In the last few months, there have been many headlines about the world. Some important issues may have slipped through the cracks. The rise in US bond rates over the past few months has been close to tipping point. Janet Yellen, the US Treasury Secretary, had to speak out about the issue earlier this week in order to calm down the markets.
Last time, the price of bonds was an issue on the market was in March when several banks went under. To correct this issue, the Fed implemented what was essentially a permanent backstop for the banking system. But as the problem continues to grow, it may only be a matter time before the next thing breaks and causes a market ruckus. Or cause the recession that investors have begun to forget.
What’s going on?
In July, the Fed stopped raising interest rates. They say they might do one more hike in the coming months, but that’s it. The yield on US bonds has risen since then, adding almost 100bps. This is not the way things should work. It is expected that yields will rise and fall in accordance with the rate set by the Fed. We are now in a situation…
