2016-01-24reuters.com

Increased regulation and lower margins have seen five banks exit various countries in the last three months. Others look set to follow, further eroding the infrastructure through which governments raise debt.

While these problems are for now masked by the European Central Bank buying 60 billion euros ($65.5 billion)of debt every month to try to stimulate the euro zone economy, countries may feel the effects more sharply when the ECB scheme ends in March 2017.

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Primary dealers are integral to government bond markets, buying new issues at auctions to service demand from investors and to maintain secondary trading activity. Without their support, countries would find it harder to sell debt, forcing them to offer investors higher interest rates.

Frankly we see this as B.S. In the digital age, there is no need for primary dealers as middle-men to distribute government debt, taking their own cut. Perhaps the biggest opportunity lost will be that for primary dealers to assist central banks in manipulating the market, not making it....



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