One of the most catastrophic things central banks have done in the post financial crisis period is destroy financial markets. Investors are no longer investors, they’re merely helpless rats running around the lunatic central planning maze desperately attempting to survive by front running the latest round of central bank purchases.
While actual macroeconomic and corporate fundamentals do still exert influence on financial asset prices from time to time, the far bigger driver of performance over the past several years is central bank policy.
– From April’s post: The ECB’s Insane Monetary Policy is Creating a Rush Into Derivatives
If the following headline from a Bloomberg article published today doesn’t give you the chills, you aren’t paying attention.
Here are a few excerpts from the article:
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Yesterday, the Wall Street Journal published an article highlighting the surge in what it calls “ultralong” bonds, defined as having a maturity of more than 30 years. The findings are simply stunning. In what may seem counterintuitive, bond yields at hundred year plus lows in many countries has led major investment firms to rush into ever riskier and longer duration fixed income securities just to earn some income. This has opened the floodgates to governments and corporations looking to lock in low yields on debt they won’t have to pay back for a generation.