‘The Fed is breaking things’ – Here’s what has Wall Street on edge as risks rise around the world

cnbc.com:

As the Federal Reserve ramps up efforts to tame inflation, sending the dollar surging and bonds and stocks into a tailspin, concern is rising that the central bank's campaign will have unintended and potentially dire consequences.

Markets entered a perilous new phase in the past week, one in which statistically unusual moves across asset classes are becoming commonplace. The stock selloff gets most of the headlines, but it is in the gyrations and interplay of the far bigger global markets for currencies and bonds where trouble is brewing, according to Wall Street veterans.

After being criticized for being slow to recognize inflation, the Fed has embarked on its most aggressive series of rate hikes since the 1980s. From near-zero in March, the Fed has pushed its benchmark rate to a target of at least 3%. At the same time, the plan to unwind its $8.8 trillion balance sheet in a process called "quantitative tightening," or QT — selling securities the Fed has on its books — has removed the largest buyer of Treasuries and mortgage securities from the marketplace.  

«The Fed is breaking things,» said Benjamin Dunn, formerly a chief risk officer at a hedge fund who now runs consultancy Alpha Theory Advisors. «There's really nothing historical you can point to for what's going on in markets today; we are seeing multiple standard deviation moves in things like the Swedish krona, in Treasuries, in oil, in silver, like every other day. These aren't healthy moves.»

For now, it is the once-in-a-generation rise in the dollar that has captivated market observers. Global investors are flocking to higher-yielding U.S. assets thanks to the Fed's actions, and the dollar has gained in strength while rival currencies wilt, pushing the ICE