FOMC Advanced Battle Tank Is Blowing Up Global Bond-Market
Sept. 26, 2022 (EIRNS)—As if a new battle tank had been unleashed on the NATO side—the Federal Reserve’s Federal Open Market Committee (FOMC)—whose destructive power is shoving NATO sanctions themselves to one side, the suddenly spiking U.S. dollar has started a global currency crisis and threatens the world’s bond markets with a meltdown. The dollar continued its rocket rise on Monday morning, Sept. 26, with U.S. Treasury interest rates now rising 10-20 basis points per day and taking corporate bond rates up with them even among the few remaining AAA-rated conglomerates. The euro is down to 96 cents; yen at 144/dollar where it has not been for decades; sterling has collapsed from $1.14 last Thursday afternoon (Sept. 22) to $1.06 Monday afternoon; China’s yuan has hit 7/dollar and the People’s Bank of China moved to restrict currency derivatives trading in order to keep it there. The Bank of England held an emergency meeting but, unlike the PBOC, only talked about doing something and did not; so it will probably have to hold another, even greater, emergency meeting very soon.
Bank of America market analysts published a note Sept. 23, widely reported in financial media over the weekend, which warns that the U.K. bond market crisis which exploded Sept. 22 could signal that the Federal Reserve’s repeated jumps in dollar interest rates could trigger a “historic global bond market crash” spreading from the British to other nations’ debt. Such a crash would threaten general liquidation, BOA said, “of the world’s most crowded trades” of the moment: in U.S. Treasuries, U.S. technology companies, and Wall Street private equity firms.
The BOA analysts said that “Bonds are generally regarded as one of the most liquid asset classes available to investors. If liquidity dries up in that market, it’s bad news for just about every other form of investment.”