Commentary Central banks don’t manage risk, they disguise it. You know you live in a bubble when a small bounce in sovereign bond yields generates an immediate panic reaction from central banks trying to prevent those yields from rising further. It’s particularly evident when the alleged soar in yields comes after years of their having been artificially depressed with negative rates and asset purchases. It’s scary to read that the European Central Bank (ECB) will implement more asset purchases to control a small move in yields that still left sovereign issuers’ bonds with negative nominal and real interest rates. It’s even scarier to see that market participants hail the decision to disguise risk with even more liquidity. No one seemed to complain about the fact that sovereign issuers with alarming solvency problems were issuing bonds with negative yields. No one seemed to be concerned about the fact that the ECB …
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