Bonds Are Flashing a Red Alert

Bonds Are Flashing a Red Alert by Bill Bonner – Bonner and Partners

BALTIMORE – “Investors Prepare for Inflation,” warned the front page of The Wall Street Journal on Wednesday.

“Rising Treasury Yields Ripple Through Markets,” it added on Thursday.

“U.S. Treasurys lead bonds sell-off,” the Financial Times piled on, “as investors fear a faster retreat from crisis stimulus.

These headlines may herald the biggest financial turnabout in 35 years.

Stocks are hitting record highs. But bonds are slipping.

For three and a half decades, inflation and interest rates – which tend to travel in the same direction – have gone down.

Now, they are going up.

The yield on the 10-year Treasury note – an important benchmark for borrowing costs in the economy – fell to 1.37% on July 8, 2016.

Since then…

“Another drop in bond prices sent the yield of the 10-year Treasury note above 2.5%,” says the Journal.

But what does it mean?

Shaping up in front of us is a delicious farce, a comedy of errors and ignorance, like The Three Stooges, but without the “nyuk, nyuk, nyuk.”

Fed chief Janet Yellen either didn’t see the bond sell-off coming… or she didn’t think it was worth worrying about.

There is nothing “flashing red,” she said in her last congressional appearance. “Or even orange.”

Perfect.

We mean, from a slapstick point of view.

Ms. Yellen, then at the San Francisco Fed, didn’t see the crisis of 2008 coming, either. Instead, she turned her back and got whacked on the tushy.

Then, when the crisis hit, she had no idea what she was doing in the hysteria that followed, so she deferred to her fearless leader at the time, the hilarious Ben Bernanke.

This clown later modestly described himself as having the “courage to act.”

Courage?

The markets were correcting the damage done by excess credit provided by Greenspan, Bernanke, and Yellen, et al. But instead of having the cajones to let the correction happen, Bernanke panicked… giving it even more credit.

To the cheers of practically every investor, householder, politician, and economist, he slashed interest rates and bought up bonds with newly minted digital cash (QE).

That is, he was the quack who gave the diabetics what they wanted: more sugary donuts.

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Bill Bonner founded Agora Inc. in 1978. Since then, it has grown into one of the largest independent newsletter publishing companies in the world. Bill also co-wrote two New York Times bestselling books, Financial Reckoning Day and Empire of Debt, In his latest book, Hormegeddon, Bill describes what happens when you get too much of a good thing in the sphere of public policy, economics and business. This new newsletter is unlike anything else published in America today. Now in this industry, Bill Bonner has agreed to share his secrets and insights every month. It’s like having a super-wealthy uncle share his best ideas, insights and wisdom about business, relationships, investments, trends, developments, ideas and more.