In part, it is due to various types of non-bank investor in credit finding themselves facing actual or incipient liquidity pressures. Both as cause and effect, liquidity in the capital markets is impaired.
This is apparent in the opening up of a so-called “negative basis” between the spreads on corporate bond and on equivalent credit-default swaps, which unbundle the transfer of credit risk from the provision of funds and so are less affected by liquidity hoarding (Chart 12). A twin-engine financial system?