On Wednesday, 27 October, the dollar began to strengthen. Appeared on the market speculation about the parameters of quantitative easing, with the range of estimates is huge - from 100 billion to 4 trillion U.S. dollars, of course, lies somewhere in between. Most respected investment houses of the world predict 1-1,5 trillion dollars is certainly a huge amount, and it will inevitably lead to inflating bubbles. One of them may be formed in the bond market because it is through the purchase of these tools the Fed intends to pour money into the economy.
"There is much talk about the" bubble "in the bond market and the scare that it may break. I think people are afraid is not quite what follows - the president and chief investment officer of RNC Genter Capital Management, Dan Genter. -" The Bubble " Of course, there is, but I do not think that interest rates suddenly rise and hurl bond prices. This will be a slow, gradual process, and the catastrophe will not happen. And the real problem that few people pay attention - the issue of quality bonds. Investors chasing yield, so buying bonds are less reliable issuers - both corporate and municipal. As a result, today, the spread between, say, A and BBB has shrunk by half in comparison with what was a year ago. In such a situation, I would not fear defaults, and the consequences of reducing the rating. the ten-year bond downgrade from A to BBB can cost investors 15% of the cost. And today's rates do not reflect this risk. "
The process of blowing a bubble in the bond market would be ambiguous. On the one hand, it would lead to a decrease in Treasury yields, because the U.S. Treasury (US Department of the Treasury) - the safest borrower on the planet. However, this can cause an imbalance in the debt market denominated in other currencies. Thus, a dollar in any case, once again wins.
