In the past 3 days since our last IOTP episode, events in the market are moving extremely quite rapidly. Especially in the bond market, bond yields have been increasing 0.3% to 0.5% per day which was threatening the global debt bubble.
In the past few days, we saw liquidity risks events manifesting and rising credit risks which has spooked many investors. This occurred in both the developed and developing world – such as Turkey which was this week credit default swap rates reach a 19 year high. Much of these moves were in anticipation of the US Federal Reserve’s FOMC which happened in the past 8 hours. In response to rising inflation and inflation expectations data, the FOMC increased interest rates by 0.75% the largest one meeting increase since 1994.
The FOMC has also foreshadowed that interest rates will rise by another 0.5% to 0.75% in July 2022 and that its QT program will continue as previously announced. Today’s actions of the US Federal Reserve and their expected actions going forward are likely to continue to raise credit and liquidity risks both within the USA as well as globally.
If continued unabated – the liquidity or credit crisis will eventuate very quickly.
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