Global economy’s ‘soft landing’ stumbles amid soaring bond yields, raising concerns of massive corporate failures in 2024. A hard landing scenario is in the cards.

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Global economy’s glide to ‘soft landing’ gets bumpy as bond yields jump

WASHINGTON, Oct 6 (Reuters) – Rocketing U.S. government bond yields that have led to a global jump in borrowing costs are raising new risks for economic policymakers hoping to lower inflation without triggering a major crisis.

The world’s finance officials, who will gather in Morocco next week for the annual meetings of the International Monetary Fund and World Bank, may disagree over the exact drivers of a global bond rout that now appears to reflect more than guessing how far central bankers will raise interest rates.

The cause – whether high government deficits, China’s suddenly turgid economy, or political dysfunction in the U.S. Congress – may be less important, though, than the implications for a world financial system that had seemed headed for a “soft landing” from the post-pandemic breakout of inflation.

Central banks around the world approved rapid-fire interest rate increases in response to rising prices, and officials throughout the policy tightening welcomed the largely smooth adjustment in global financial conditions as a testament to better monetary and fiscal management across many countries.

Fall of the zombies? Why corporate failures could surge in 2024

LONDON, Oct 6 (Reuters) – Debt-laden companies across Europe, Middle East and Africa face a $500 billion refinancing scramble in the first half of 2024, a challenge that could kill off many “zombie” businesses even though an expected peak in rates could bring some relief.

Businesses facing rising debt costs after years of low rates will have to compete to secure enough cash in the biggest corporate refinancing rush seen for years, just as banks rein in risk ahead of stricter capital rules.

Analysis by restructuring consultancy Alvarez & Marsal (A&M), shared with Reuters, shows the value of company loans and bonds maturing in the six-month period is higher than any other equivalent period between now and the end of 2025.

A crunch is looming, finance industry experts said, with many weaker, smaller businesses seeking new private loans and public debt deals just as government borrowing costs – which influence loan rates – are soaring globally.

 

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JPMORGAN’S MARKO KOLANOVIC BRACES FOR 20% MARKET PLUNGE, DELIVERS RECESSION WARNING (CNBC)

JPMorgan’s Marko Kolanovic is bracing for a 20% sell-off to hit the S&P 500.

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According to the Institutional Investor hall-of-famer, high interest rates are creating a breaking point for stocks — and choosing cash at a 5.5% return in money market and short-term Treasurys is a key protection strategy right now.

“I’m not sure how we’re going to avoid it [recession] if we stay at this level of interest rates,” the firm’s chief market strategist and global research co-head told CNBC’s “Fast Money” on Thursday….