Bonds continued to get hammered. On Tuesday morning, the particular yield on the 10-year Treasury rose above 2 . 9% , and the yield on the 30-year is knocking on the doorway of 3%.
Since connection yields rise as connection prices fall, this indicates a significant decline in the bond marketplace. In his podcast, Peter Schiff said that at some point, the market is going to actually crash.
“ A crash is certainly coming. Because, if the bond market doesn’t crash, the stock market will. And if the particular bond market does crash, well then, the stock market is going to crash too. So , in any event, at some point you’re going to get some kind of accident. ”
The last period bond yields were this high was in late 2018. The target Fed funds rate at that time was 2 . 25% to 2 . 5%.
“ Therefore , that was the highest the Fed was able to raise rates, plus they had to start cutting all of them because that 3% yield was doing a lot of harm to the economy, as were the two-and-a-quarter to two-and-a-half Fed funds. Well, the Fed funds rate continues to be at. 25 to. five now. The Fed offers only hiked rates once by 25 basis points. And we’re already almost at 3%. … So , yields are already where these were when the Fed funds rate was 2% higher than it really is right now. ”
If the Fed in fact succeeds in raising short-term rates back to 2 . 5%, by then, you should see bond yields above 5%.
“ Does anybody believe that the economic climate can handle 5%? We didn’t want to even handle 3% within 2018 when we had a lot less debt than we have now. ”
Peter said the thing that should really scare investors in both the particular bond and stock markets is just how fast yields rose to 3% even though the Federal Reserve has barely started to move.
“ We’ve currently reached the level where the economy broke down in 2018 due to how much interest rates had currently risen. ”
Remember, in 2018, when the economy reached this particular level, the Fed halted tightening. It began cutting interest rates, and it relaunched quantitative easing. This fact will get lost in the extraordinary monetary policy we got in response to the COVID lockdowns. However the Fed was already loosening before the pandemic.
There is certainly another thing the Fed had been doing in 2018 that it can be only just now talking about — balance sheet reduction. Actually the balance page is still growing .
“ The question is: when the Fed is talking about fighting inflation and they’re serious, why do they continue to make inflation? If the Fed is really going to aggressively shrink the balance sheet, why does this continue to expand its stability sheet? And if the US connection market is this weak when the Federal Reserve is still buying bonds, imagine how much less strong it’s going to get when the Government Reserve not only stops buying but actually starts promoting, which is exactly what they are indicating they are about to do. For this reason I’m saying that a crash might be imminent in the stock market whenever stock investors actually fully understand the reality of what’s going on within the bond market and what it portends for the economy and corporate earnings. ”
In this podcasting, Peter also talks about the particular weakness in the technology plus cryptocurrency sectors, strength within gold and silver mining stocks, the high levels of inflation and how much the Fed has dropped behind the curve, and the Musk takeover bid to get Twitter.