Loading ...And if there is any doubt that market prices have completely detached from underlying fundamentals, look no further than Italy. Italian 10-year yields collapsed 31 bps this week to 2.36%. Spectacular panic buying across global bond markets.
Powell, Draghi, Kuroda and the like fully appreciate that a decade of ultra-loose monetary policies has fueled dangerous Bubbles. But they’ve thrown in the towel; a fight they are afraid to confront. The Fed has not only abandoned “normalization,” it has deserted its primary responsibility for safeguarding financial stability. We’re witnessing nothing short of a historic failure in the Bernanke inflationary policy doctrine, today masked by precarious Speculative Dynamics throughout the risk markets and a historic melt-up in global sovereign bond prices.
History has never experienced such powerful financial Bubbles on a globalized basis. The scope of international trend-following and performance-chasing finance is unprecedented (many tens of Trillions). And with these Bubbles at risk of bursting, central bankers are resolved to employ “whatever it takes” monetary stimulus to hold dislocation at bay. The upshot is only further emboldened market participants, more intense speculation, a greater accumulation of speculative leverage and even more precarious “Terminal Phase” Bubble excess.
ZERO BOUND INTEREST RATES=Swiss 10-year yields down three bps to negative 0.52%
Ten-year Treasury yields declined four bps this week to 2.08%. German bund yields dropped another six bps this week to a record low negative 0.26%, with Swiss 10-year yields down three bps to negative 0.52%. Japanese JGB yields declined three bps to negative 0.12%. Some of the more spectacular yield moves have unfolded away from the typical safe havens. Spanish 10-year yields dropped 16 bps this week to a record low 0.55%, and Portuguese yields sank 19 bps to an all-time low 0.62%. Greek yields fell eight bps to 2.81%.
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