Is there a US Bond Bubble?

[Cold Pizza]

I have not read up on this in a while, and I hope a poster can clarify it for me. There is also optimism.

Sabang?

We know how these econ-pundits often get it wrong.

This person (short 2 minute video at link) claims there is a Bond Bubble of "epic proportions" and interest rates will have rise and may rise quickly.

Boockvar: The bond bubble 'of epic proportions' will be a challenge for Trump's presidency
Elizabeth Gurdus | @elizabethgurdus

A Donald Trump presidency could hold significant economic benefits, but a major challenge for the administration will be a huge bond bubble on the verge of bursting, analyst Peter Boockvar said Friday.

"I'm optimistic that the regulatory noose around the economy is going to loosen up. It'll be bullish with lower taxes. The problem that Trump faces is that we have an unwinding of a tremendous bubble. This is the biggest bubble we've ever had that is now leaking," Boockvar said.

The Lindsey Group analyst told CNBC's "Squawk Box" that the bubble "of epic proportions" could cause rates to move up rapidly.

"The July lows in global interest rates we may never see again in our lifetime," Boockvar said. "We have to deal with the consequences of that shift higher in interest rates because the Fed and other central banks have created an economic construct and an asset-priced construct based on very low interest rates, so there has to be an adjustment."

And, with global growth generally sluggish and the cost of capital rising, Boockvar said the normalization of rates may not be felt until the second, third, or even fourth year of Trump's presidency.

Either way, Boockvar still believes that the end of the bond bull market is approaching, as he wrote in an opinion editorial for CNBC in September.

Now that Trump has been elected president, markets are rotating in expectation of an increasingly pro-growth environment, Deutsche Bank chief U.S. economist Joseph LaVorgna said on "Squawk Box."

"You've seen a rotation out of the stocks that people thought could grow in a very soft environment — FANG, if you will," LaVorgna said.

That cluster of technology stock — Facebook, Apple, Netflix, and Google parent Alphabet — were trading lowerfollowing news that Trump had won the election.
LaVorgna said that the yield curve, which has recently been steepening, has historically been a good predictor of growth. The economist said business confidence may also improve in light of an administration that may loosen the regulatory reins on businesses.

"You're possibly unshackling a lot of businesses where sentiment has been very poor," LaVorgna said. "You could really harness ... the innovation, creativity and dynamism that arguably has been lacking for a while that now possibly can shift."

That shift could even double trend growth for a time, the economist predicted, to 3 or 4 percent.

The catalyst is also a shift in who controls and shapes policy, said David Lebovitz, global market strategist for JPMorgan Asset Management.

"We've been talking about passing the baton from monetary policy, monetary stimulus, which hasn't really worked, to fiscal stimulus, and now it looks like that's going to happen," Lebovitz told "Squawk Box."

"You're going to have lower taxes, you're going to have an increase in infrastructure spending. How we pay for it is another issue, but I think this is very pro-growth, at least for the next 12 to 18 months," he said.

In terms of the expected Fed rate hike in December, Lebovitz said that if rates do rise, they will finally be rising for the right reasons — for one, because growth outlook is looking better.

Still, LaVorgna contended, the Fed should maintain their slow pace in raising rates so as not to short-circuit or shock markets in a time of major transition.

Boockvar: The bond bubble 'of epic proportions' will be a challenge for Trump's presidency

[VocalNeal]

I think there is a whole USA bubble that is in danger of bursting. No jobs, everyone out for themselves , too much welfare, prisons full.

But then it has been that way for a while.

[Seekingasylum]

The entire bond market is heading towards negative yield. QE and zero interest rates ensure this. Only continued Central Bank support postpones a reckoning. A shift towards higher interest rates will snap bones and spill blood on the floor.

The UK's stagflation and Brexit induced recession will be an interesting scenario 2018/19 but I'm hoping for inflation running at an annual 4%. Equities will of course decline.

[Cold Pizza]

The entire bond market is heading towards negative yield. QE and zero interest rates ensure this. Only continued Central Bank support postpones a reckoning. A shift towards higher interest rates will snap bones and spill blood on the floor.

Thanks for the response SA.

I admit my ignorance.

If the Central Banks raises interest rates, then the yield will go down, but the interest rate up, correct? Or, the yield and interest are the same thing with different names?

Or am I confusing the price of the bond?

(There is an inverse relationship between between the price and yield, yes?)

[Cold Pizza]

$1 Trillion.

American Public Absorbs Loss From Treasury Debt Plunge
Posted by Charles E Carlson January 5, 2017

Three months of lower Treasury Debt (TD) prices has wiped out about one $trillion in the value of all Treasury Bonds, notes, and bills which represent about 5% of its total value. The American public is, unknowingly the biggest owner and loser. A further decline in price of 20-25% is not unreasonable to expect, so grossly and over inflated are these US debt securities .

The past series of wars in the Middle East have been funded with electronic money, created through a ruse that could only be done in the electronic world of today. Basically, the money for war has been created in unimaginable quantity through the issue of Treasury debt.

The plunge in the dollar price of Treasury issued instruments has been witnessed and largely ignored by Wall Street. The US war machine is hooked on the $trillions it has received from the Treasury. Continued sale of TD is dependent on a rising, not a falling market price. But falling they are! The Treasury and the FED will attempt to re-inflate Treasury debt prices. But there is good reason to believe this market will no longer supply the Pentagon’s demand for $trillions for war.

Lisa Abramowicz, wrote a helpful feature story in establishment Bloomberg News on December 30, 2016, Beware the Foreign Exodus From Treasuries, in which she stated: “The biggest foreign buyers of U.S. government bonds are quickly retreating after years of absorbing record amounts of the securities.”

Abramowicz specifically referred to China, Japan, and Brazil as “constant sellers.” I add that that Russia has been dumping US Treasuries for at least two years, as might be expected in view of our government’s ” economic sanction” on Russia, a country we owe money to! Does Donald Trump throw rocks through the widow of he bank where he owes his mortgages? Neither should our government!

The US war machine has employed the Electronic money press run by the Federal Reserve System (FED) to finance every conflict including the two world wars. Mass killing cannot be hidden long, but the money cost of war has been shielded from us. Neither President-elect Trump, nor almost-President Hillary Clinton, nor departing President Obama has told us about America’s financial risk in playing the new war game. In fact, they may not know! Each in his own way takes the erroneous position that the cost of future wars need not be discussed. But all these politicians seem to sense that the next war has become a necessity because our war based economic system will probably crack without war’s stimulation. Is it time we accept that cost, whatever it may be? The truth is always best faced.

The art of war changed when we Americans revolted (remember the Draft Card burnings) after 50,000 of my contemporaries, most of them “drafted”, died in Vietnam. Their names now adorn a memorial wall. Never mind the million or more Asians who were starved and slaughtered! America revolted over our unnecessary human losses, not the dollar cost, which we only sensed but did not understand.

The Neo-Peace: For 20 years, until January 1991, we rearmed in the name of peace. Wall Street quietly funded rearmament that resulted in the non-nuclear, military, killing machine used today. The cost was paid by printing and selling Treasury debt. The Neo-Peace included about 1000 costly foreign military bases world-wide. In 1991 this new, unstoppable destruction machine, featuring depleted uranium projectiles, and enormous Bunker-Buster bombs, was unleashed upon the hapless and helpless people of Iraq. The decision to destroy our former ally, Saddam Hussein and his entire army, was justified to us Americans because of his invasion of Kuwait, a kingdom we had no reason to care about. Iraq was the test case for this unstoppable, new military for which money was no longer an object.

To accept the 1991 concept of war without cost, the American people had to be convinced Iraq was different from Vietnam. We were given to believe: 1) the war would not hurt us at home; 2) the Iraqi people deserved it; 3) our sons and daughters would be safe waging it; and, most important in selling war, 4) only “volunteers” would be at risk. The “Draft” or conscription, which twice called upon this writer to uniform in the “Cold War,” was gone.

This anti-Saddam (anti-Islam) propaganda objective was accomplished through a year-long campaign that most of us have forgotten. But I have not forgotten because I wrote about it then In January 1991.

The US Military exposed its new arsenal of pricey and deadly, non-nuclear weapons, and it utterly destroyed Iraq’s military elite in 31 days on the deserts of Kuwait. It was the first step in our serial wars against weak foes in the Middle East, all to be funded by sale of TD to to us, the public.

During the 26 years that followed, our government has borrowed tens of trillions of dollars from our people, most of whom have no idea they are creditors, and that these loans can never be repaid, except by printing more money by selling more TD. Additionally, the New War Machine has borrowed as much as $5 trillion from the fast growing foreign governments with whom we now trade. (TD) outstanding has increased about 500% since the first bombing of Iraq, and some 20 times since the public forced the shut down of our Vietnam disaster. Don’t take my word for it.

Much, but not all of this growth of debt, can be attributed to the cost of our serial wars across the Middle East. US hostile threats are now being directed toward Russia and even China. There is strong evidence that behind the scenes war-angel funders in the USA have even invented the new enemy, called ISIS, to be a sparring partner in the Middle East. It appears the plan is to joust with ISIS until an aggressive war with Russia or Iran can be concocted. This scheme needs to be exposed now, we have no draft cards so lets sell our TD!

But the staggering cost of any war is not the biggest problem in preventing more wars; the deception that has allowed the debt to explode, is the greater problem. The international banks that own and control the Federal Reserve banking system have hung the cost of war around our necks. The federal government now owes debts equal to 25% of all the private mortgage debts in the USA! Roughly half of all these instruments have been pawned off on us, the public, through our Social Security, IRAs, pensions, mutual funds, and other funds managed for us by someone on Wall Street.

The unique big event coming down may be first ever market crash of the US Treasury debt (TD). The slow slide that leads to the crash began two or more years ago when other governments, led by Russia, China, and Japan, began to unload their huge hoards of Treasury bonds bills and notes. It has not gone unnoticed.

This may be only the first leg down after a 30 year manipulated up market. During this three month drop, about $1 trillion dollars in value disappeared from holders of TD. This means the decline in market value in just 3 months wiped out about 2 1/2 years of interest income for anyone holding TD, even if in a 401(k) or a managed pension plan! That is a huge loss to investors who thought they were making the safest investment in the world. Imagine what this will do to the US Social Security fund, about $6 trillion, all of it, yes 100%, is invested in Treasury debt. The same is true of Veterans pensions.

Others are debating how much debt is sustainable for a nation like ours, but please do not get involved or give credence to these academic and irrelevant false-flag debates. They are pure diversion.

The important issue is not the amount of debt our government has amassed, but the deception that has been used in selling it in our name and in inveigling Wall Street into stuffing TD into our 401(k) and pension plans, to be repaid in inflated dollars! US Investment funds and pension plans own more than 1/4 of the 20 $Trillion. If investors who depend upon their holding of Treasury-issued debt came to recognize the level of fraud used to sell these bonds, bills, and notes, they would stampede to get out, as the Chinese government is doing, and a crash in the TD market would result. The staggering realization is that this scam is not a secret–institutional owners of TD know. They simply think the Federal Government is capable of keeping the TD Ponzi scheme floating. We know the Treasury and the FED will manipulate the market in the short run, but planting news, but can they control the longer term price of $20 trillion of paper, half of which is in the hands of potential sellers? We will see.

The big sellers in the 2016 were foreign governments but they still hold hold roughly 25% of all TD notes. But more yet is in the account of Mutual fund managers and trusts. What will happen if they become net sellers? Worse yet, $4 trillion of the US TD is owned by the Federal Reserve System and has never been paid for: it is the root of the scam. The FED purchases are a pretense, the act of a shill, one of whom is Janet Yellen, whose job is to maintain confidence that the price of TD can go only one way, up. The FED goes the carnival shill once better, it does not give up any real assets to make its purchase, so its purchases seem to be unlimited. It is allowed to print the funds electronically by virtue of a charter granted to the FED by Congress in 1913. It keeps others placated.

The most gigantic Ponzi in the history of mankind is shaking in its boots, about to be discovered. Several factors indicate discovery. First, private holders and foreign governments, can and will sell. They must protect their assets from market decline once they realize the market can and will drop if holders get out! This decline occurs when interest rates rise, by definition of a bond. When Interest rate go up, bond value goes down. To put this into prospective, the FED has purchased with electronic money, and holds TD equal to 1/3 of all the mortgage debts on all home, apartments, farms in America. The FED admits this when they turn back to the treasury the interest they pretend to earn on the TD they claim to own.The Wall Street Journal reveals this fact while covering for the FED.

What might the FED, the complicit members of Congress, and the Executive Branch do to keep this scheme going? The one answer history has taught is to start a larger war that might take our minds off money and debts. This is indeed a big event thatis coming down unless public revolt prevents it! Lets do it!

US Treasury Bonds,The Godfather Of All Bubbles. Charles E Carlson April 27, 2015

Treasury Debt Down Hard on American PublicWe Hold These Truths

[chassamui]

The only bubble is the vacuum between your ears.

[Cold Pizza]

The only bubble is the vacuum between your ears.

You're about as dumb a Davis.

Old and grumpy.

You're useless around here. And a loser who's divulged what a loser your life has been in the Lounge.

[UrbanMan]

The entire bond market is heading towards negative yield. QE and zero interest rates ensure this. Only continued Central Bank support postpones a reckoning. A shift towards higher interest rates will snap bones and spill blood on the floor.

The US raised their interest rates recently (the Fed), and indicated more raises should be expected. If this plays out, the usd bond market will feel pain. They prolly would have acted sooner, but its tradition they don't like to do much leading into an election.

Lots of people in the US are up to their ears in debt. If the cost of borrowing rises, expect to see many stories in the press of people experiencing financial catastrophe.

Other countries might be different.

[birding]

Have read for some time of countries, Ruaaia, China etc selling off US bonds (debt) but to sell something there must be a buyer.

So who is the buyer.....The FED perhaps but the selling countries are not going to accept funny money they will want real money they can buy gold with or gold itself.

This leads to the question............ Are the US gold reserves being used to buy back debt (bonds) ?

Some interesting reading on this subject :

The Chinese Are Buying Gold, Selling Treasuries - Should You? | Zero Hedge

https://srsroccoreport.com/china-sel...rkets-at-work/

Why are Russia and China Buying Gold, Tons of it? | New Eastern Outlook

[SKkin]

(There is an inverse relationship between between the price and yield, yes?)

Yes, as interest rates go down bond prices(or value) go up.

30 year bond price(value) chart going back to pre-1994...which direction is most likely next? Notice it's already down from the highs.




The 10 year note...valuations not quite as extreme as the 30 year.



Note in the bottom line of the charts the differences in recent moves by Commercial Hedgers vs. traders(large and small).

Personally I think the Donald's Admin is in for a world of economic/financial hurt. Possibly by design...

[Cold Pizza]

Personally I think the Donald's Admin is in for a world of economic/financial hurt. Possibly by design...

I see the difference in the Commercial Hedge and the Large Traders, but I don't know what this means.

As for 'world of economic/financial hurt. possibly by design'

Do you mean Wall St Banks would do this intentionally?


They were all for HRC.

[Cold Pizza]

The Bear starting? It's been a 35 year run.

As Bond Bear Market Beckons, Veterans Tell Tales of the Unknown

Five veterans with two centuries of experience trading and analyzing the $13.9 trillion U.S. Treasury market issue a stark warning to their younger counterparts.
by Sid Verma and Andrea Wong
January 27, 2017

Nowhere is that truer than in the bond market, where a largely uninterrupted 35-year bull run in U.S. Treasuries has become the defining experience for generations of debt traders and investors. For them, double-digit inflation, benchmark interest rates above 6.5 percent, and prolonged capital losses on bonds have only ever been theoretical.

Now, with expectations for U.S. inflation and rate increases climbing, concerns have emerged that the much-feared bear market in government bonds is finally poised to take root -- potentially leaving investors worse off than the 1994 ``bond massacre.''

Video at link: https://www.bloomberg.com/news/artic...of-the-unknown

[Cold Pizza]

Sir, old and dumb harkens again. Post calling the kettle black. Maybe he wants a last quote before he - and the US economy goes down.

ECONOMY WORLD ECONOMY US ECONOMY THE FED CENTRAL BANKS JOBS GDP OUTLOOK

Greenspan: Bond bubble about to break because of 'abnormally low' interest rates
Former Fed Chief Alan Greenspan said "abnormally low" interest rates will break a bubble in the bond markets.

CNBC.com

Former Federal Reserve Chairman Alan Greenspan issued a bold warning Friday that the bond market is on the cusp of a collapse that also will threaten stock prices.

In a CNBC interview, the longtime central bank chief said the prolonged period of low interest rates is about to end and, with it, a bull market in fixed income that has lasted more than three decades.

"The current level of interest rates is abnormally low and there's only one direction in which they can go, and when they start they will be rather rapid," Greenspan said on "Squawk Box."

That low interest rate environment has been the product of current monetary policy at the institution he helmed from 1987-2006. The Fed took its benchmark rate to near zero during the financial crisis and kept it there for seven years after.

Since December 2015, the Fed has approved four rate hikes, but government bond yields remained mired near record lows.

Greenspan did not criticize the policies of the current Fed. But he warned that the low rate environment can't last forever and will have severe consequences once it ends.

"I have no time frame on the forecast," he said. "I have a chart which goes back to the 1800s and I can tell you that this particular period sticks out. But you have no way of knowing in advance when it will actually trigger."

One point he did make about timing is it likely will be quick and take the market by surprise.

"It looks stronger just before it isn't stronger," he said. Anyone who thinks they can forecast when the bubble will break is "in for a disastrous" experience."

In addition to his general work at the Fed, which also featured an extended period of low rates though nowhere near their current position, Greenspan is widely known for the "irrational exuberance" speech he gave at the American Enterprise Institute in 1996. The speech warned about asset prices and said it is difficult to tell when a bubble is about to burst.

Those remarks foreshadowed the popping of the dot-com bubble, and the phrase has found a permanent place in the Wall Street lexicon.

"You can never be quite sure when irrational exuberance arises," he told CNBC. "I was doing it as part of a much broader speech and talking about the analysis of the markets and the like, and I wasn't trying to focus short term. But the press loved that term."

https://www.cnbc.com/2017/08/04/gree...est-rates.html