Back in the 1990s, James Carville, US Democratic party strategist, declared that in his next life he wanted to be reincarnated as the US bond market – rather than Pope or a basketball star – since the bond market “can intimidate everyone”.
These days, however, that phrase needs a subtle update, at least in the eurozone. As Europe prepares to publish the results of bank stress tests, it is not simply the behaviour of the bond market that is “intimidating” governments. Nor is it merely the antics of American hedge funds that are causing alarm.
Instead, the players provoking particular behind-the-scenes unease are those sitting in Asia. For while the sovereign wealth funds of countries such as China generally loathe the limelight, their potential market power – or ability to intimidate by implication – is rising steadily, as their coffers swell. And that, in turn, is starting to have some surprising impact on the eurozone debates.