Defaults Won’t Stop Funding Frenzy Started by Central Banks

In a world riven by disease and credit risk, traders are betting central bankers will pin down global borrowing costs for years to come -- regardless of the consequences, Bloomberg News reported. With banks awash with cash, money markets are signaling that unsecured lending rates will stay near historic lows across Europe and the U.S., even as rising corporate bankruptcies add pressure to bank balance sheets. Eurodollar futures, benchmarked to the three-month London interbank offered rate for dollars, suggest borrowing costs will barely budge until at least the first quarter of 2023. Funding gauges in other parts of the world paint a similar picture. Of course, freeing up liquidity was part of policy makers’ motivation for cutting interest rates to near zero, and in that they’ve succeeded. Read more