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There was panic in the emerging markets a year ago because former US Federal Reserve chairman Ben Bernanke had said that he would begin a gradual retreat from quantitative easing. Interest rates spiked. Capital was pulled out of countries such as India. Currencies tumbled.
It is strange that US 10-year bond yields are 60 basis points below their peak a year ago. Last week, the yield on German benchmark bonds went below 1% for the first time ever. Data from major countries across the world show that monetary conditions are easy even as the US Fed is close to winding down its bond purchases.
The global financial markets are in a strange situation. The consensus is that central banks will have to tighten policy if another financial crash is to be avoided. There are too many warning signals flashing about a new global asset bubble; but the actual bond yields show that traders are not pricing in these fears as yet.