By Robert Wenzel
On the heels of a warning by New York Federal Reserve President William Dudley and another warning by JPMorgan CEO Jamie Dimon, José Viñals, the director of the IMF’s monetary and capital markets department, says that the Federal Reserve’s first interest rate hike risks triggering a jolt to bond markets that could surpass the turmoil the central bank inadvertently set off in 2013
The Federal Reserve’s first interest rate hike risks triggering a jolt to bond markets that could surpass the turmoil the central bank inadvertently set off in 201. “This is going to take place in uncharted territory,” he told FT in an interview.
In its Global Financial Stability Report, released this morning, the IMF argued that risks have not only risen worldwide but that they have rotated to parts of the financial world that are harder to monitor — including to the non-bank sector.
In the report, the IMF said a sudden rise of 100 basis points in 10-year Treasury yields was “quite conceivable” once the market wakes up to the possibility of the first rise in official rates in nearly a decade. “Shifts of this magnitude can
“Markets could be increasingly susceptible to episodes in which liquidity suddenly vanishes and volatility spikes,” it said.
I have never before seen banksters so publicly worried. They are aware that the interest hikes coming are going to be a severe punch to the financial system, especially the bond market.
Think about it: Warnings from the New York Fed president, the head of JPMorgan Chase and a top IMF official. You really have to be insane to own long-term bonds now.
Robert Wenzel is Editor & Publisher at EconomicPolicyJournal.com and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics
This sounds like the usual jawboning when authorities try to scare people with threats of higher rates without actually raising them. Action speaks louder than words.
ReplyDeleteYep. No mention of government borrowing costs or deficits exploding.
DeleteHas Hilsenrath spoken yet?
ReplyDeleteYou think a Fed rate hike happens, I do not;
but if so, will be short lived, a new round of US QE will follow.