Global liquidity trends.
Concerns over global liquidity have resurfaced since late 2014, both in advanced and emerging markets (EMs). Both central banks and the IMF note that market liquidity has declined, especially in bond markets, due to stricter regulations on derivatives trading in advanced economies, lower sovereign bonds demand in some countries and the end of the credit boom in some EMs. Global liquidity is a loosely defined concept that can be interpreted in different ways and covers a variety of countries and market realities.
Liquidity is highly cyclical and follows a 'boom and bust' cycle.
Accomodative monetary policy and financial regulation may partly offset the exposure to global liquidity volatility.
US monetary policy tightening could exacerbate an EM crisis, where corporates have heavily issued dollar-denominated debt.
The ECB monetary policy will remain accommodative until at least March 2017 partly offsetting risks of a global liquidity shortage.
