We've dealt with the bond market in detail. Their constant and deep sale creates growing concerns in the markets. The American ten-year-old exceeded 5%. French and Italian ten-years are close to touching 4.5%. The bottom of the barrel can't be seen. But what has caused this mass sale? How likely are we to experience a debt crisis again?
We have extensively analysed the reasoning of the new FED administration. The «bazooka» In the case of liquidity on the table, through quantitative relaxation, as a lever for intervention in the markets, he entered the warehouse. The central bank is in an observer position.
With the war in progress and geopolitical fever soaring, the oil market shows signs of fatigue. Black gold is again over 100$ The barrel. The scenario we used to say about oil at 150.$ If the alleys remain closed for a long time, it seems possible again. Inflationary expectations are rising. Confessors are asking for a greater return. Bonds sell out.
In addition to inflation, there is an oversupply of debt. Governments in the West, with their invisible deficits, are constantly borrowing, increasing their public debts. It's not just governments that borrow. The AI revolution has created unprecedented capital needs for the construction of Data Center. It is estimated that in 2026 the new loan will reach $500 to $600 billion. After a long time, the spreads of bonds for Data Center began to increase. Investors require greater efficiency to lend the technological colossals.
The large offer creates competition in the bond market. Why would an investor lend the American public with 4.9%, while having the option to lend a data center manufacturer with 6%? Let alone when data center bonds have an AAA rating. The growing amount of high-quality debt, then, makes government debt less attractive. Increased interest rates are a natural consequence.
One more panic factor is Japan. With the rising sun country facing a new monetary and economic reality, mass sellout in the Japanese yen creates panic. To support the yen, Japan's central bank sells US government bonds to increase its reserves. The US Finance Minister, to avoid further bond sales, decided to support Jen himself. It's unprecedented. But this act is based on the assumption that Japan's central bank will raise interest rates at its next meeting. Bessend acted like a machine god to prevent the worst. If this act convinced the traders, it remains to be seen.
So selling in progress makes sense for investors to start wondering who the weakest link is. It's definitely not the Data Center and the United States. The clouds above the patients of Europe are getting dense.
