Worst Western debt market crash since 1949, Bloomberg predicts

Bloomberg says: “Week by week, the bond market crash is getting worse, with no end in sight.” The worst collapse of the Western government debt market since 1949 is coming.

Last Wednesday, at the meeting of the Fed, the policy rate range was raised to 3% – 3.25%, this was the third consecutive increase of 75 basis points. Politicians say they expect the rate to rise above 4.5% and plan to keep it at that level even if it hurts the economy a lot. According to the latest data:

1. On Friday, UK 5-year bonds collapsed the most since at least 1992, after the government launched an ambitious tax cut plan that could only bolster the Bank of England’s position.
2. Two-year US Treasuries are in the middle of their worst losing streak since 1976.
3. Worldwide, according to Bank of America, government bond markets are on track for their worst year since 1949, the period when Europe was recovering from World War II.
4. The mounting losses reflect how far the Fed (Federal Reserve) and other central banks have moved away from monetary policy due to the pandemic, when they kept interest rates close to zero to prop up their economies.

The reversal has taken a toll on everything from stock prices to oil as investors brace for a slowdown in economic growth and higher rates push Western economies further down.

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