Source: Morning Star —
‘Usually in tightening cycles, something blows up’
Global financial market stresses are piling up, but the commotion that forced the Bank of England to make an extraordinary intervention in the U.K. bond market Wednesday isn’t likely to be a game-changer for U.S. stock-market investors on the lookout for a market breakdown.
A working notion among investors and traders has been that the Federal Reserve will continue to aggressively raise interest rates “until something breaks,” forcing policy makers to ease up and potentially allowing a battered stock market to put in a bottom.
“I don’t think you can read into the Bank of England actions in the gilt market and draw conclusions about the Federal Reserve and the U.S. bond market,” said Michael Antonelli, market strategist at Baird, in a phone interview.
In a stunning reversal, the Bank of England on Wednesday announced it would buy U.K. government bonds, or gilts, with long maturities at “whatever scale is necessary” to arrest a surge in yields that followed the U.K. government’s announcement last week of a deficit-boosting raft of tax cuts and energy aid.
