The bond market is not pretty right now.
The 10-year US treasury just passed 4.43%.Yields across the world are spiking. Many people are wondering how Gold & Silver, which are supposed to be safehavens during these times, are now down more than 25% from their peaks…The answer is in bond yields.If the cost of capital goes up (people sell bonds, pushing the yield to own a bond higher) then risk assets get hit. It’s hard to take the risk and buy stocks when you could do nothing and get 4.45% guaranteed from the US government, which is 90 basis points above the Federal Funds Rate. Gold and Silver have become risk assets. I know they shouldn’t be, but when anything starts fluctuating 5-7% DAILY, it has turned into speculation more than a safe haven. These assets, just like $Grayscale Bitcoin Mini Trust ETF(BTC.US) and growth stocks, are now being hit.The worst thing about all of this is that if oil continues to stay elevated…and people sell off stocks…AND people sell off bonds…then we are just going to see higher inflation with no demand for bonds to bring it down because the credit markets will be demanding a higher yield. At the same time, if equity markets won’t be buying stocks, you’ll see yields going up and stocks going down at the same time which is a recipe for disaster.Trump knows this. It’s exactly what got him to pivot during April last year.I wonder how long he lets this continue, but at some point…the credit markets will dictate how bad this gets.Source: amit
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