Those who know such glaring lines and explicitly from the... deep state of Wall Street - I am not included in them, but I am transferred - tell me that one of them is: «The market bonds has more right than all economists together». Excessive perhaps, but it contains more than one grain of truth, which consists hereafter: investors in bonds are not interested in narratives – they play their money, and that is why they do not «Play»...
So the question is this: What has persisted in selling (sell-off) in international bond markets lately? Is it just a reflection of the thrust of the energy crisis or something much more serious?
«Coordination» crisis
In the present sell-off in bond markets there is an impressive convergence of a double «coordination». Firstly, geopolitical nature: the collapse of the Alaska Agreement between the US and Russia on Ukrainian now leads to «coordination» the two war centres, Ukraine and the Middle East. This makes everything more complicated, making it very difficult to solve or normalize and increasing the duration of time until a solution or solutions are reached. Second, purely economic: for the first time since the 2008 crisis «coordinated» global sell-off on international bond markets on both sides of the Atlantic, with yields approaching or even exceeding high years or decades.
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The structural problem
The assumption that this is just a reflex of the energy crisis cannot withstand serious control. The energy crisis acts as a catalyst for all crisis outbreaks, but here there are three independent structural causes.
The first concerns the simultaneous and parallel over-charge of G7 countries: USA, Japan, the United Kingdom, France, Italy and Spain are at the same time in a state of over-charge, with the arrow heading upwards at even higher levels of debt. Not only that, but also snowball, i.e. the impact of the deficit on debt is positive, i.e. increases debt, due to the very high costs incurred by all major blocs (US, EU) but also the strongest countries in the EU. As such, for «defence and security» and the competitiveness of their economies. Investors in bonds expect an increase in government debt and a debt surplus (large bond issues, at unprecedented height after the war) and begin to invoice trying to answer the question: what is the rate of yields which «You should» request that they be covered without at the same time breaking the international market.
Crisis Without «stabiliser»
The energy crisis, the ejecting of geopolitical risk and now a new deterioration on these fronts revealed another structural cause: the absence of a stabiliser in the markets. In all the crises in recent years there has been at least one stabilizer, namely an area that has been left unscathed by the crisis and has prevented the worst or a saving institutional intervention. For example, war increased geopolitical risk, but low inflation kept the bond market intact. Oil was rising, but bond yields were downward. Or, more recently, when bond markets were downwards, technological stock went up as compensation. Or, if everything went wrong, as right after the 2008 crisis, central banks had the margin to make large-scale projects «quantitative relaxation» Throwing plenty of money into the markets.
Today we see something rather unusual: an energy crisis, an upward trend in inflation and interest rates, the geopolitical risk remains high and is valued accordingly from the markets, the bond market is in crisis, the technological shares are in decline – and while all these are happening, the portfolios of central banks are over-inflated due to quantitative relaxation programmes and the upward trend of inflation does not allow central banks any substantial intervention, rather obliging them to raise interest rates, triggering bond markets.
All this explosive mixture refers to is the terror of stagnation scare «No help from anywhere».
Investment deadlock
Globally, in the last 15 years at least, the investment portfolio was built based on a very simple logic «diportu»: shares + government bonds. When the shares fell, they usually raised the bonds. But now it has become common stock and bonds falling at the same time.
In 2022 the market was mainly concerned about inflation, which has swelled rapidly since autumn 2021. Today he has something more complex to worry about: inflation may remain high, so interest rates, while at the same time governments need more and more borrowing and central banks are hand-tied...
Problems and dilemmas have become much more complicated and harsher...
The dangerous assembly of all crises, observed in recent days, is not a rare astrological phenomenon in world markets, but the new regularity of a crisis that is multifactorial and complex...
