The growing fragility of the debt market in the main economies of the world highlights that the cost of indebtedness can no longer be ignored, and governments must act with greater fiscal discipline to avoid a crisis of trust.
Alert markets: pressure on Japanese bonds and warnings from Wall Street.
Reuters
The market of global debt crosses a decisive weekmarked by growing tensions in the yields of sovereign bonds and high -caliber warnings on tax sustainability. As Japan faces critical auctions in its bond market, from Wall Street, the CEO of JPMorgan Chase, Jamie Dimon, launches an alert signal about the risks involved in the growing indebtedness of the United States.
In Japan, the Ministry of Finance must place this Tuesday ¥ 2.6 billion (about US $ 18,000 million) in 10 years bondsand others ¥ 800,000 million in debt at 30 years on Thursday. The concern is palpable: Last month’s weak auctions unleashed a wave of sales and called into question the ability of the Japanese government to continue financing their growing debt without generating instability.
“The situation is especially delicate in the long part of the curve,” said Kazuya Fujiwara, a fixed income strategist of Mitsubishi UFJ Morgan Stanley Securities. “The markets will remain volatile,” cited by Bloomberg.
After years of massive intervention of the Bank of Japan, which today has more than half of the debt in circulation, the market tries to recover against returns that begin to reflect a more genuine adjustment of financial conditions. The Japanese bonus at 30 years, which exceeds 3.18% – its highest level since its creation – now operates about 2.93%, while the 10 -year bonus remains around 1.5%.
Warnings from Wall Street
In parallel, Jamie Dimon turned on the alarms on the US Fiscal Front, warning that the current level of public debt could cause a shock in the bond market. In an interview with Fox Business, The JP Morgan CEO He pointed out that if investors begin to question the role of the dollar as a global refuge, there could be a strong adjustment in credit differentials, with impact on the entire real economy.
“It harms people looking for money,” Dimon said. “That includes loans to small businesses, high performance debt, leverage and real estate loans. That is why we should worry about volatility in the bond market.”
USA Wall Street Markets
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Dimon’s comments coincide with a context of growing nervousness in fixed income markets, where changes in monetary and fiscal policies in the main economies are generating steep movements. The expectation that both the Bank of Japan and the US Treasury have to review their issuance strategies grow among institutional investors, who have already begun to demand greater returns to assume the sovereign risk.
“The market is sending a clear message to governments: there is no infinite demand to finance deficits without consequences”, Warned Tadashi Matsukawa, by Pinebridge Investments Japan.
In sum, the week is presented as a key thermometer to measure the health of the global debt market. The auctions in Japan and the perception of fiscal risk in the United States will be closely followed by investors, in fear that pressure on long -term bonds will translate into a new source of financial volatility worldwide.
Source: Ambito
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