LONDON : For months, investors had shrugged off the threat of rising interest rates. That changed this week.U.S. tech specialists Silicon Valley Bank's failed scramble for fresh capital, after losing $1.8 billion selling a package of bonds to meet depositor demands for cash, sparked a global rout in bank
LONDON : For months, investors had shrugged off the threat of rising interest rates. That changed this week.
"This is the first moment since rates started to rise where systemic risk has really arisen," said Florian Ielpo, head of macro at Lombard Odier Investment Managers.After more than a decade of economic life support by way of easy policy and the flooding of markets with trillions in cash that even spawned virtual crypto money, central banks are slamming into reverse.
Major developed economies alone have lifted rates by more than 3,000 basis points in this tightening cycle, the fastest pace since the 1980s in a bid to tame prices. Demand for U.S. dollars in the currency derivative markets meanwhile surged on Friday, another sign of stress trickling through the system.After triggering the great financial crash more than a decade ago through high-risk bets on housing loans, banks are now shooting back up the list of investor worries.
Graphic: Unrealized gains on investment securities https://www.reuters.com/graphics/BANKS-UNREALIZED%20LOSSES/CHART/lbpggladopq/chart_eikon.jpg U.S. benchmark 10-year yields surged by more than 200 basis points last year and almost 40 bps in February alone on renewed rate-hike bets.
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