'My heart goes out to all those Lehman staff. -  up to 5,000 jobs lost in London alone, they say. All the usual platitudes apply, of course, but life does goes on, so I thought readers might like a glimpse of what life is currently like for the (increasingly fewer) City professionals still working in the markets. This is just a snapshot of what the new financial world order is now like.

First off, the bond market is simply not functioning any more. Shock, horror. 'Bovvered,' I hear you say. But this is no joke. Without recourse to the bond markets, institutions like banks simply can't raise money - and that affects us all when we need to borrow money, or take on a mortgage. Quite frankly, Bank debt is now behaving more like emerging market debt in a time of crisis. For example, an HBOS 3 year bond that came to market at 1.00% over libor a few months ago, is now trading at 3.00 %. Or would be, as there are currently no trades, and there is no liquidity. Pretty serious stuff. Much of the market is now behaving as an 'order only' market now (processing client trades only), with no traders wanting to commit their bank's capital (what there is of it left) to trade on its own account.

We always understood when a dodgy third world state lurched from crisis to crisis - and that debt would soon be untradeable. But now it's our own institutions, and some of the biggest financial names in the world, that are under pressure. And there are currently few takers for their stock and hardly any interest in their bonds. Just look at  AIG, for example, which is now re-rated a  lowly A2/A - and is 'offered without' (a dividend)! No-one trust anything any more. Even Lehman senior bond holders, who should expect 60 to 80 cents on the $ for their paper, are seeing those bonds trading at a discounted rate of 30 cents on the $. Incredible.

I always wondered how our financial system, based on trust, could continue to refinance trillions of $ worth of debt every year. The irony now is that the only place you see true liquidity is in the US Treasury market. The Treasury has no choice but to keep issuing securities (the US deficit ensures that), so you are always guaranteed plenty of liquidity there. What investors are now asking, however, is how long can First World countries be trusted when their institutions are failing ?

And, for now, we in the market sit on our inventory and exchange rumours and speculation with colleagues and clients. I had an overseas client call me yesterday, laughing nervously. I hadn't heard from him for ages. He was very direct. 'Oh, I've not got any business for you any more, but I just had to talk to someone who understands what we're going through'.  That sums up the situation perfectly -  a lot of talk and no chalk!'

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