I have been thinking a lot about the debt markets lately.
Right now the spread between the 10 and 30 yr bond is just 30 basis points and I said publicly around two years ago that this would happen. I also said that I expect we will suffer another yield curve inversion just like the ones which occurred at the top of the Dotcom and 2008 market meltdowns. In my opinion The Federal Reserve cannot normalize their balance sheet fast enough to prevent another yield curve inversion from happening. Again, the spread between the 10 and 30 in now just 30 basis points so we are close.
This is my concern... The debt market in my opinion is in an epic bubble, moreover the major banks are holding credit default swaps on that debt. So WHEN this debt bubble bursts, and it will at one point just as every single bubble before it has, there is not enough liquidity in the system to cover the CDS and prevent a global Lehman Brothers moment.
***The issue with the major banks holding these credit default swaps, that is guaranteeing that they will pay off the debt in the event of a debt bubble meltdown, puts the entire global financial system in peril... and THIS is the reason why such extraordinary measures are going on right now to keep the bond market propped up.
Gregory Mannarino, "The Robin Hood Of Wall Street." (Is this article important? Then please share it!)
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