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Global yields reach 15-year highs as rate-hike worries build
Global government bond yields extended their climb — with the US 30-year reaching the highest point since 2011 and other benchmarks returning to 2008 levels — as resilient economic data challenges the view that central bank rates are peaking. Treasuries have led the global debt selloff as the US economy defies expectations that more than five percentage points of Federal Reserve interest-rate hikes would cause a recession. Officials at the last policy meeting remained concerned that inflation would fail to recede, requiring further tightening, minutes of the meeting released Wednesday showed. (Bloomberg Markets | Aug 17)
US stocks fall as VIX fear gauge takes a leg higher
US stocks fell for the third straight day as a global bond market selloff intensified on worries interest rates will stay high which tamped down enthusiasm for growth-oriented tech giants. Wall Street’s fear gauge, the Cboe Volatility Index or VIX, touched 18 for the first time in seven sessions. The VIX hasn’t reached above 30 — a level considered a sign of heightened volatility — since a series of bank failures rocked the market in March. (Bloomberg Markets | Aug 17)
High-yield default rate to climb as pressures mount: Fitch
Fitch Ratings Inc. is concerned about the ability of US junk-bond issuers to pay back their near-term obligations as the Federal Reserve continues to raise interest rates. The credit grader expects the high-yield default rate to be as high as 5% by the end of this year, as banks pull back on lending and interest expenses weigh on company profits, according to a Tuesday report. Defaults by issuer count were 2.8% in July, up from 2.6% in June, the report said. (Bloomberg Markets - Bonds | Aug 15)
Wall Street is ready to scoop up CRE on the cheap
Wall Street firms are raising new funds to acquire office buildings, apartments, and other troubled commercial real estate, looking to scoop up properties at a fraction of the price investors paid a few years ago. The new funds seek to capitalize on one of the most troubled commercial-property markets in decades. Values have nosedived since interest rates spiked last year, driving up borrowing costs in the highly leveraged business. (The Wall Street Journal | Aug 15)
How the Fed got drawn into shadow banking
Bankers are warning that tougher capital rules being proposed by the Federal Reserve and other US regulators will push more risks out of well-regulated lenders and into markets. “This is great news for hedge funds, private equity, private credit... they’re dancing in the streets,” Jamie Dimon said on JPMorgan Chase & Co.’s earnings call last month even before the entire proposal was unveiled. The chief executive officer of the biggest US bank has since called the plans “hugely disappointing,” saying they will likely increase costs and restrict supplies of some mortgages and small business lending — from banks at least. (Bloomberg Opinion | Aug 14)
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