The selloff in corporate bonds is deepening and investors are seeking safety in the longest-dated government debt, which does best when the economy does worst. Defaults are rising as oil tumbles and investors are looking for the best ways to hedge against credit losses.
All this comes as the Fed does, well, nothing much. Instead, it’s China that’s taken the lead with new rounds of financial stimulus in the face of slowing growth. But some days it’s a free for all, with even Kazakhstan wielding its influence.
“Financial markets are desperate for the Fed to drive trading themes, but the ‘world’s central bank’ has fallen to the second rank this summer,” or sometimes third, Jim Vogel, an interest-rate strategist at FTN Financial in Memphis, Tennessee, wrote in a note Thursday.
Benchmark U.S. interest rates are still at about zero, and even if the Fed makes a move this year, it’ll only increase those rates by a fraction of a percentage point. In other words, U.S. monetary conditions are still very easy, more than six years after the worst financial seizure since the Great Depression.
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