Markets were remarkably unmoved by Washington's political theater over the debt ceiling. The fall in stocks was limited. Any bounce from this weekend's deal was quickly overshadowed Monday by more bad news on the U.S. economy, The Wall St Journal reports
But, in an obscure corner of the stock market, investors did get a reminder of the risks still lurking in the system—in particular, Wall Street's popular practice of depending heavily on short-term funding to finance long-term investments.
At the height of the debt-ceiling uncertainty on Friday, a handful of mortgage real-estate investment trusts suffered a mini flash crash. Shares of Annaly Capital Management plummeted 19% in a few minutes in the morning, and American Capital Agency fell 22% before recovering the lost ground. The two REITs invest in government-backed mortgage securities using huge amounts of short-term debt. The quick selloff was said to be induced by stop-loss orders that many investors place on these shares, which trigger a sale if the share price moves a certain amount…..
Read more at http://online.wsj.com/article/SB10001424053111903520204576482514017505394.html?mod=markets_newsreel
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