(Ruchir Sharma is an investor, fund manager and author of the upcoming book 10 Rules of Successful Nations. The column first appeared in Times of India on September 28, 2021)
- For much of this year commentators have been warning that falling yields suggest the bond market is increasingly irrational, out of touch with a rapid global recovery and misled by heavy central bank buying or the ebbs and flows of the pandemic. Now, events in China suggest the bond markets are far from clueless or crazy. The world’s most indebted real estate developer, Evergrande, has been teetering on the verge of default. Its troubles are reverberating across China’s property sector and the world, revealing a very rational reason why long-term interest rates would not rise too far: The global economy is too heavily indebted and too financially fragile to handle tighter credit conditions. We are caught in a debt trap.