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Bonds & Interest Rates

Buckle Up - Interest Rates Are Heading Higher

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Posted by Michael Campbell

on Tuesday, 15 November 2016 06:41

The evidence continues to mount that the 35 year bear market in US bonds is over, interest rates are heading up and the implications are dramatic. For example,  the rate on a 10 year US bond is 2.37%. Compare that to the rate of a 10 year German bond of .35% and you know why German money is flooding into the US driving the dollar higher and other currencies down. (full transcript below)

Interest Rates Are Heading Higher 

by Michael Campbell
 
Talking about interest rates isn’t as near as exciting as last weeks US election, but i'll tell you the implications of a change in trend would be profound and the evidence continues to mount that the 35-year bear market and bonds is over in the US. In other words the low in interest rates is in.
 
The US 30-year bond prices have clearly broken down and the 10-year bond looks to be on the same path. I'll give you just one quick example of the implications before maybe you nod off to sleep. The rate on a 10-year US bond is now 2.37%, almost 3% on their 30-year bond. Now think about this. The 10-year raid on a German bond is only .35% so you don’t have to have a finance major to see the incentive for German money to start coming into the US pushing the US dollar higher, and other currencies, including the Loonie and the Euro, lower. That's what's been happening in the last week with the Loonie dipping under 74 cents.
 
 The drop-in bond prices is estimated to have cost investors 1 trillion dollars in the last week alone! At the same time the estimated 9 trillion in debt of emerging market countries that have their debt denominated in US dollars is becoming unmanageable as their home currencies decline along with their economies.
 
 As I said, this is a really big story. There's a 152 trillion dollars in global debt including 16 trillion in negative yield debt, so a change in interest rates will have major, long-term repercussions.
 
Michael Campbell

 



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Bonds & Interest Rates

We Were Headed Down This Path No Matter Who Became Our Next Commander in Chief

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Posted by Larry Edelson - Money & Markets

on Monday, 14 November 2016 15:05

Screen Shot 2016-11-14 at 1.55.40 PMWill President-elect Donald Trump deliver on his campaign promises to dig in with an anti-globalization stance and potentially start one or more trade wars?

I have no doubt that he will follow through on this promise. He was clear about one goal throughout his campaign: Getting much tougher on trade relations.

The president-elect has talked up a range of aggressive actions, including:

- Labeling China a currency manipulator …

- Slapping tariffs on goods imported from China and Mexico …

- And renegotiating or walking away from trade deals like the North American Free Trade Agreement (NAFTA) and the proposed Trans-Pacific Partnership (TPP) deal that President Obama was pushing.

If President-elect Trump delivers on the protectionist measures he pitched during his campaign, investors can expect increased market volatility, especially in bonds. In fact, it’s already started.

This week alone, global bond investors have seen more than $1 trillion in value wiped out. My view: It’s the start of the sovereign debt crisis as foreign governments and central banks — worried about trade — send a message to Washington. So if Mr. Trump carries through with renegotiating trade deals or slapping tariffs on goods, guess what?

Our U.S. Treasury note and bond market will get clobbered, interest rates will soar, compounding the interest on our country’s gargantuan debts … and …

As I’ve been saying, the piper will inevitably and finally get paid.

Washington will go bankrupt, right along with the U.S. Federal Reserve, which is stuck with more than $4.5 trillion of U.S. notes and bonds.

The fact is my cycles and AI models warned of a sovereign bond crisis long before Mr. Trump even decided to run for president. We were heading down this path no matter who became our next Commander in Chief.

Best wishes,

Larry

http://www.moneyandmarkets.com



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Bonds & Interest Rates

Bonds getting murdered here….

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Posted by Mike Larsen - Money and Markets

on Thursday, 10 November 2016 08:04

Screen Shot 2016-11-10 at 6.55.50 AM
 

It’s hard to overstate the degree of carnage we’re seeing in the bond market here. Treasuries are getting absolutely murdered, with long bond futures plunging five ponts in price.(see chart)



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Bonds & Interest Rates

The Presidential Election Won’t Stop the MOTHER OF ALL DEFLATIONS

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Posted by Steve St. Angelo - SRSrocco Report

on Tuesday, 08 November 2016 08:32

Unfortunately, it doesn’t really matter which party wins the presidential election as neither one will be unable to stop the coming MOTHER OF ALL DEFLATIONS.  While it is frustrating to watch just how insane this presidential race has disintegrated into, I try to not to focus on it.

Why?  Because the U.S. Government will become totally powerless to deal with the future financial and economic collapse.  Furthermore, most institutions will also lose the ability to function when the system cracks.   This really isn’t a matter of if or when…. IT’S HAPPENING NOW.

According to a recent Zerohedge article, Dallas “Pension Fund Panic” As Major Warns Of 130% Property Tax Hike To Avoid Collapse,

“This is much like a Bernie Madoff scheme, if you ask me,” said Dallas mayor Miek Rawling discussing the collapse of the local Dallas Police and Fire Pension Fund. The Dallas pension board wants the city to contribute $1.1. billion in 2018, but to do that, they would have to increase the property tax rate by 130%.

This is just one sign of many hundreds that continue to eat away at the financial and economic system.  What is ironic to witness is the complete failure of the analyst community to understand the real reason for these financial disasters.  While most of the blame is put on the totally useless Mainstream Financial Networks, the majority of the alternative media analysts are clueless as well.

This is due to the alternative media’s failure to understand the underlying energy dynamics.  I used to read a lot of the alternative media sites (especially the precious metals), but presently only look over a few.  Many of the precious metals sites continue to harp on matters that really aren’t important anymore.

Of course, they do this because they do not want to look at the vital energy dynamics.  For some reason, most of the precious metals analysts look at energy as just another industry…. much like the retail or health care industries.  It doesn’t matter to them that the price of oil is now $75 below the cost of new production of $125 a barrel(according to the Hills Group work).

The falling oil price is totally gutting the U.S. and Global Oil Industry.  I wrote about this in my article, The End Of The U.S. Major Oil Industry Era: Big Trouble At ExxonMobil.  Without transports fuels, the world’s economy disintegrates…. and disintegrate it will.

Thus, the collapsing oil price will destroy the value of most physical and paper assets, BUT NOT GOLD & SILVER.  Here is a chart of the “Global Asset Universe” by the Savills Research Group Report:

Global-Asset-Universe-2015NEW



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Bonds & Interest Rates

How “Risk-Free” Bonds Will Trigger Bloodletting in Bonds, Stocks, other Assets

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Posted by Wolf Street

on Thursday, 03 November 2016 07:21

Investment-BondThe costs of the largest game of “Greater Fools” in economic history

Rarely do we investors get a market that we know is overvalued and that approaches such clearly defined limits as the bond market now. That is because there is a limit as to how negative bond yields can go. Their expected returns relative to their risks are especially bad. If interest rates rise just a little bit more than is discounted in the curve it will have a big negative effect on bonds and all asset prices, as they are all very sensitive to the discount rate used to calculate the present value of their future cash flows.

That is because with interest rates having declined, the effective durations of all assets have lengthened, so they are more price-sensitive. For example, it would only take a 100 basis point rise in Treasury bond yields to trigger the worst price decline in bonds since the 1981 bond market crash. And since those interest are embedded in the pricing of all investment assets, that would send them all much lower.

....continue reading HERE

....related:

Roughly Every 80 Years, the Piper Always Gets Paid …

 



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