Recent inflation readings in Australia and the US have reinforced the strong consensus view that inflation will remain very low for a long time.
After fears of rising interest rates and bond market volatility rocked global markets last year, the consensus is now swinging back to the low economic growth / low interest rates narrative.
A primary focus for global financial markets in Q4 2018 was the growing fear that the FED has tightened monetary policy too far, too fast and risks tipping the US economy into recession. This culminated in a severe global equity sell-off, which accelerated after the December FED meeting.
In a theoretically efficient fixed income market, closely related bonds (or derivatives) with similar risk characteristics would always be priced the same. In reality, these prices persistently diverge from each other, which means fixed income markets are inefficient.
Following last week’s meeting of the US Federal Reserve (FED), markets have become increasingly concerned that the FED is making a policy mistake in continuing to increase interest rates.
Recently in the AFR, Tamar Hamlyn discusses how the past weeks and months have seen financial markets approaching the year-end period with decidedly less lustre than investors might like.
This Livewire exclusive discusses the global shift in central bank policy as a key driver of recent volatility and what to expect moving forward.
What does the yield on a 3 month US T Bill have to do with the price of a holiday in Argentina? Plenty, if you follow the chain of events that have driven capital flows since the 2008 financial crisis.
We’ve noted previously that the transition from Quantitative Easing (QE) to Quantitative Tightening (QT) is one of the two important paradigm shifts currently taking place in markets.
It’s our view that there is a paradigm shift currently taking place.