The bond market is imploding right now . . . . The U.S. Treasury made an emergency intervention last week to prop up the value of the Japanese yen. Why? To prevent U.S. yields from rising further. Japan is a major holder of U.S. Treasuries. If it had to sell a large amount of the debt to prop up its spiraling currency, it could push up U.S. rates.
Rising bond yields are a hurdle for the stock market. At higher rates investors can get a better return when they put it into bonds. But most investors aren’t there yet. Enthusiasm for equities is lifting stock markets to new highs. But the stock market is dependent on big bets on A.I. Data centers being built with borrowed money. This is now a deck-of-cards.
If the cost of borrowing keeps rising and bond yields rise, A.I. could bring the whole deck down. Central bankers are holding their interest rates steady, but the bond market is raising them. When the bond market talks, investors need to listen . . . .
Clearly, the bond market has been saying risks are rising. Wars, tariffs and geopolitical uncertainty, mounting debt and political dysfunction are all coming to a head. Bottomline; if you want to borrow money, you will have to pay more. The implications of rising bond yields are broad and deep. Errol's Commodity Wire, Calgary
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