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Letter 495, May 2025
This is a trilogy on ‘A New Liquidity Order’. The first part deals with the Bond Market Conundrum, while the other two parts of this complex and layered topic are the normalization of the term premium, the new equilibrium & its ramifications for risky assets.
Table of Contents
Causes & Symptoms
Conclusions
The Invisible Driver: Domestic Balance Sheet Shrinkage
The Downturn of the Term Premium
Trend Reversal
International Balance Sheet Shrinkage
Conclusions
Systemic Pressure Points – Where the Crisis may Brew
Cross-Asset Repricing: Equity, Risk and Volatility
Real Estate and Shadow Credit
Emerging Markets
The Likelihood of a New Credit Event
The House Reconciliation Bill
The Dollar