Don’t fear the rate rises… More QE is a bigger risk

Mark Gilbert at Bloomberg says “with the Federal Reserve poised to unleash its first interest rate increase in almost a decade there's a debate among investors about whether the past is any guide to how markets will react to a monetary tightening.” In this article (VIEW LINK) Gilbert sheds some light on how the bond market reacted to each of the four tightening cycles of the past 15 years and concludes that, actually, “there's nothing much to fear from a change in direction by the central bank.” However, the research team at BoA Merrill Lynch reckon you should be more worried should the Fed not raise rates and embark on another round of QE. The analysts say that despite this being a low probability event… it would pose the biggest threat to markets. (VIEW LINK)