Monday, June 24, 2013

Treasury Yields Continue to Soar

Overnight, Treasury securities continued to sell off in Asia and Europe, pushing government debt yields up to their highest levels since 2011.

The 10-year note yield was up 10 basis points on the day at 2.636%. The 30-year bond yield was up 5.5 basis points at 3.638%, and the 5-year note  yield was up 9.5 basis points at 1.526%.

^TNX Chart

^TNX data by YCharts


  1. Please consider the severity of money breakdown that occurred in May 2013: fiat money died.

    Just like in a hard freeze, where the element of a plant’s life perishes with a quick and hard snap, so in financial life, the element of money’s life has perished by a sharp rise in the Interest Rate on the US Ten Year Note, ^TNX, and has perished by a vertical rise in the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX. as is seen in the Steepner ETF, STPP, steepening vertically.

    What Doug Noland terms the global government finance bubble, has popped, it has been this bubble, that has underwritten, and swelled financial asset bubbles worldwide. This popping of bubbles, is seen in the ongoing Yahoo Finance chart of closed end funds AWP, EIM, PFL, PTY, RCS and CSQ, ... ... where the most interest rate sensitive bubble has suffered the greatest explosion. When fiat money died, it exploded the most interest reate sensitive asset classes with the greatest gusto.

    Please understand the desperate nature of financial system death that is taking place: the balance sheet of the US Federal Reserve is been stuffed with US Treasuries, TLT, and Mortgage Backed Bonds, MBB, and is largely based upon the most toxic of debt, that is the “assets” taken in under QE1, these are largely illiquid debts like those traded in Fidelity Mutual Fund FAGIX.

    As opposed to the previous rounds of central bank actions featuring Global ZIRP, the next round of central bank actions will be something entirely new, things such as capital controls, and working together in un dollar currency initiatives, such as regional commerce trading platforms, such as the Hangzhou-based company, Alibaba Group. Thor’s Hammer writes in Naked Capitalism "China is forming alliances, engaging in non-dollar denominated energy trade arrangements, and actively working to replace the US dollar as the world reserve currency." And Thor’s Hammer goes on to relate “When the US loses its reserve currency status that will signal the end of its reign as the world’s only great power. The USA is dependent upon its ability to print dollars to sustain its worldwide imperial military system.” I add that as the Bretton Woods System, also termed the Milton Friedman Free To Choose floating currency system, really gives way, that the US Dollar Hegemonic Empire, will collapse, and The Ten Toed Kingdom of Regional Governance, will emerge, where ten regional zones of increasing iron diktat will emerge out of today’s clay democracy, as foretold in bible prophecy of Daniel 2:25-45.

    Global bond markets determine the fate of equity markets. This is the principle of debt deflation: falling bond prices, first cause currency sell-offs, and then investment derisking out of nation investment, and in particular financial institutions. This has been the case in the Emerging Markets, EEM, where Emerging Market Bonds, EMB, have plummeted on the sharp rise in the Interest Rate on the 10 Year Note, ^TNX, and then Emerging Market Currencies, CEW, have given way, and then, Nation Investment, EFA, IFSM, in particular the banks of the countries under stress. A case in point is Brazil, where the Brazilian Real BZF, has fallen, driving Brazil, EWZ, EWZS, and its Banks, BRAF, lower.

  2. At what point does it begin to be a problem? And which sectors would it start impacting?

  3. What is Helicopter Ben going to do about this? Will the Fed capitulate to the market or will they step on the gas one more time?

    Eventually this nonsense either stops and we have ourselves a doozy of depression or they destroy the dollar.