stress

The Federal Reserve raised interest rates at the fastest pace in decades in 2022. But despite the rapid shift in borrowing costs, not much in the financial system actually 'broke.' Stocks and other risk assets went down, but aside from a few issues like the gilt market drama in October, we didn't see a big systemic event. On this episode of Odd Lots, which was recorded live at the Credit Market Structure Alliance conference in New York, we speak with Fabio Natalucci about how he's thinking of financial risk right now. Fabio is the Deputy Director of the Monetary and Capital Markets Department at the International Monetary Fund and he writes the IMF's annual financial stability report. He walks us through the key risks he sees as still lurking in the system, as well as what's changed since 2008.

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The market for US Treasuries is arguably one of the most important and liquid markets in the world. But it's been experiencing a number of hiccups in recent years, such as the sudden selloff of March 2020. And in more recent weeks, yields on US government debt have also spiked as the Federal Reserve raises interest rates. Some of that makes sense as the central bank makes big changes to its forecast for inflation and markets adjust to the new path. But the degree of the moves has also led some traders to conclude that there's a problem in the way this huge market is functioning. So why does a market that should be pretty boring keep experiencing all this drama? On this episode, we bring back Josh Younger, Managing Director and Global Head of ALM Research and Strategy at JPMorgan, to talk about why bonds keep going through all these shocks and what can be done to minimize them. 

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The collapse of the Terra/Luna experiment has brought fresh attention to stablecoins, and the different flavors they come in. Some are fully backed with standard financial assets. Others are backed by crypto. Others aren't really backed at all. But why the interest in stablecoins to begin with? Why so much enthusiasm and investment for cryptocurrencies that aren't even designed to go up? On this episode of the podcast, we speak with Alan Lane. Alan is the CEO of Silvergate Bank, which is one of the most important financial institutions in crypto, providing banking services to many of the big players. It's also active in the stablecoin space, providing infrastructure for creating and redeeming them. Among other things, it purchased the assets of Diem, which was Facebook's aborted stablecoin project. We talk with Alan about why there's so much money in the space, and how the industry might be properly regulated.

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