"Andy Haldane fears the bursting of 'the biggest bond bubble in history' after electronic money printing exercises by the Bank of England and the Federal Reserve in the US"
"In a wide-ranging testimony to MPs, Andy Haldane, Bank of England director of financial stability, admitted the central bank's new financial policy committee is taking too long to force banks to hold more capital and appeared to criticise the bank's culture under outgoing governor Sir Mervyn King.Haldane told the Treasury select committee that the bursting of the bond bubble – created by central banks forcing down bond yields by pumping electronic money into the economy – was a risk "I feel acutely right now".
He described bond markets as the main risk to financial stability. "If I were to single out what for me would be biggest risk to global financial stability right now it would be a disorderly reversion in the yields of government bonds globally." he said. There had been "shades of that" in recent weeks as government bond yields have edged higher amid talk that central banks, particularly the US Federal Reserve, will start to reduce its stimulus".
"Let's be clear. We've intentionally blown the biggest government bond bubble in history," Haldane said. "We need to be vigilant to the consequences of that bubble deflating more quickly than [we] might otherwise have wanted."
The Bank of England later issued a statement, describing Haldane's remarks as his "personal view" and stressed that if it raised interest rates– stuck at record lows since March 2009 – too quickly the consequences might be severe. "Any attempt to return interest rates quickly to more normal levels would recreate recession conditions," the Bank of England. Haldane said the FPC was on alert to any bubbles created by the help to buy mortgage guarantee scheme for first-time buyers and house movers, stressing the scheme should be temporary.
Source: theguardian
