Loading ...Is The Bond Market About To Break Washington
For months, investors have focused on missiles, retaliation headlines, oil chokepoints, and the possibility of a broader regional escalation from the Iran War. During the geopolitical noise, I urged readers not to overlook stress in financial markets that was happening before the war even started, namely in places like private credit and subprime auto lending. I called these “real crises” hiding behind record highs while “investors” chase gamma squeezes higher in an ongoing distortion feedback loop that is making things look far better than they are under the surface.
The 10-year Treasury yield is arguably the single most important price in global finance because virtually every major asset class is built on top of it. Mortgage rates, commercial real estate valuations, private equity models, corporate borrowing costs, equity multiples, venture capital, and government financing itself all depend on stable Treasury markets. When yields rise too quickly, everything starts repricing at once. That is why this matters so much more than the daily moves in the stock market.
Mom and pop savers are about to get squeezed from every direction at once. Their wages will fail to keep up with inflation. Their borrowing costs will rise. Their credit card rates will stay elevated. Their insurance, food, energy, and housing costs will continue climbing. Their retirement portfolios will become more volatile. And eventually, after enduring all of that pain, they will likely watch policymakers step in to rescue the bond market and financial system through another round of monetary intervention that further destroys the purchasing power of their savings.
Meanwhile, the average family gets punished twice. First through inflation, then through the policies used to contain the damage caused by inflation.
https://www.zerohedge.com/markets/bond-market-about-break-washington
AND
Foreign Treasury Selling Is Getting Serious
According to CNBC, foreign holdings of U.S. government debt fell sharply in March as central banks sold Treasuries to defend weakening currencies during the geopolitical and energy shock tied to the escalating Middle East conflict. That should deeply concern anyone paying attention to the structural fragility underneath the U.S. financial system.
https://www.zerohedge.com/markets/foreign-treasury-selling-getting-serious
“Meanwhile, the average family gets punished twice. First through inflation, then through the policies used to contain the damage caused by inflation.”
LETS BE VERY CLEAR HERE, SINCE THE LANGUAGE USED IN THE PRESS IS DESIGNED TO DECEIVE.
The inflation is printing over and beyond good production, thanks to deficit spending by Congress (via bond issuance)
When those bonds drop in price (via higher yields), the Fed has stepped in with CTRL-P to buy what the market won’t at prevailing prices.
That the story line running through The Creature.
And Warsh knows that script. Steph and Adam wonder what’s next
https://x.com/i/broadcasts/1wxWjaXEgnAJQ
The counterpoint (very important)
A single month decline is not unusual in volatile markets
Foreign holdings:
Were near record highs before the drop [money.usnews.com]
Are still massive overall (~$9T+) [congress.gov]
U.S. Treasuries remain:
The world’s primary reserve asset
Highly liquid and widely demanded
? So:
One month of selling does not automatically signal a fragile or failing system.
and the COUNTER COUNTER POINT
is that a 40 year bull market in US Bonds ended 5 years ago, and rates have been netting higher each year since.
We are due for a correction to this yield ramp by next year, but why? cycles and psychology.
Forget the trees, look for the forest.