Taking a hike
Having previously expected no interest rate hikes until 2024 at the earliest, most economists are now calling for the Reserve Bank of Australia to hike by another 50 basis points to a cash rate target of 2.85 per cent on Tuesday.
Here's how that would look - the fastest pace of tightening we've experienced:
So the story goes, we have to hike hard, because that's what the US Federal Reserve is doing, even though wages growth in Australia is running at well under 3 per cent.
Now it largely seems to be a case of waiting to see who or what blows up first.
Running on fumes
If history is any guide, the sharp increase in yields breaking to the upside means there's likely to be some trouble lurking around the corner.
There's been a fair bit of talk around the traps over the past day or two about major insolvencies potentially being about to break...
The recent declines in the Deutsche Bank share price make the global financial crisis lows look like relative bliss, so that's one possibility.
A more likely candidate - if you believe everything you read on the forums that is - appears to be restructuring Credit Suisse, which is reportedly preparing to shed 5,000 jobs, the once proud stock price of $89 now trading under $4 making it look more like a case of, well...Debit Suisse.
Policy panic
Who knows which major institution will be the first to blow up, but it's looking a bit ugly out there, with Bank of America now discussing forced liquidations and asset sales as stock markets continue to plunge.
Markets won't stop panicking until central banks stop panicking, is their bearish take.
The UK pensions industry also famously flirted with catastrophe this week as the Tories released an ill-considered "mini-Budget", and the Bank of England has barely gotten going with its rate hiking cycle yet with a base rate at 2.25 per cent.
While we're on the subject, what about in Australia?
It's always tricky to know with these things, but much of the industry talk around the traps is that multiple building and development firms have been teetering on the brink in recent months (although maybe not at the top end of town).
Development is generally not a high margin industry (15 to 20 per cent, at best) yet materials prices leapt by at least 30 per cent in many cases on supply shortages, pushing fixed price development projects deeply into loss-making territory.
Yet another 50 basis points interest rate hike will surely finish more of them off.
Although maybe that's the point?
