• 525 days Will The ECB Continue To Hike Rates?
  • 526 days Forbes: Aramco Remains Largest Company In The Middle East
  • 527 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 927 days Could Crypto Overtake Traditional Investment?
  • 932 days Americans Still Quitting Jobs At Record Pace
  • 934 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 937 days Is The Dollar Too Strong?
  • 937 days Big Tech Disappoints Investors on Earnings Calls
  • 938 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 940 days China Is Quietly Trying To Distance Itself From Russia
  • 940 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 944 days Crypto Investors Won Big In 2021
  • 944 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 945 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 947 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 948 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 951 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 952 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 952 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 954 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

A Dangerous Bond Bubble

As reported two weeks ago: spreads had been sending a caution sign for the risk of yields rising. That has been happening, and the 30 year yields are rising ...

It was June 2008 when the 30 yields had hit its last peak level before dropping. From there, it down trended until it hit a low not seen in well over a decade.

That low was made in December of last year. Since then, the 30 year yields have been rising ... this was not just a rise, it was a rise that penetrated a 10 month Resistance line.

Why is this important?

Because the Fed has a mission to keep 30 year mortgage rates below 4.5% in an effort to give the housing industry a chance to recover.

With the 30 year yields moving above this long term resistance, the markets are saying that risks levels and the threat of inflation demand higher yields.

The Fed is saying, "no, we want the yields to stay low".

The Fed has already spent over $100 billion in purchasing Treasuries in an effort to keep rates down.

Just as the yields are now breaking through a long term resistance, the Fed is going into battle and is expected to buy another $300 billion in bonds over the next 6 months in a continuing effort to force mortgage rates lower.

So, rather than normal market forces interacting with each other, we have the overt manipulation of Fed interference.

It is a zero sum game in the end for the Fed because they will cause a bubble in bond prices that will have an ugly ending.

Pete Seeger's song lyrics had it right ... When will they ever learn?

 

Back to homepage

Leave a comment

Leave a comment