Not that you would have guessed from the stock market, hovering at all-time highs, or from soaring junk bonds, even the riskiest paper: CCC-and-below rated junk bonds skyrocketed since their February 12 low as their average yield plunged from 21.6% to 13.5%. Even the S&P US Distressed High Yield Corporate Bond index has soared 57% since February 12.
Those are miracles to behold.
At the slightest squiggles of the market, the Fed goes into bouts of by now embarrassing flip-flopping on rate increases that demonstrate to the world that they have absolutely nothing else in mind than keeping the stock market inflated and keeping the biggest credit bubble in US history from unceremoniously imploding.
And the ECB is out there with its scorched-earth monetary policies, with negative interest rates and bond purchases, including asset backed securities and corporate bonds, that it has been caught buying directly from issuers. It’s driving even corporate bond yields into the negative. Just now, French drugmaker Sanofi and German household products maker Henkel issued bonds with negative yields, thus getting paid by these hapless investors to borrow.
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Most of the readers of this blog will not realize why the interest rate manipulation is so important. Many people do not understand how Wall Street and the Fed work. It is all a rigged game. Didn't use to be rigged, but it is now.
ReplyDelete4:32 right on,zero interest rates only benefit the rich so their companies borrow at near zero interest and in turn they borrow from their companies evade taxes and live large.
ReplyDeleteTo big to let fail
ReplyDelete