The New CS Board

[jumanji0881]

How A Small Rise In Bond Yields May Create A Financial Crisis : https://www.zerohedge.com/markets/how-small-rise-bond-yields-may-create-financial-crisis

My Comment : The Fed has no choice but to continue to suppress rates for fear rising rates will burst the bubbles, but that only makes the bubbles larger and it supports inflationary pressures which forces rates higher.

Excerpt:
What worries me the most is that most consensus comments messages are that central banks should accelerate financial repression to avoid a market slump. Instead of paying attention to the risks built in the past decade due to abnormal rates and bond valuations, instead of raising the alarm on the numerous bubbles we can see in markets, most are asking central banks to inflate the bubble further at any cost.

However, this time it may not work. Why? Because this time inflation is actually rising, and rates rise even with central bank dovish policies and financial repression. You wanted inflation, you got it. What is the problem of a bounce in inflation if the economy is recovering strongly? The problem is that, for years, investors have been told to take massive and rising risk betting on one thing and the opposite: That the economy is going to grow, and inflation recover but central banks will keep low rates and high liquidity regardless.

There is no problem in a 2% US 10-year bond yield in normal conditions of a growing economy with 2% inflation. There are a lot of problems when entire markets have based their valuations on inflationary policies not generating inflation.

The risk of a financial crisis does not come from rising bond yields. The risk of a financial crisis was created by lowering bond yields to unrealistic and unjustifiable levels in the first place.