Bill Gross: Here’s What Could Trigger a ‘Run on the Shadow Banks’

Bill Gross thinks conditions are ripe for a significant liquidity crisis in the markets, and he points a finger at his old firm for its potential to be at the center of the storm.

In his monthly note to investors, the Janus Capital Group fund manager said there are six specific triggers for such an event in which there would not be enough buyers to accommodate sellers in a panicked bond market. ( Tweet This )

“Long used to the inevitability of capital gains, investors and markets have not been tested during a stretch of time when prices go down and policymakers’ hands are tied to perform their historical function of buyer of last resort,” Gross wrote. “It’s then that liquidity will be tested.”

The comments come as fixed income investors face challenges on multiple fronts: Looming debt defaults from both Puerto Rico and Greece, and the latter’s potential exit from the euro zone, along with the likelihood of a Federal Reserve rate hike later this year.


Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.