This week the focus has been on Japan, where “Abenomics” is beginning to bite in ways unexpected by the Japanese authorities. Confidence in both bond and equity markets was destabilised, as investors digested the implications of monetary policy out of control. There is a portent here: there comes a point where a central bank loses control of markets, perhaps an event coming to a central bank near you soon.
The fall in Japanese markets has, however, undermined markets elsewhere – both through the spread of deteriorating sentiment, and also because hedge funds had been unwinding long positions financed by borrowing in yen. The effect on US Treasury bond yields should ring some alarm bells, as indicated in the chart for the 10-year bond, which has now broken firmly above the 2% level.
Read the complete article at GoldMoney here.
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