The Bond Market Is Starting to “Crack”!

Everyone is busy looking at the Stock Market, but they’re ignoring something 

MUCH MORE SIGNIFICANT: 

The Bond Market Is Starting to “Crack”!­­

The Fed has been printing (electronically creating) money to inject into the market via the purchase of mortgage backed securities (and equities – don’t kid yourself) to the current tune  of 

$120 billion per month!

These economically and financially LETHAL actions have been going on since 2009.

The Fed has recently indicated that they’d begin tapering soon, but anyone with any financial “intelligence” whatsoever, knows that they really can’t actually do that and not crash the stock & bond markets, which would result in disaster.

It’s also a tax increase for EVERYONE!

Example: 

The current situation for most U.S. taxpayers is a 3% - 4% wage increase, while prices / cost of living

 is increasing 8%. 

On top of traditional Federal & State income tax, most people are essentially paying an additional form of tax of  4% - 5% in respect to the loss of purchasing power! 

Those that were on-the-edge / breaking about even financially, are now going to be seeing the quality of their current lifestyles change – 

potentially drastically for many.

 But look at the bigger picture 

(which most do NOT):

 The 10-Year Note yield is beginning to rise – and appears to have transitioned into a Bull Market! 

The 10 Year Note yield has gone from .5% to over 1.5% since late August, 2020 –  that’s a 100 basis point rise in the 

last 15 months!  

 It is widely known that as inflation and interest rates begin to increase, bond prices will fall (and don’t forget that the bond market has been in a 30 year+ bull market)! 

What the "root" cause of inflation is, 

is the government increasing the money supply (excess spending combined with wasteful spending).  

The result is higher prices - not caused by the grocery stores, etc., but caused only by rampant and irresponsible government spending!!!

Therefore, price controls, as always, don't even come close to addressing the problem of higher prices, despite what the mainstream media try to make the public believe!
 

This is a bond bear market developing and is very dangerous for bond investors.

As mentioned earlier, as the yields on bonds (and notes) climb higher, their prices slide lower, bond investors face losses...and they're fleeing the bond market. 

This tends to build upon itself as the mass exodus grows like a snowball rolling down a steep hill!

The 10-Year Note (and longer duration debt instruments like 

the 20 & 30 Year Bonds) 

are at the long end of the yield curve - that is, they're considered long term maturity debt instruments. 

The Fed cannot control long term rates - the free market dictates long term interest rates. 

The Fed can only control short term interest rates, like T-Bills, CD's, etc. (by printing / electronically creating money and purchasing mortgage backed securities, equities, etc.).  

Markets are primarily based on PERCEPTION.

If foreign investors (buyers of our Bonds / the FREE MARKET) feel that investing in the USA is becoming more risky, they will demand higher interest rates (compensation) for the PERCEIVED higher risk that they’re taking by lending money to us! 

Due to the non-stop money injection from the Fed ($120 billion per month) and the disconnect between the equity markets and the actual poor fundamentals of our current economy / “Main Street” economy, we (the USA) are appearing to be more of a risky country to lend money to - hence, higher long term interest rates are being demanded   (and are beyond the control of any central bank, including our Fed).

As far as inflation is concerned: 

Pay no attention to the “man-behind-the-curtain” (Wizard of Oz reference) – 

that is, the “man-behind-the-curtain” being the CPI (Consumer Price Index). 

Both the CPI & PPI are beginning to take off to the upside - the CPI is based on government “math” and EXCLUDES the cost of food & energy.

So, if you don’t eat or drive or use electricity, then the CPI is accurate, otherwise, NOT. 

Chairman Powell (and Janet Yellen) keep saying that inflation is “under control”  in addition to being “transitory”, 

that is, if you only look at the 

government numbers (the CPI).

However, if you go to the gas pump or supermarket (i.e. reality for most of us – not the Washington microcosm / “bubble”), you will see significantly higher prices. 

Again, as stated above, actual inflation at the gas pump and supermarket is going up rapidly (some commodities such as meat and chicken are up over 20% with the median gas price well over 

$3.50 / gallon!

Sure, some consumer goods are “deflating” such as flat screen TVs and laptop computers, but overall, on essential items (food and energy), 

prices are going up big time – 

in other words - 

INFLATION!

It has been being said that the CPI is at around 5% - 6%, if you include gas and food, we’re currently looking at close to a 1% increase PER MONTH, which is approximately 12% annualized CPI inflation – over time, which will devastate bond prices as  well as hike consumer prices significantly higher!

Inflation is the biggest enemy of the bond market.

When inflation increases, bond yields soar & bond prices decline. 

That is what we’re beginning to witness right now!

The rise in bond yields and the collapsing bond market mean inflation lies ahead.

The inflationary "flood gates" are beginning to open.

Higher rates will cause the bond market prices to fall, as well as the stock & financial markets, the real estate market, retail, etc. 

Needless to say, 

in order to profit from rising inflation:

Over the upcoming months (very possibly years), HUGE potential profits will be available – if you know which financial vehicles to utilize – and how & when to effectively enter and exit the future recommended trades.

Trader Screen will be purchasing Call Options on TBT (inverse bond ETF) as well as multiple other financial vehicles either way in the near (and continuing) future!