QE Party is Ending, Rising Interest Rates Means the Fed Could Go Bankrupt
By: Graham Summers
Aug 20, 2013
The QE party is ending. And the following hangover is going to be brutal.
Since 2007 the Central Bankers of the world have operated under the belief that they can hold the financial system together by engaging in round after round of Quantitative Easing (QE) without losing control of the bond markets/ interest rates.
They believed this because:
1) We haven’t had a bear market in bonds in 30+ years
2) They believe that they (Central Banks) will never lose credibility with the markets.
This entire theory crashed into the wall in April 2013 when the Bank of Japan announced its “shock and awe” QE program.
The yield on the ten-year Japanese Government bond has since violated its trendline and is now retesting former resistance. This is a classic breakout that typically precedes sharp moves higher. In the case of Japanese Government bonds, this would mean the bonds losing value.