Trillion-Dollar Firms Dominating Bonds Prompting Probes
http://www.bloomberg.com/news/2014-04-14/trillion-dollar-firms-dominating-bonds-prompting-probes.html
Bill Gross and Larry Fink manage a $3 trillion pile of bonds -- an amount almost as big as Germanys economy. Their firms, Pacific Investment Management Co. and BlackRock Inc. (BLK), doubled holdings since 2008, outpacing the markets growth of 50 percent.
Some of the largest hedge-fund firms, including Bridgewater Associates LP and BlueCrest Capital Management LLP, have also more than doubled their investments in debt, data compiled by Bloomberg show. At the same time, Wall Street banks are shrinking their stakes in bonds, Federal Reserve data show.
The lopsided bond market has caught the attention of the U.S. Securities and Exchange Commission. Not only is the SEC examining whether the biggest players get preferential prices and access because of their influence, its also worried about what happens when the five-year bond rally ends as U.S. policy makers prepare to raise interest rates.
Its going to be interesting to see wholl take the other side of the trade if theres a meaningful sell-off, which presents a huge risk, said Arthur Tetyevsky, a credit-trading strategist at Imperial Capital LLC in New York. Were much closer to the end of the rally, thats for sure.