Why are the markets against the Central Banks? What’s next?

Since the beginning of the year, but from before, especially after the Trump election, there has been a “phenomenon” that never prejudges good things… Especially at times when the causes of anxiety multiply almost daily. What is the phenomenon? It is that while the Central Banks are in a phase of reducing the interest rates of the states in which they define monetary policy, markets (secondary bond market) do the opposite, they increase bond yields. CORVERSE Simply put, the Central Banks on the basis of estimates – that is what they say – to deescalate inflation gradually reduce the official cost of financing the financial system with guarantees of government bonds. In other words, they reduce the cost of lending to the economy. At the same time, however, that the Central Banks estimate that conditions are appropriate for this, the financial markets increase the yields of the bonds traded on the secondary market by reducing their prices, going forward against the line of the Central Banks. Which means, they value the denomination of the bonds they negotiate, smaller and ask for greater returns (from publishers) to buy them. This is how we have found ourselves in a situation where the US issues ten-year bonds to refinance their uncontrolled debt – due to high deficits – and markets require “interests” that exceed about 4.7%. With Great Britain under even worse pressure. Markets in short are asking for more interest on the risk they take by buying these bonds. CORVERSE On a smaller scale but on an upward trend are also the returns on European bonds, with the economies of France and Italy paying very dearly for every euro borrowed by the state or private enterprises. To the point where fiscally they either have to increase taxes, reduce spending, or both. But the same goes for the United States… The first and greatest consequence of this ‘contra’ is according to Bloomberg and the FT now threatening the ability of the UK Government to determine its own economic policy. They even go so far as to talk about the possibility of repeating a ‘Trash moment’, namely a collapse of the government, if this pressure continues without an effective response. The same questions, however, come – on a larger scale – for the Trump government, which, according to the new statements made by the person responsible for spending cuts Elon Musk now seems difficult to achieve the goal of cutting $2 trillion in deficit… Are we going for an unprecedented crisis in the debt market with reference points in New York and London, namely on the world’s two largest financial markets? It is difficult to say that, so superficially, without knowing what is already going on behind the closed doors of the Fed and BoE. But what we can say with certainty and without frivolous predictions, is that if this conflict between the line of the Central Banks and the markets continues, the “strikes” up to – although so far – to be managed can cause strong financial “shocks”, much stronger than those of September 2008. And the bill on the cost of this management and the ‘losses’ will undoubtedly be paid first in Euros and then in dollars. As in 2008 – 2011. Surely in 2025 we have many surprises ahead and the “roadway” within it does not currently have stable orientation points. This is why another “paradox” phenomenon has emerged. Despite the upward trend in the exchange rate of the dollar, despite the high interest rates and yields of American bonds, gold re-entered the $2700 threshold and is preparing to travel even higher…