Treasury Yields Rising Since September 18 '24 Fed Announcement Lowering Of Yields
Trouble Brewing In the Global Debt Bubble Economy
“Also, when you find that Lenin declared and demonstrated that a sure way to overturn the existing social order and bring about communism was by printing press paper money, then again you are impressed with the possibility of a relationship between a gold-backed money and human freedom.”
Hon. Howard Buffett, Congressman from Nebraska, 1948
(Warren Buffett’s dad)
After the Fed’s FOMC announced on September 18 2024 a 0.5% (50 basis point) decrease in the overnight rate set by the Fed, the bond market has been sending a different signal for longer duration Treasury yields.
Yields on 2-Year (green line), 10-Year (purple line), and 30-Year (red line) US Treasury Bonds have marched HIGHER driving lower bond prices as these durations of Treasuries have been sold indicating a decline in market appetite for promised future payment of US fiat currency - see Figure 1 below.
Meanwhile, the digital price for gold (gold line) has increased to $2,620 /oz. today from $2,570 /oz. on September 18.
Figure 1 - 2-Year (green line), 10-Year (purple line), and 30-Year (red line) US Treasury Bonds vs Gold (gold line) Since September 18, 2024; source: TradingView.com
If this short-term trend continues and migrates into shorter term Treasury bonds, even as the market is told to anticipate lower interest rates, it will be a signal that the Fed is losing the ability to steer the bond market with its pronouncements.
The fact that the highly modulated digital price of gold has moved higher while bonds have been sold is a further indication of the market’s reluctance to buy the story of lower rates from the Fed.
The digital price of gold has risen from $1,860 /oz. to $2,620 over the past 12 months in a stealth bull market move with very little interest from the retail sector as indicated by the price of gold miner shares.
The ‘GDX’ VanEck Gold Miner Share Index remains 40% lower today than its 2011 high value when gold topped-out at $1,873 /oz. on a weekly basis.
A Continuation of Treasury Declines And Climbing Gold Signals The Fed Is Losing Control
Continuation of the trend of selling Treasury Bonds coupled with buying gold (and silver) is the road to crisis.
Total US system debt stood at $99.8 trillion at June 30, 2024 and the debt-bubble economy that the Fed central planners have created is dependent on extremely low interest rates.
A continued run higher in interest rates will ultimately lead to a currency and banking crisis and economic and social dislocation.
Figure 2 - Total US Debt Securities And Loans; source: St. Louis Federal Reserve Bank
Selling of bonds and buying of gold and silver is sending a signal that should not be ignored.
Given the scale of the global debt bubble created by central banks, sustained higher interest rates and the decline of the bubble economy will have very real consequences.
From this vantage point, directly held gold and silver bullion and coins are looking very attractive.
Best regards,
David Jensen
I think somehow the wizards curtain has finally fallen away. All will see the Fiat Fed for what they are and the herd will try to exit the burning theater and all get thru that itty bitty precious metals door, should be interesting the first day physical delivery metals go "no bid" on a global basis. Some musical chair games have big Cha Ching's at the end!
I've been watching the spread between the 3-month T-bill and the 10-year note for the last year or so. Prior to the Fed's recent rate raise it was like watching paint dry, particularly with regard to the 3-month, as it hardly budged, and the 10-year being more range bound but usually kept under 4%. Since their raise of a half percent the yield on the 3-month bill has fallen precipitously, from a bit over 5.3% to now around 4.64%, and the 10-year's yield has crept up to 4.01%.
David, you wrote "If this short-term trend continues and migrates into shorter term Treasury bonds, even as the market is told to anticipate lower interest rates, it will be a signal that the Fed is losing the ability to steer the bond market with its pronouncements." I wouldn't disagree, other than saying I may be more worried about an even worse situation suddenly arising if the part of the yield curve I pointed out un-inverts. Do you think it will and should I be more worried if it does?
Either way, I think the paint is done drying.