Feeding the Chickens

“I believe in being fully transparent,” we told our spouse, negotiating NFL playoff viewing rights this past weekend. “It’s working,” she said. “I can see right through you.”

In that same spirit of confession, your correspondent reminds readers of last week’s forecast regarding fund flows. We predicted outflows from retail loan accounts, which had been in the $1 billion-plus range (settling down to $327 million last week), would moderate to close to zero. Perhaps even a small in-flow.

So it was a surprise when out-flows continued in a robust fashion – $943 million for the week. In our defense, this outcome was a surprise to at least one other credible analyst. “It certainly didn’t feel like $1 billion left the market,” he wrote.

There was also the suggestion that broadly syndicated loan PMs are more comfortable managing with less cash, given the lower volatility we’ve been seeing since the start of the year. Nevertheless it’s hard to believe more outflows in this range would not at some point begin to affect overall liquidity in the market.