06/11/17

The Central Bank Bubble: How Will It Burst?



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The Central Bank Bubble: How Will It Burst?
// Zero Hedge

Alberto Gallo of Algebris Investments steps up to take his shot at the $64,000 (more like trillion) question in a report published this week "The Central Bank Bubble: How Will It Burst?"

Gallo manages the Algebris Macro Credit Fund described as "an unconstrained strategy investing across global bond and credit markets, and with lead responsibility for Macro Strategies" on the company's website.

Gallo sets the scene as follows.

Most investors are still playing the game, and in the same direction. We estimate there are currently around $11tn in negative-yielding bonds and over $2tn in strategies that explicitly or implicitly depend on stable volatility and asset correlations. If low interest rates and QE have been the lever pushing up prices of dividend and coupon-paying assets, central banks are the fulcrum.

This fulcrum is slowly shifting: the ECB has just announced a reduction in its bond purchase programme, the ....

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