A 6% Yield On The 10 Year Treasury Is Coming
Submitted by QTR's Fringe Finance
Nobody knows exactly where the breaking point is, but we are getting closer to finding out. The 10 year Treasury ended the week around 4.7%, while the 30 year pushed above 5.3%. Washington intervened with larger Treasury buybacks, yields briefly fell, and then the selling resumed. So much for throwing a match to try and dry up the ocean of free market bond trading that takes place globally.
For years, markets have asked how high interest rates can go before something breaks. I think that question is about to change. The question now is how high Treasury yields can go before Washington decides they are no longer allowed to go higher. My guess, for the 10-year, is that the number begins with a six.
I have been warning non-stop for many years that math doesn’t cease to exist because Christine Lagarde wears fancy spectacles.
Boring old reason and common sense have continued to suggest that eventually the sheer size of the debt and deficits would collide with the bond market. For a long time, that warning was easy to dismiss. Deficits did not matter until they did. Debt did not matter because there was always another buyer. The Treasury market could absorb anything Washington threw at it because, well, it always had before.
Now federal debt is above $40 trillion, interest expense is enormous, Treasury issuance is relentless and the marginal buyer is starting to ask for more compensation. Apparently the free market has developed the annoying habit of wanting to be paid more for lending money to an entity that believes, kid’s fairy tale style, that dollars can be conjured up out of thin air using alchemy any time they are needed. The nerve!
A 6% 10 year would be more than another 100 or 125 basis points of tightening.
Markets have adapted surprisingly well to yields between 4% and 5%. At 6%, the arithmetic gets considerably uglier...(READ THIS FULL ARTICLE 100% FREE HERE).