Right now only few market participants are quoting one tick wide markets for the futures contracts. Because of the current spike in volatility, electronic futures liquidity has fallen to historic lows to a point where we now have a median of 10 contracts. This is 12 times shrinkage when compared to 2019 because at that time, we had a median of 120 contracts. Only a small number of contracts is being quoted and only a few market makers are quoting a narrow spreads. Because of this market turmoil, on Monday we had E-mini futures that had 50 cents wide more than 25 percent of the trading time. This is double of what was happening during the 2008 market decline.
Due to this low liquidity, smaller trades are now able to move the markets unlike during normal conditions where small trades have not significant effect to the market. This makes the market very volatile and unpredictable even as the current global panic continues to cause more selloff. The SPX futures and options volume has been lower in the past week compared to the initial stages of this bear market. This explains why the liquidity in equity markets has been collapsing in the last two weeks. At the same time, other financial assets have been affected and this can be attributed to the ongoing global panic that has shocked the financial system. Until now, the Federal Reserve has not been able to fully resolve the liquidity problems in the markets. Even the repo market is facing a lot of liquidity challenges and this has forced the Federal Reserve to step in to at least remedy the situation. The global financial markets are crashing at a very fast rate and very soon we might find ourselves in an economic collapse.
The situation has only been getting worse every passing day and right now the bond market is struggling with the lack of liquidity to a point where veteran traders are troubled. Also the US treasury market worth more than $17 trillion has been creaking because of this panic among the trades as a result of a slowdown in global economy. The 30-year treasury bonds yields have dropped to historic lows and this is a perfect reflection of how bad the economy is. These huge moves show how fragile the bond market is. Early this week, the bond market posted the worst intraday decline in the last two decades.
We have had an abrupt deterioration of liquidity in the last two weeks and to add insult to this economic injury, the stock and the bond markets are surging continuously. Right now we have a panic selloff in the stock market and right in this week the market has been down for more than 20 percent. We have wild price swing in the markets only seen back in 1929. This is happening when the whole economy is going through an economic collapse. This is the time when the Federal Reserve has to take massive actions to save the markets and the economy at large; otherwise we will find ourselves in the middle of a devastating stock market crash and it will be too late to act.
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