Dear Reader,
The Wall Street Journal reported, (though everyone’s talking about it on Wall Street) the U.S. government’s had trouble trying to sell $69 billion worth of debt.
Demand is very tepid.
When you try to sell $69 billion worth of bonds in a week to finance this deficit that we have…
And you have tepid demand…
The buyers are saying, “you gotta pay us higher rates.”
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Now, what was unique about this auction was that it was short-term Treasuries – two-year notes, basically.
So remember, to finance this crazy spending binge that we’re on, the U.S. government has to sell bonds every week.
Sometimes it’s two-year notes, 10-year debt, 30-year debt.
Now, nobody in their right mind would actually lend the U.S. government money for 30 years under 5% interest – it’s just not enough. No one wants it.
In other words, 30-year debt is mispriced.
Because all roads lead to inflation – no matter how you slice it.
Unless Trump really clamps down on spending, and no incoming president ever really does, we are in for inflation.
I just don’t see spending getting any better, personally.
That’s why we’ve been recommending short-term notes.
But, here’s the challenge with that: the government is selling two-year notes.
That means that when interest rates spike, the U.S. government will have to refinance those notes in two years and pay higher interest.
As 30-year notes are not paying enough, and investors are walking away, saying, look, we’ll buy two-year notes, sure. But you’ve got to pay us more than you’re paying us.
That’s what investors are saying to the United States government.
That comes up for renewal every two years.
Every two years those bonds expire and they have to issue new debt.
And the risk with that is, as interest rates keep going higher, our nation’s interest expense will keep going higher every time we refinance that debt.
It is crazy.
Think about it – two-year notes are paying over 4%.
And that’s getting tepid response. I could see two-year notes march right up to 5%.
I could see 30-year notes march to 6-7%, which means bond prices go down.
Remember there is an inverse relationship between yields and bond prices. If yields go up, bond prices go down. If yields go down, bond prices go up.
And there was an interesting note out from Neuberger Berman basically telling people “don’t touch 30-year bonds.”
Everybody who knows anything about how this works says U.S. government 30-year debt is just mispriced.
They need to pay a heck of a lot more to get people to actually want to lend the U.S. government money because lending the U.S. government money right now is a risky proposition.
As Paul Tudor Jones said, it’s like lending $40,000 a year to somebody who makes $100,000 a year and owes you $1 million already. And they’re borrowing another $40,000 a year in extra debt!
So you have to think, what would you require to lend that person money?
Personally, I’d require a lot of collateral…
Super high interest rates. I’m talking like credit card debt rates. That’s how bad the situation is here.
Anyway, I thought that was important to share with you: AVOID long-term debt – all the “smart money” is.
I know I’ve talked here about takeovers the past week and I don’t think I told you that we’ve actually averaged 17% “income” every month since 2023 on these.
Over the five years I’ve been sharing these with readers, we’ve won on darn-near 100% of our recommendations and turned out a gain every few weeks on average.
I believe my “#1 Trump Takeover Target” is about to get a buyout and I don’t want you to miss this one.
This very same company, being targeted by Amazon, jumped 40% in a single day on just a rumor Amazon was looking at them in the past.
That’s why we went live with our first webinar of the year, but my team is taking the replay link offline TONIGHT.
So this is your very last chance to watch it.
Go here to see “Our #1 Trump Takeover Target” before the link expires.
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