Brexit Aftermath: Dead Cat Bounce and Another $1 Trillion in Bonds Now Have Negative Interest Rates
July 2, 2016 (EIRNS)—Almost before the Brexit vote was known, Bank of England Governor Mark Carney last Thursday June 30 had announced some £250 billion ($330 billion) in new quantitative easing, to try to forestall an uncontrolled panic meltdown of the trans-Atlantic financial system. The European Central Bank and the Bank of Japan are doing the same, and the Fed has "signaled" pretty clearly that the long-awaited next interest rate rise is postponed indefinitely—if not longer. And so, the City of London and Wall Street would have us believe, all is well in the world of finance ... at least through the July 4 holiday weekend.
Reuters reported on one interesting result of this massive effort to flood the markets with yet more hyperinflationary liquidity:
"Since the Brexit vote, more than $1 trillion worth of bonds have joined the negative-yield club, with more than $11.7 trillion worth of debt worldwide now estimated to be yielding less than zero."
And those bonds that were already in negative territory are now going further south with every passing day. For example, German bunds are now trading at -0.13%, and some market gurus project them dropping to -0.25% over coming months.
Reflecting the level of psychosis pervading the financial world, Reuters tried to put a smiley face on it all:
"Pessimists may have underestimated the positive effect of increased liquidity in markets.... U.S. investors are focusing on what they see as an immediate, virtual certainty that the Federal Reserve will not raise interest rates anytime soon."