The expanding shadows of private credit seem an odd place to lurk
if central banks’ ‘higher-for-longer’ mantra on interest rates suggests they keep things tight until something breaks.
Without much change in near-term assumptions about peaking Federal Reserve policy rates, investors are starting to reprice long-term bonds to cope with a potentially more resilient, higher-inflation economy where the unwinding of central banks’ gigantic balance sheets of bonds also whips away market supports.
Bond analysts have differing models to measure this, but the New York Fed’s estimate turned positive this week for the first time in more than two years - having been in negative territory for all but two brief occasions in the past eight years.
With a lack of transparent data, especially in Europe, the sheer size of this debt pool hasn’t really been tested in a major downturn or period of prolonged high interest rates. And regulators have fretted about system risks - even if investors are typically pension, insurance and sovereign wealth funds that can better deal with illiquidity over long periods.
France Dernières Nouvelles, France Actualités
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