Can the Bond Bubble be Unwound in an Orderly Fashion?
In this report I cover the recent developments in the bond markets as a result of pronouncements by the major central bankers of the world.
The heads of the Fed, ECB, Bank of England and Bank of Canada have recently stated that they are ready to start unwinding their extremely loose monetary policy of the last decade by selling off or stop adding bonds to their massive balance sheets.
Once the yield curve inverts it's all over!!
The banking cartel won't stop until they get what the want. The bond bubble will be a problem, but there is no telling when they will pull the plug.
@maneco64 nice post waiting people respon
@rizalsipil Thank you.
What do you think about the idea that central banks will just buy their own bonds with freshly printed currency, to prevent bond yields spiking?
It's been noted that many foreigners have been selling US treasuries, for example (the Chinese, the Saudis), but yet the interest rate doesn't seem to reflect this. Who's buying these bonds? I suppose it must be the Fed quietly buying them.
If rates did spike, would this spell doom for pension funds, and all the debtors of the world, like government? It seems to me there is a motive to control these markets. And if this is the case, then they are just pushing the default onto the currency, and risking the market rejecting the currency. Or am I mad?
Anyway, great post, as usual.
@bayon Money printing and buying bonds is what they have been doing for the last decade and now they think they can unwind that operation which entails not buying any more bonds and also selling the ones they have on their massive balance sheets. The $64k question is whether they will succeed doing that without creating a systemic crisis.
pls listen to the interview with Jim Rickards June 23rd, 2017
greetings from a #steemsilvergold member
Right, I see. I'm relatively new to this strange world of finance, I came to it from cryptos. It's 'Alice in Wonderland' stuff, a market where an issuer buys his own product from himself with money he made from nothing, it seems to violate the definition of the word 'market'.
Thank goodness I discovered people like Jim Grant, and yourself. The Economist and FT just confused me further.
@maneco64
Thank you for this important bond update. The voice of reason and experience.
The US 10 year bond has been the place to be for nearly 35 years. It would seem reasonable to think that the bond market will reverse fortunes eventually.
It would be hard to predict the day, or even the week. For me at least.
I try to trade the futures market. Those markets jump around a lot. lol
I will be watching for your posts over the next few weeks and months on your comments about the bond market. I have to believe we will soon see a reverse of price direction.
Francis
Hi Francis, Thanks for the interest. I'll do my best to keep everyone informed.
It could be as simple as wanting rates to rise, so they have ammo to reduce them again during the next crisis. Oh hang on, forgot, I won't see another crisis in my lifetime :-)
Interesting to see this. So in summary are you expecting yields to spike as bonds become less secure? If so that would be bad for gold unless people defaulted on the bonds?
@diamaidflynn During the last bond bear market in the 1970s gold went from $35 to $887.50 so I am not sure how a rout of the bond market would be bad for gold because rising interest rates mean dropping bond prices and a lot of defaulting borrowers.
Thanks @maneco64. Bonds are one of the more alien asset classes to me so thanks for the reply.
Good analysis as always. Thanks.
You are welcome.
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