The Great Bond Market Crash

[Fortify]

Is this the latest crisis that is going to cause a recession? Bond yields in many countries are skyrocketing, which basically means the amount of money the government has to pay to service their (ever increasing) debt pile is getting more expensive to fund. For the decade between 2010 and 2020, many of these were paying 1-2% and now they are hovering around 5%. Bonds are "guaranteed" and one of the safest forms of investment - many peoples pensions end up converted into bonds because they are so secure. However when they spike higher, it means the cost to service that government debt goes up which may lead to tax increases.



It's having a knock on effect on the stock market, because why would you risk your money on a big behemoth company paying around a 3% dividend when you can buy government debt that is paying you 5%? I'm not sure how much effect Trump is having on these things, but investors are starting to think twice about the USA as the safe haven it once was and are re-allocating their money to other places. The best case scenario is that this is a temporary blip and the markets do crazy things at times before correcting back to the norm. The worse side is that this creates "unrealized losses" where big holders who bought at when bonds were paying 1% will now struggle to sell them in future and have to take a huge loss if they need to offload them - which could be the source of the next financial crisis if this continues for too long.

Personally, I stay optimistic and have been buying while the opportunity is there - it's hard to find a savings account paying 5% in my country as interest rates fall and the government is offering a 30 year one! I just hope inflation keeps coming down

What are your thoughts?

[WillyAp]

people in government simply don't care.
Larger the sum lesser they care.

Article from September 21, 2021
https://www.independent.org/article/2021/09/21/the-debt-does-anyone-care/

if they didn't care in 2021 they won't care now.
Don't forget government don't go bankrupt, they just default-

[boyptc]

It's easy for the government to keep on distributing these bonds because it's like a cash advance to them because they have it in plan to keep printing more money.

More money, more inflation.

And more inflation, more reason to print.

They're making this call for years and it's nothing new. While us, we are in the rat race and just getting the drip of the faucet from how big they're getting.

Personally, I stay optimistic and have been buying while the opportunity is there - it's hard to find a savings account paying 5% in my country as interest rates fall and the government is offering a 30 year one! I just hope inflation keeps coming down

What are your thoughts?

As much as I want to take that opportunity as well, there are better offers depending on where we are. A savings account would barely pay 5% per annum in most countries.

If the money that I'll be investing into these government bonds is good as gone forever, it's no brainer to choose BTC and let it sit for the next cycles.

[Fortify]

It's easy for the government to keep on distributing these bonds because it's like a cash advance to them because they have it in plan to keep printing more money.

More money, more inflation.

And more inflation, more reason to print.

They're making this call for years and it's nothing new. While us, we are in the rat race and just getting the drip of the faucet from how big they're getting.

Personally, I stay optimistic and have been buying while the opportunity is there - it's hard to find a savings account paying 5% in my country as interest rates fall and the government is offering a 30 year one! I just hope inflation keeps coming down

What are your thoughts?

As much as I want to take that opportunity as well, there are better offers depending on where we are. A savings account would barely pay 5% per annum in most countries.

If the money that I'll be investing into these government bonds is good as gone forever, it's no brainer to choose BTC and let it sit for the next cycles.

True, America especially is in a unique position as the default reserve currency of the world but they are in danger of letting that slip away if the government keeps acting so erratically. Trump is making it difficult for businesses to do much long term planning because he enacts tariffs and then pushes the back another 3 month when other countries do not budge. Any savings or money that he hopes to raise from these tariffs is going to be lost in the extra money it costs the government to service the debt. This might be all part of a long term plan though, just look at China - they love to suppress their currency because it means they can sell more things overseas and they've benefited a lot by exporting small items using the postal service rules that worked in their favor. There was definitely change needed, but he has tried to do too much too quickly.

[bitmover]

It's having a knock on effect on the stock market, because why would you risk your money on a big behemoth company paying around a 3% dividend when you can buy government debt that is paying you 5%?

It is more complex than that.

High interest rates may lead to higher inflation. Government will print money to pay their debts.

On the other hand, stocks are real world assets. If inflation goes up, those stocks should follow inflation (at least theoretically)

[cabron]

It's having a knock on effect on the stock market, because why would you risk your money on a big behemoth company paying around a 3% dividend when you can buy government debt that is paying you 5%?

It is more complex than that.

High interest rates may lead to higher inflation. Government will print money to pay their debts.

On the other hand, stocks are real world assets. If inflation goes up, those stocks should follow inflation (at least theoretically)

If they are going to print their way then inflation will also rise which means that 5% dividends may have less valuable  in the end.

So much cuontries been dumping their treasuries and that image above seem to have skipped China. AFAIK China was in the headline for dumping US treasury bonds which its them who hold most of their bond treasuries during that time. I could be that China was omitted because they are done with it already long before these countries started.

[boyptc]

It's easy for the government to keep on distributing these bonds because it's like a cash advance to them because they have it in plan to keep printing more money.

More money, more inflation.

And more inflation, more reason to print.

They're making this call for years and it's nothing new. While us, we are in the rat race and just getting the drip of the faucet from how big they're getting.

Personally, I stay optimistic and have been buying while the opportunity is there - it's hard to find a savings account paying 5% in my country as interest rates fall and the government is offering a 30 year one! I just hope inflation keeps coming down

What are your thoughts?

As much as I want to take that opportunity as well, there are better offers depending on where we are. A savings account would barely pay 5% per annum in most countries.

If the money that I'll be investing into these government bonds is good as gone forever, it's no brainer to choose BTC and let it sit for the next cycles.

True, America especially is in a unique position as the default reserve currency of the world but they are in danger of letting that slip away if the government keeps acting so erratically. Trump is making it difficult for businesses to do much long term planning because he enacts tariffs and then pushes the back another 3 month when other countries do not budge. Any savings or money that he hopes to raise from these tariffs is going to be lost in the extra money it costs the government to service the debt. This might be all part of a long term plan though, just look at China - they love to suppress their currency because it means they can sell more things overseas and they've benefited a lot by exporting small items using the postal service rules that worked in their favor. There was definitely change needed, but he has tried to do too much too quickly.

Yeah, can't deny that Trump is making it look like difficult for most business to go in there because of the tariff war that he has initiated.

He's doing a lot lately and trying to fix a lot of mess from the past admin and even the problem of other countries that are into wars, he's stepping in to stop it.

As for China, they're making a lot of alliances through their loans and that's why the other countries that are in their help and debt has probably that in contract that they should also accept CNY as their reserve and should pay in that for the interest.

[STT]

Underlying inflation is much higher then realized in bond rates so if anything the market is being too calm and probably it would continue to be that way right up until an actual collapse.  Main reason being a hierarchy of debt rates via measures in the global reserve currency and Federal reserve has effects worldwide such is the influence of QE programs on US debt.
   Interesting thing to note is Yen rates via the Japan government holding 1 trillion in US debt is very much a global concern, this isnt just a national problem its going to hit you like a tsunami even if you live the other side of the world; these countries are all very much linked like it or not.

[Catenaccio]

This map can help for getting an overview of world bond market.
World Government Bonds, Yields and Inverted Yields.
https://www.worldgovernmentbonds.com/

You can have information for many national bonds, their yields and more important inverted yields that imply something negatively are happening in nations with Bond Inverted Yield.

[shinratensei_]

Bonds yield rising everywhere simply means people are ditching it because people know governments are printing money more than ever and they want to switch to a more lucrative asset.
Even 5% yield isn't that much and not enough to fight the real inflation.

[bubilas]

Is this the latest crisis that is going to cause a recession? Bond yields in many countries are skyrocketing, which basically means the amount of money the government has to pay to service their (ever increasing) debt pile is getting more expensive to fund. For the decade between 2010 and 2020, many of these were paying 1-2% and now they are hovering around 5%. Bonds are "guaranteed" and one of the safest forms of investment - many peoples pensions end up converted into bonds because they are so secure. However when they spike higher, it means the cost to service that government debt goes up which may lead to tax increases.



It's having a knock on effect on the stock market, because why would you risk your money on a big behemoth company paying around a 3% dividend when you can buy government debt that is paying you 5%? I'm not sure how much effect Trump is having on these things, but investors are starting to think twice about the USA as the safe haven it once was and are re-allocating their money to other places. The best case scenario is that this is a temporary blip and the markets do crazy things at times before correcting back to the norm. The worse side is that this creates "unrealized losses" where big holders who bought at when bonds were paying 1% will now struggle to sell them in future and have to take a huge loss if they need to offload them - which could be the source of the next financial crisis if this continues for too long.

Personally, I stay optimistic and have been buying while the opportunity is there - it's hard to find a savings account paying 5% in my country as interest rates fall and the government is offering a 30 year one! I just hope inflation keeps coming down

What are your thoughts?

You have very interestingly noted that all this is one vicious circle. And if the state borrows a lot of money from people through government bonds, then in the end it can pull off such a not entirely honest scheme: raising taxes for the population. That is, in fact, the people to whom the state owes money will pay the state more, and at the expense of these funds the state will pay off debts. This is, of course, an absurd and dishonest scheme.
That's why I'm so glad that we have cryptocurrencies and don't have to put our money in bonds or in a bank to save it.

[pooya87]

I always view this as a nasty cycle with no end.

They print more fiat so inflation goes up.
The inflation goes up so they increase interest rates to battle that.
Increased interest rates means they have to pay more on the bonds they sold to cover their deficit.
They don't have money to pay, so they print more fiat.
They print more fiat so inflation goes up.
....

The only outcome is either the whole system collapses or they default and things collapse in a different way!
So far the governments been keeping this cycle alive digging a deeper hole and postponing that collapse which in my opinion only makes it more catastrophic.

[STT]

Bigger then bonds is the currency and ultimately the bonds pay out the currency on a future basis so with never ending supply that is what will crash.  The government has the power to repay all bonds if they use a new issuance of currency and so far on a smaller scale that is what they have been doing for decades.
  All the QE programs should have been reversed but they have not, in the US the main holder of those QE programs has and will be the pension schemes of big government.  Ultimately those pension schemes will pay out poorly in an over inflated currency but also its a large time scale so no leaders currently in power will still be alive.

[JeffBrad12]

Personally, I stay optimistic and have been buying while the opportunity is there - it's hard to find a savings account paying 5% in my country as interest rates fall and the government is offering a 30 year one! I just hope inflation keeps coming down

For me, still not interested, 5% is too small if we look at m2 global supply. I think yield could still rise and buying right now means we gonna lose some money if yield keep on rising.
In my opinion, the reason bond yield aren't decreasing in the first place because people realize the yield isn't enough, otherwise the yield won't get this high.
People realized it take more than just bond to outperform the inflation which equal to saving their money from vanishing.
I'd rethink if it's 7%-8%.