Bonds Essay

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Global bonds plunged for a second straight month in June, stocks tumbled and the dollar began to rebound as the Federal Reserve set a timetable for ending the stimulus that drove equities to record highs and debt yields to record lows. Emerging markets suffered as China created a cash squeeze and protests turned violent from Turkey to Brazil. The $41 trillion of bonds in the Bank of America Merrill Lynch Global Broad Market index lost an average 1.4 percent in June. The MSCI All-Country World index of equities declined 3.1 percent as emerging markets erased 6.8 percent of their value. The Standard & Poor’s 500 fell for the first time in eight months. The U.S. Dollar Index ended 0.3 percent lower after falling as much as 3.5 percent. Enlarge image A trader works on the floor of the New York Stock Exchange as Federal Reserve Chairman Ben S. Bernanke speaks on television. Photographer: Jin Lee/Bloomberg . U.S. central bankers could start reducing their $85 billion of monthly bond buying as soon as this year, Fed Chairman Ben S. Bernanke said June 19, prompting investors to recalibrate their outlook for economic growth. Stimulus efforts around the world have supported markets following the worst financial crisis since the Great Depression. “The market had been pricing in that the Fed would normalize rates much more slowly than it has done historically, and clearly the market was taken aback,” Binky Chadha, the chief global strategist for Deutsche Bank AG, Germany’s biggest lender, said in a June 26 telephone interview. “That shock has spilled over across all of the asset classes. Everything is down.” On Edge Markets were already on edge as the World Bank cut its global forecast on June 12 after emerging nations from China to Brazil slowed more than projected, while budget cuts and slumping investor confidence deepened

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