Yields on the 10 yr going bonkers, causing turmoil in financial markets, but it's probably good news in the medium term...

in LeoFinance3 years ago (edited)

The yields on the 10 yr Treasury spiked to highest levels in a year, sending shock-waves through financial markets

For those not believing in the re-opening trade, look no further than the 10 year Treasury yields.

They've been climbing for months, and are now really accelerating.

Hitting levels currently not seen in more than a year:


(Source: https://www.cnbc.com/quotes/US10Y)

The current yield over 1.5% marks almost a 3x increase from lows seen in August of last year.

Why is this happening?

The bond prices and yields move inversely to each other, meaning that when there is more demand for the bond the yields go down and conversely when there is less demand the yields rise.

So, what is this telling us?

Traditionally, when you see yields rise like they are it means there is more confidence in the economy and when they fall it signals a lack of confidence in the economy.

With the vaccine roll-out well underway and pockets of the economy starting to open back up, it means that investors are positioning for a significantly improving economy in the not too distant future.

As a result yields are rising on the 10 year and stocks are falling as investors are repositioning for the expectation of a stronger economy in the coming months.

As a result stock markets are getting crushed, with the Dow down roughly 500 points and the Nasdaq being hit even harder.

What does this mean for bitcoin?

It could mean a lot for bitcoin, or nothing at all.

With bitcoin being more institutionalized than ever before, it also has some drawbacks...

With a lot of the largest tech investors also holding bitcoin, if they are forced to start selling tech stocks they may also be forced to sell bitcoin as well.

Tech stocks traditionally are the most impacted by rising yields as it costs more money to service debt.

However, something else to consider are the implications of a rising 10 year T-bill...

Not only does it often signal an improving economy, it's also traditionally a barometer of expected inflation.

IE, when yields rise it also means there is an expectation of impending inflation, while inflation may be seen as bad by most people, bitcoin investors have long opinioned that's exactly the thing bitcoin was created for.

So, there is the chance that if we are entering a period of higher inflation, it might actually be good for bitcoin, though that is up for debate.

Either way, the FED is still buying $120 billion worth of Treasuries and Mortgage Backed Securities every month, and that won't be stopping any time soon and we are on the cusp of another massive stimulus bill.

Things are still in place for a great year for bitcoin and probably stocks as well, there might just be some turbulence in the very near term as the yields catch up to what the stock market had already been signalling, an improving economy.

Stay informed my friends.


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Or this could be the indicator of the beginning of the melt down of the bond market which will domino into the currency market.

I think the meltdown you and others seem to think is imminent is going to take a lot longer than most realize...

K shaped recovery in full swing. I don't think the economy will be growing much within the next 10 years.

We are likely to see huge economic growth in the coming months, but it will be coming off very low numbers.

I will be happy when all of these stimulus bills are behind us. They just feel really reckless. I understand the heart of them, but I just feel like there has to be a better way to go about it. This is definitely some interesting news and I look forward to following your continued analysis of the TBills.

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I would like to see this next one come out, mostly because if it does I think it guarantees bitcoin goes to $100k this year. :)

I'm not an economics expert, but this seems like a positive sign to me. Perhaps in 1 year we will also see the S & P 500 to 4000

It represents a return to more "normal" market conditions. In the medium term its good and healthy, in the short term its causing some turmoil.

Thanks for reply... I like your profile

The inflation already happened in the money supply last year. We just get to ride out the economic consequences of its ripple effect now.

Inflation in the money supply often isn't felt in the real economy for some time...

And the effects are irregular, especially when it happens to such an extreme degree. The stocks, bonds, and real estate market are where I would expect to see it hit first, and here's your post.

Yea, it will be interesting to see how the FED responds. They can do nothing and just ignore it, they can back off their buying and let the free market dictate rates, or they can dig in and buy even more...

QE perversion in full effect - the economy is looking great - sell, sell, sell!

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I'm sure they'll come up with some scheme to keep the rates from rising too fast, I see the 120 a month printing we'll go up to 200 or more. They are such ridiculous losers and have no idea what they're doing.

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It’s killed silver prices...

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