The Daisy Chain narrative is starting to get more traction in some investor circles.
Evidence of a coordinated effort by central banks to stabilize sovereign debt markets starting back in October is stacking up.
The October IMF meeting coincided with:
- Bottom in Global Liquidity downtrend
- Peak LT Treasury yields & implied volatility
- Peak dollar strength
- Bottom in asset prices (stocks, gold, crypto, etc.)
Logically it makes sense too. Dollar strength was becoming a real problem and the UK Gilt crisis sparked spillover concerns for more systemically important debt markets, the most prominent being US Treasuries.
Stability in sovereign debt markets is absolutely paramount for policymakers. It trumps every other mandate including inflation and employment.
But the perception of domestic asset purchases would signal a step back from the inflation fight. So the next best thing is to coordinate with other central banks to do your bidding.
We tackled the implications of this and plenty more in our latest episode of Bull vs. Bear.
