Saxo Bank: Fed “burst the bubble” in the market of corporate bonds with the help of the aggressive policy of raising the key rate and provoke a new crisis

Danish Saxo Bank’s chief economist of the investment represented by Stephen Jacobsen presents its own series of “shocking forecasts” for 2016. Analysts believe that the US Federal Reserve (Fed) to burst the bubble in the corporate bond market with the help of the aggressive policy of raising the key rate. Investment Bank noted that “shocking forecasts for 2016″ are not official estimates.

“The bubble has become too big, so it can be burst. However, in late 2016 the Fed will come to the conclusion that he had no other choice, and signs of overheating in the markets - labor, property, stocks and bonds - Adjust head regulator Janet Yellen on a decisive way, which will lead to a series of aggressive rate increases, “- says Jacobsen.

Despite the fact that this step is waiting for a long time, it will provoke a large-scale sell-off of all major bond markets, yields were fixed up, carrying amount of the premium for the risky assets. Nothing special, all within the framework of a rate hike scenario.

“But then there was something terrible, something resembling the apocalypse bond market after the bankruptcy of Lehman Brothers. Bond trading and market meyking virtually disappeared from the balance sheets of banks and brokers, which means that the element vital to the functioning of the market, simply no longer exists. The realization will come too late, and all buyers - pension funds, bond funds and insurance companies, as well as funds parity risks with huge leverage - in a panic rush to the exit, “- says Jacobsen.

It also notes that the market will not “safety cushion” in the form of purchasing power of the banks, resulting in a market expected catastrophic consequences.

16 December 2015

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