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The U.S. Bond Market Is Flashing ‘Danger’

U.S. Bond Market Flashes ‘Danger’

By Phoenix Capital Research | July 24, 2018

As I outlined in my bestselling book The Everything Bubble: The Endgame For Central Bank Policy, when the U.S. completely severed the U.S. dollar from the Gold Standard in 1971, U.S. sovereign bonds, also called Treasuries, became the bedrock of the financial system.

From this point onward, these bonds represented the “risk-free” rate of return, the baseline against which ALL risk assets (including stocks) were valued. What followed was exponential debt growth as the U.S. took advantage of this fact to go on a massive debt binge.

The U.S. Bond Market Is Flashing 'Danger'

ALL of this debt requires U.S. bond yields to continue to fall. Put another way, in order for this massive debt bubble to be maintained the bond markets must make it continuously cheaper/easier for the US to pay/service its debts.

Which is why the recent breakout of bond yields is a MAJOR concern.

The U.S. Bond Market Is Flashing 'Danger'

As you can see, the yield on the United States 10-Year has broken above its long-term trendline – in the WRONG direction. This chart is telling us that it has become more expensive for the U.S. to issue/service its debts.

Granted, this is not a systemic issue yet, but unless yields reverse soon, the Everything Bubble will begin to burst.