NEW YORK (Reuters) – The global financial crisis may morph into a second, equally virulent phase where borrowing costs rise again, hobbling an embryonic economic recovery, debilitating cash-strapped banks, and punishing investors all over again.
Early warnings signs of this scenario include surging government bond yields, a slumping U.S. dollar, and the fading of the bear market rally in U.S. stocks.
Optimists hope that a fragile two-month rally in world stock markets, a rise in U.S. Treasury yields from record lows during the depths of the crisis in late 2008, and some less scary economic data all signal that a recovery is around the corner.
But gloomy analysts insist that thinking is delusional.
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