Financial markets: European Central Bank is launching a “global warning” on systemic risks

All financial flows are moving to the United States, causing strong tremors in the rest of the world.

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Let’s call him Paul. He is a broker in a large European bank, and his job is to find investors ready to put their money in treasury bills in the governments of Central Europe. For more than six months, he has been having trouble convincing them. “They say to me:” Why would I invest in Serbia or Romania when I can put my money in the United States for 3 % or 4 %? “

His complaint sums up the immense pendulum movement which is currently shaking the financial markets. Since the beginning of the year, the Federal Reserve (Fed, American Central Bank) has increased its interest rate by 3 points, to more than 3 %. Today, a ten -year American treasury voucher obtains a yield of 3.6 %, compared to 0.5 % two years ago, at the worst time of the pandemic. After having reported almost nothing for a long time, these assets, deemed the safest in the world, now offer a decent return.

At the same time, the other monetary institutes have not increased so quickly. The rate of the European central bank is 0.75 %, that of the Bank of England, by 2.25 %. Logically, all investors rush to dollar assets. “The first countries sanctioned by this movement are the emerging countries [because deemed more risky],” continues the same broker. The most fragile, like Ghana, are now in discussion with the International Monetary Fund for a rescue plan. Solid, a country like Romania is forced to pay dearly: its ten -year bonds come close to 9 % yield.

Liquidity drying

Since the beginning of the year, investors have withdrawn $ 70 billion (71.2 billion euros) from the obligations of emerging countries, including 4.2 billion in the week of September 26 to 30, according to The data collected by JPMorgan and EPFR Global, reports the Financial Times.

This great drying up of liquidity even affects countries like the United Kingdom, the 6 e global economic power. After the presentation of a budget that lowered taxes without explaining where the funding would come from, investors were afraid and began to demand better return: the interest rate of obligations at ten years has gone from 3, 8 % to 4.6 % in two days, before the intervention of the Bank of England puts an end to panic.

which says drying of liquidity also so -called stronger volatility and unexpected upheavals on the markets. For several months, most of the financial indicators have been red. Thursday, September 29, the European Systemic Risk Committee (CERS), which is the organization of the European Central Bank responsible for monitoring financial risks, has issued, for the first time, a” general warning “. Since its creation in 2010, he had already issued warnings, but specific to certain sectors, never in a generalized way.

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