Posted on 08/18/2011 4:56:17 PM PDT by bruinbirdman
The global credit markets are braced for deflation and perhaps depression.
Panic flight to safety has pushed the yield on 10-year US Treasuries below 2pc for the first time in American history, exceeding the extremes of the Lehman crisis and the banking crash of the 1930s.
Investors scrambled to buy the bonds of strongest industrial states on Thursday on fears of a double-dip recession on both sides of the Atlantic and a European banking crash, driving down their returns to investors. German yields fell to 2.08pc and Switzerland's 3-month rates have turned deeply negative.
Markets were stunned by a plunge in the manufacturing index of the Philadelphia Federal Reserve to minus 30.7 in August from plus 3.2 in July, one of the most violent falls ever recorded.
"It is a catastrophic collapse," said Rob Carnell from ING. "Markets are in a fearful state right now, and data like this gives them plenty of excuses to panic."
Andrew Roberts, credit strategist at RBS, said investors are haunted by fears that European banks may have lost full access to America's $7 trillion markets, leaving them at imminent risk of a dollar squeeze.
An unidentified European lender had to tap $500m from the European Central Bank's (ECB) swap line with the Federal Reserve, indicating that it had been shut out of the markets. US investors have brought down the guillotine since the EMU debt crisis spread to Italy and Spain, and Germany vetoed any form of eurobonds or fiscal union. "This is what has kicked [off] the latest turbulence," Mr Roberts said.
Ewald Nowotny, Austria's central bank governor and an ECB member, told newspaper Wirtschaftsblatt there was a "growing reluctance" within US money market funds to finance the Europeans, though he blamed the cut-off on a change in US
(Excerpt) Read more at telegraph.co.uk ...
“”The global credit markets are braced for deflation and perhaps depression.””
Not so sure this is the reason for the drop in interest rates to 2% for the 10 year bond.
I would attribute the Federal Reserve and other Central Bank purchase of sovereign debt as the reason. The money has to go someplace.
CW II, it’s coming.
“The global credit markets are braced for deflation.”
You mean my spendable income may buy more goods.
You mean people that work their asses off will actually be rewarded for their efforts? Most “poor” people eat better, drive better, have better cell phones, and dress better than me.
If you have income.
Or savings.
Rather iffy in a depression.
yitbos
I gotta believe that people with skills and are willing to work will ALWAYS be employed.
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