Global Central Banks to Pump $3T in QE Into Markets This Year Alone

Higher interest rates are not threatening stock markets just yet as central banks around the world are still running the printing presses, supporting asset prices.
Quantitative easing (QE) will pump almost $3 trillion extra into markets this year, analysts at State Street believe, before more central banks follow the US Federal Reserve’s example and start withdrawing the stimulus.
“It is too early to call time on the market, because central banks are there,” said Antoine Lesné, top strategist and researcher in the finance group’s ETF arm.

The US Fed under Janet Yellen started cutting down its stock of assets purchased, but other central banks including the ECB are still buying more bonds Credit: Yin Bogu/Xinhua / Barcroft Images
“They are continuing to push the expansion of balance sheets – we are at $21.3 trillion of assets purchased by the largest central banks, including China. We expect this will become $24 trillion by the end of this year.

“There is still a lot of money being put into the market.”
Even if bonds do fall and 10 year US Treasury yields rise to 3pc, this will just make them a particularly attractive investment for investors looking for low-risk returns, effectively limiting the rise in rates, he believes.
Demographics too will cap rates.
“From a long-term demographic standpoint, there are going to be more and more buyers of debt securities to lower the volatility of their portfolio and look for more stable income,” Mr Lesné said.

“This increased demand for stable income from bonds will continue to be there, it is a long-term trend, and it should put a cap on where bond yields can go.”
Although stocks are at record highs in areas such as the US, overall shares globally are not particularly over-valued, according to Tim Graf at State Street Global Markets.

August 28 2018