Bonds general & USA
Updated March 14, 2021 - FED openly stated that interest rates will be locked at present low/negative levels until 2024!
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Zero & Negative Interest Rates make it all EXPLOSIVE... Bond market topping out...since 2011 and natural market forces are not taking over yet!?. You cannot predict higher interest rates if you at the same time also predict QE to infinity. QE is the non-economic purchase of government and other debt securities. Therefore as long as QE expands to meet the size of the bond offering, the bond market will stay bullish and interest rates will not rise significantly... The critical interest rate level for Japan is 1% - critical level for other western countries is 2% to 0% (Feb 2021) |
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Once again, the Fed will pretend to be “considering rate adjustments”...but none will come. But with public debt soon passing $30T and climbing, we all know the Fed & ECB will never raise rates this generation, for the simple reason that they can’t afford to. So long as the cost of debt (rates) are stapled to the floor of history, debt levels can equally surpass the record books of history. The soothsayers behind MMT (Magical Monetary Theory) will tell you inflation and rates won’t go up, as the central banks won’t let them. Like Santa Claus, that’s a very comforting thought. Unfortunately, natural bond market forces rather than unnatural central bankers ultimately get the last say (and dark laugh) when it comes to rising rates. With over $18T worth of negative-yielding bonds in circulation, it’s only a matter of time and headlines before someone yells “fire” in a crowded bond theater whose exit door (i.e. liquidity) is the size of a mouse hole. With little to no yield for over-bought risk, bondholders will eventually become bond sellers, and when bonds sell-off, their prices tank, and hence their yields skyrocket. Of course, when yields skyrocket, rates spike…and the system collapses. |
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As Seen in History - what happened in Greece (and Turkey) is a perfect example of what is to happen with other Treasury Bonds: when the bubble bursts, most of the time, it's too late to act - Five past twelve to move out of Fixed-interest instruments & financial instruments based on bonds (incl. TAK and other bank manufactured products) and into Real Assets (incl shares but excl. Real Estate and ex. financial shares, pension funds, (re)-insurance co's). This is a completely MANIPULATED market and will be the coffin of many Fortunes...Treasuries = Credit Default Swaps = Bank manufactured products = saving accounts = bank deposits,. What good does it do to be safe when on day 1001 you are slaughtered!?.
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| Vanguard Total Bond Market: this is INSANE |
High Yield Corporate Bond: INSANE - but a BREAKOUT |
| Interest Rate is the derivative of Money Supply...it is impossible to regulate the economy by RIGGING the interest rates (like Central banks try today). |
Utility Index :
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The Bond market is one BIG Bubble...A DRAMA will unfold if Central Banks reverse QE...and Central Banks have decided for QE4...
- Interest rates are bottoming and beware of the Marginal maximum of interest rate levels. The marginal levels are between 1% and 3% depending on the currency. Hell will break loose once interest rates break these levels.
- The 35-year interest cycle peaked in 1981 and bottomed in 2016 as the chart of the US 10 year Treasury Note below shows. The current yield of 1.59% is not far from the low but the recent fall in rates has not been confirmed by momentum indicators. Thus the chart indicates a bullish divergence and therefore the potential of rates going up from here. Our proprietary cycle indicators confirm that move.
- But whether rates go up from here or slightly later is of less importance. What is certain is that central banks will lose control of interest rates as bond markets collapse and yield surge when money printing takes off in earnest.
- The current belief in flight to “safety” by holding government bonds is absolutely ludicrous. At some point in the next year or so, investors will exit bonds at any price. Nobody will want to hold a toxic instrument issued by a bankrupt government that can neither afford to pay the interest or the capital without issuing more worthless bonds.
| 30-year US-Treasury Bond price | |
| Bullish Objective | we have 4 historic tops and a bubble!.... |
| Resistance | 185 |
| Support | 168 |
| Bearish Objective | 148 |
| Technical pattern | End of a 35-year cycle |
ʘ ʘ ʘ 30 year US Treasuries Yield - critical level for Japan is 1% - critical level for other western countries is 3% (Jan 2018)
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ʘ ʘ ʘ 10 years US Treasuries Yield - the Bond market is finally still not turning Bearish and one must avoid Bonds as it all becomes EXTREMELY DANGEROUS.
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ʘ ʘ ʘ - Municipal bonds now also bought by Central Banks (FED).
| The Federal Reserve, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, just changed the liquidity requirements for the nation's largest banks. Municipal bonds, long considered safe liquid investments, have been eliminated from the list of high-quality liquid collateral. assets. That means banks that are the largest holders will have to dump them in favor of the Treasuries and corporate bonds that do satisfy the requirement. |
March 2016: Less than a week after the ECB’s announcement, and months before it is to actually buy any bonds, a new record for a euro-denominated corporate bond issue was set on Wednesday when brewer Anheuser-Busch InBev said it was seeking to raise 13.25 billion euros ($14.9 billion).
“In our view, this highlights the current positive backdrop for primary issuance induced by the ECB’s new easing measures” and particularly the new corporate bond program, credit analysts at Dutch bank ING wrote in a note to clients.
The corporate debt market has already benefited indirectly as ECB purchases of government bonds have pushed investors into the corporate market, lowering borrowing rates. In addition to the corporate bond purchases, the ECB also announced earlier this month a program to effectively pay banks if they step up their lending.
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Interest Rates have never so low since the 15th Century.
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| Interest Rate is the derivative of Money Supply...it is impossible to regulate the economy by RIGGING the interest rates (like Central banks try today) |  |
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To the left is the law of supply and demand of Money...or how the price of Money (Interest) is regulated in an open system. When the money supply goes up, the interest rates should come down. When the money supply comes down, the interest rates should rise. |
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1981 was a historic top and 2017 is a historic bottom |
This is the section where so far we have been completely wrong (at least for the USA - but also for the EU where the FED and the ECB have been able to avoid the worst) because so far no crash happened. This does not mean however that a CRASH can happen any time. Having said this, the TIMING is wrong..the technicals and the fundamentals, however, are not!
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10 Year Treasury Bonds in Gold ---A CRASH IT IS! ...80% loss since 2000 or 10% loss each yearly. The downtrend is has been resumed in September 2017.
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Interest Rate cycles are 60-70 years long: 30-35 years up and 30-35 years down. |
 Pension funds and (re)Insurance companies must by law invest the bulk of their assets in Treasuries. |
It is clear we have an ALL TIME LOW for long-term yields and an ALL-TIME HIGH for Bonds. (click on thumbnails to enlarge) | The Treasury SELL-OFF has already begun...click on the picture below to enlarge... |
CENTRAL BANK PANIC MODES 30 y Gov. bond yields UK, EU, US (60-year cycles) |
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Nominal Interest Rates are at record lows and Real Interest Rates are NEGATIVE and will be pushed deeper into the Negative (June 2016).NOT logic is that there is a disconnect with the Money Supply. |
 Negative Nominal Interest Rates actually REDUCE the Money Supply and hereby increases its intrinsic value. |
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The PF and Long term candle charts below are of capital importance as well as the 3% threshold! The higher the debt, the lower the critical level; for Japan the critical level is 1%.
Hyperinflation occurs when a country’s bond market breaks. In other words, the sovereign nation is no longer able to fund itself. Its bonds fall (yields rise) to the point where the government has to print money or default. Rising interest rates cause interest payments to consume too much of the overall budget. The government or central bank then begins to print money to fund its deficit. Then the citizens start to consume, knowing the currency is rapidly losing value. Demand has nothing to do with the cause or the onset of hyperinflation.
Why didn't Japan have hyperinflation in the 1990s? It didn't have to monetize its debt. It had the internal savings to be able to finance its budget. The same thing is true with the United States in the 1930s. Even though we devalued the currency, the bond market remained strong into the early 1940s, thus preventing runaway inflation.
The catalyst for severe inflation globally is the breaking of many bond markets. The UK, Japan, and the US won’t be able to finance their budget gaps without the monetization. The budget deficits are now larger and they come at a time of reduced global liquidity and reduced tax revenues. Global monetization will lead to severe inflation and hyperinflation.
The other point to make about severe or hyperinflation is the fact that it doesn't come about steadily. The preconditions and causes are all the more subtle as hyperinflation occurs suddenly or dramatically. ..click here for more fundamentals
ʘ ʘ ʘ - TBT is an instrument to short Bonds.
| This is a manufactured financial instrument to SHORT bonds (we don't like it!) | |
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 In a system of Real Money (Gold and Silver) it is the Money that regulates the economic activity and the general level of interest rates.
World Bond markets move in a symphony. We have GLOBAL MARKETS. What happens in Greece is the direct reflection of what happens in the USA and the UK is a precursor of what is to happen in the rest of the world. History is being written. Bringing down interest rates and keeping them low is EXACTLY the opposite of what should be done. History shows over and over again that the authorities are champions for doing the wrong thing at the right time. Ludwig Von Mises explains clearly that one must INCREASE interest rates to INCREASE SAVINGS which are to be used for fundamentally sound INVESTMENTS. Authorities are doing exactly the opposite: low-interest rates increased consumption and created the real estate bubble (dead capital) thereby debasing the savings of the Baby boomers. Today Authorities do all they possibly can to keep the rates down and the economy alive. It goes that far that the FED buys US treasuries as soon as other buyers fail. Low-interest rates keep the rate of Foreclosure low and troubled Credit Card companies alive. However, as explained by Ludwig von Mises, at a certain point the market forces take the final decision. The longer interest rates are suppressed, the stronger they will veer up once the time has come. The chart below: European bonds have also reversed the trend. The earlier break down resulted in a false break and will now build a double Top. Authorities are injecting Trillions (Quantitative Easing) into the economy in order to keep it alive. We know this won't - in the medium-term run - save the system from collapsing. It NEVER did in the past and it will not today. Only after the misallocated funds have been cleaned out of the system afresh boom can be initiated! By artificially lowering interest rates, the authorities are doing nothing more than increasing the misallocation of funds. In the long run, interest rates |
rise as a consequence of the inflationary policies of the authorities and banks' and the latter adjust what we call 'the official interest rate' to the conditions of the market.Total Debt:
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| 2014 Total debt versus GDP | FED is insolvent |
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| SEPTEMBER 2020 Total Debt | June 2020 |
Per Capita debt Feb 2012
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