The 1994 bond shock – and seared in the memories of bond-holders – ricocheted through global markets. It bankrupted Orange Country, California, which was caught flat-footed with large bond positions. It set off the Tequila Crisis in Mexico as the cost of rolling over `tesobonos’ linked to the US dollar suddenly jumped.
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Bank of America said the “Great Rotation” under way from bonds into equities closely tracks the pattern of 1994, with bank stocks leading the way. Continue reading