Global bonds fall $2.6tn – worse than 2008 financial crisis

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The global bond market is in the grip of its worst free fall since the 2008 financial crisis as central banks struggle to rein in runaway inflation.

Government and corporate debt has fallen 11% since peaking in early 2021, translating into losses of $2.6 trillion, according to Bloomberg.

The 11% drop is the worst since the 10.8% drop during the 2008 financial crisis, according to the Bloomberg Global Aggregate Index.

The index began measuring daily market data in 1990.

Last week, the Federal Reserve raised interest rates by 0.25% – the first time since 2018 that the central bank raised rates in an effort to control inflation.

The Fed also signaled it would raise rates multiple times this year, a sharp U-turn from its massive credit-extending policies to help the struggling economy during the pandemic and a reversal from earlier in the year. last year when the central bank insisted inflation was “transitional”.

According to Bloomberg, corporate bonds are particularly vulnerable to the potential risks of high unemployment combined with rapidly rising inflation.

Wall Street stocks opened at a loss on Wednesday as investors continue to be haunted by runaway inflation.
AFP via Getty Images

Futures on the Dow, Nasdaq and S&P 500 fell before the start of trading on Wednesday morning – just a day after the market recorded a strong session.

Investor fears have been further fueled by soaring oil prices – a byproduct of the ongoing Russian invasion of Ukraine. U.S. crude was selling above $113 a barrel on Wednesday while Brent crude was trading at $120 a barrel.

Carl Icahn, billionaire investor and corporate thief, told CNBC on Tuesday that the economy could experience a “recession or worse”.

“I’ve protected everything for the past few years,” the founder and president of Icahn Enterprises told CNBC.

“We have a strong hedge against long positions and we are trying to be militant to get that advantage… I am negative as you can hear. In the short term I am not even planning.

Icahn sounded pessimistic about whether Fed Chairman Jerome Powell’s plan for further rate hikes will soften the inflation blow.

The combination of soaring inflation fueled fears of a recession.
The combination of soaring inflation fueled fears of a recession.
AFP via Getty Images

“I really don’t know if they can engineer a soft landing,” Icahn said.

“I think it’s going to be a hard landing… Inflation is a terrible thing when it starts.”

Icahn said the possible economic downturn could prompt major U.S. companies to take stock of their management structures.

“There is no accountability in corporate America,” he said. “You have very good companies, very good CEOs, but far too many who are not up to the task.”

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