View from City Road: Fundamental fears emerge among investors
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.One theory was that the February shakeout in bond and equity markets was largely driven by speculators operating in the futures markets. But yesterday's fall suggests that there are still plenty of people holding bonds and shares who can be just as easily panicked into selling by adverse economic developments. The longer the decline goes on, the less justification there is for arguing that this is not a fundamental market. The long- term interest rate - the gilts yield - has now risen by a full point since the new year to 7.3 per cent.
Yesterday there was also real news. The Bundesbank's grudging cut in its repo rate deepened market pessimism about a fall in interest rates below 5 per cent in Germany. The Italian bond auction was bereft of buyers and led to sharp price falls in European bond markets, undermining equity markets in their wake.
From across the Atlantic came news of the fastest quarterly growth in 10 years in the fourth quarter, and a sharp hike in manufacturing prices disclosed in the respected NAPM (purchasing managers) survey. The best guess must be that the US economy has clambered on to a higher growth path. American markets sold off sharply on fears of another rise in the Federal Funds rate.
The question for Europe is whether bond markets will go on behaving as if they were merely an extension of Wall Street. Given the respective cylical positions, this is not rational. But neither is it a good background for today's monetary meeting between the Chancellor and the Governor.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments