In 2007 the US dollar hit an all-time lows establishing a new lower trading range. As the 2008 crisis unfolded interest rates were also pushed to all-time lows. These events created an opportunity for global corporations to take on cheap debt in terms of cheap dollars.
Today both the USD and interest rates are higher than they were a couple of years ago. In fact the five largest bond markets in the world are indicating higher inflation on the horizon. These two factors means that it costs those corporations a lot more money to service and/or roll over that debt. We are already seeing a rise in defaults.
Why should you care? Because global fiat stock and bond markets are correlated, so what happens in emerging markets has global impact.
By ITM Trading's Lynette Zang
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