Or was the oil price decline seen as a harbinger of deflation in some regions? It could also be a reflection of deeper structural economic weaknesses that will complicate the task of policymakers, and thereby challenge the valuation of many asset prices. Only time will tell.
At the same time, the side effects of regulatory changes introduced in recent years, and in particular limitations on banks’ proprietary trading, appear to have reduced the willingness of established primary dealers to hold sizable inventories of fixed-income securities, and to continue to make markets in the less liquid issues.