US bonds face troubled times with liquidity drain

Forward thinking: Pedestrians pass a Citibank branch in San Francisco. The lending giant believes that with peak liquidity past, it would not be at all surprised to see a shift in the markets. — Bloomberg

NEW YORK: This year’s rally in risk assets has more to do with a US$1 trillion (RM4.4 trillion) central bank liquidity injection than any improvement in the economic outlook, according to Citigroup Inc.

That massive tailwind, enough to lop 50 basis points off the investment-grade risk premium, may soon become a huge drag as policymakers get back to quashing inflation after extinguishing the banking sector fire.