Dear Reader,
Today, I want to talk about a concerning financial trend we haven’t seen since the ‘90s under Bill Clinton.
A Bloomberg article came out yesterday announcing the 30-year bond yield has climbed to 4.85%.
This is the highest level since November 2023.
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Basically, the highest level since before the Fed started cutting rates.
Yet, we have bond investors refusing to buy 30-year debt at 4.85%. They are ignoring the Fed.
They’re basically forcing the Fed to get $58 billion of the $119 billion the government’s trying to raise this week from three-year notes.
The Fed will auction 10-year notes today and 30-year bonds on Wednesday.
Seeing investors ignore the Fed is unprecedented in modern history.
Nothing like this has happened since the ‘90s when Bill Clinton was in office…
Where bond vigilantes forced fiscal control over the government (which is a very good thing).
I’m not sure the fiscal restraint will come this time around.
Why is this important?
Two reasons:
First, as I’ve talked to you about, the 10-year bond has an inverse relationship to the stock market.
The market’s gone up 117% since the 2020 lows. It’s more-than doubled.
But every time the market has gone down, the downturn has coincided with the 10-year bond yield hitting 4.5%.
It’s like the market’s head gets chopped off – the market really doesn’t go higher when that yield is at 4.5%.
If you see 4.7%, that pushes the market down.
So that 4.5% level on the 10-year bond has been like a ceiling for the stock market.
It’s going to tell you more about where stock prices are going in 2025 than anything, really.
So that tells you there’s a “ceiling” on the stock market, right?
The other reason the 10-year yield is important is that commercial real estate has been suffering as we’ve talked about since July in Midnight in America.
Commercial real estate has been choking to death with massive office buildings that are basically vacant, causing trillions of dollars’ worth of issues for banks and lenders, for pension plans like CalPERS, taking massive write-downs.
Now, the commercial real estate market has had this saying: survive till ’25…
If you talk to anyone involved in commercial real estate, anyone on Wall Street involved in commercial real estate debt, they all said the same thing last year: survive till ’25.
They hoped the Fed would lower rates and that would allow them to refinance these massive buildings at lower rates.
Guess what?
Not happening.
The Fed is lowering rates, sure, but the bond market is now in control.
So, the Fed can lower rates to zero, but bond investors, by and large, are saying, you can lower rates to whatever you want, buddy. We’re not lending you money unless you’re paying us more.
So, we have massive headwinds.
The things we’ve talked about, the things we predicted last year in Midnight in America are starting.
The chickens are starting to come home to roost.
These things happen when they happen.
But right now, the fiscal spending is starting to really cost Americans money, in higher mortgage rates…
More challenges with pension funds that will have to take massive write-downs…
Commercial real estate funds that will have to take massive write-downs.
This is a problem most folks aren’t talking about, which is why I keep banging the bell on this one.
We’re watching a slow-motion car wreck.
I’m here trying to keep my readers from getting hurt.
If you haven’t seen our documentary, Midnight in America, click here to watch it now. Before it’s too late.
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