Get the latest market trends in your inbox

Stay on top of the latest market trends and economic insights with the Axios Markets newsletter. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Minneapolis-St. Paul

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa-St. Petersburg news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa-St. Petersburg

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Illustration: Aïda Amer/Axios

The big lesson of this week: Don't trust the markets.

What's happening: U.S. money markets fell into chaos this week as risk-free overnight interest rates spiked to almost 10%. But, while market information is a very important signal, it should never be taken as being definitive.

  • In the stock market, public order books on "lit" markets — where all the buy and sell orders for any given stock are theoretically visible to all traders — have been functionally useless for years. High-frequency traders place and withdraw millions of orders every second, and there's a mini "flash crash" in some stock or other every day, with the price plunging and then recovering within the blink of an eye.
  • In precious metals futures, criminal racketeering and market manipulation went on for some 8 years, according to a complaint this week against JPMorgan traders, including the former head of the bank's precious metals desk.
  • In fixed-income markets, banks have been fined billions of dollars — and 5 bankers have gone to jail — for manipulating the key Libor interest rate.

Where it stands: This week's chaos was largely due to a series of technical factors, including the fact that the Treasury issued some $54 billion of new bonds at exactly the same time that companies started withdrawing cash in order to make their Sept. 15 quarterly tax payments.

Context: Until the financial crisis in 2008, the Fed conducted open market operations every day to keep interest rates at their target level. Those operations ended when quantitative easing massively expanded the central bank's balance sheet.

  • Now that its balance sheet is shrinking and banks need abundant reserves for regulatory reasons, the Fed is going to have to step in more frequently to ensure that rates are where they should be.

My thought bubble: The Fed's traders could probably have told Treasury's liability-management team that the timing of their bond issues would be problematic for the money markets.

  • But we no longer live in a world where Tim Geithner could move effortlessly from Treasury to the New York Fed and back again. President Trump is waging war against the Fed, which makes things very awkward at Treasury.

What they're saying: "There are some advantages to just asking banks to make up the interest rate," writes the indispensable Bloomberg columnist Matt Levine. "To the extent that reality is messy and idiosyncratic there is something nice about abstracting away from it."

The bottom line: Multitrillion-dollar financial markets often look reasonably stable from afar. But they're always slapdash and human, and prone to deliberate or accidental breakage.

  • When that happens, governments and technocrats need to be able to step in to fix what's broken. Governments aren't perfect, but taking them out of the system entirely, as some Bitcoin true believers would like to do, seems like a terrible idea.

Go deeper

Cold December as safety nets expire

Illustration: Sarah Grillo/Axios

Safety nets are likely to be yanked from underneath millions of vulnerable Americans in December, as the coronavirus surges.

Why it matters: Those most at risk are depending on one or more relief programs that are set to expire, right as the economic recovery becomes more fragile than it's been in months.

15 hours ago - Health

Food banks feel the strain without holiday volunteers

People wait in line at Food Bank Community Kitchen on Nov. 25 in New York City. Photo: Michael Loccisano/Getty Images for Food Bank For New York City

America's food banks are sounding the alarm during this unprecedented holiday season.

The big picture: Soup kitchens and charities, usually brimming with holiday volunteers, are getting far less help.

17 hours ago - Health

AstraZeneca CEO: "We need to do an additional study" on COVID vaccine

Photo: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images

AstraZeneca CEO Pascal Soriot said on Thursday the company is likely to start a new global trial to measure how effective its coronavirus vaccine is, Bloomberg reports.

Why it matters: Following Phase 3 trials, Oxford and AstraZeneca said their vaccine was 90% effective in people who got a half dose followed by a full dose, and 62% effective in people who got two full doses.