🚨 This is not normal.
U.S. 30-year Treasury yields have just touched 5.52%, the highest level since 2004.
And things are getting worse every day.
The Treasury Department has increased the size of long-term bond repos threefold to $6 billion, yet yields are still moving higher.
The problem is simple: who will buy the next wave of U.S. Treasuries?
Japanese government bond yields have already exceeded 3%, and Japanese investors have sold about ¥3 trillion worth of overseas bonds this year.
China is also reducing its holdings—U.S. Treasury positions have fallen from about $696 billion to $618 billion over the past year.
Hedge funds are becoming an increasingly important buyer, but their logic is different from central banks.
Central banks buy U.S. Treasuries because they need reserves; hedge funds buy because the trade is profitable.
Once it stops being profitable, they will leave.
That means marginal buyers are becoming increasingly sensitive to price.
If 30-year yields keep rising, the impact won’t be confined to the bond market.
Stocks, real estate, #BTC—every asset will have to be repriced.
U.S. 30-year Treasury yields have just touched 5.52%, the highest level since 2004.
And things are getting worse every day.
The Treasury Department has increased the size of long-term bond repos threefold to $6 billion, yet yields are still moving higher.
The problem is simple: who will buy the next wave of U.S. Treasuries?
Japanese government bond yields have already exceeded 3%, and Japanese investors have sold about ¥3 trillion worth of overseas bonds this year.
China is also reducing its holdings—U.S. Treasury positions have fallen from about $696 billion to $618 billion over the past year.
Hedge funds are becoming an increasingly important buyer, but their logic is different from central banks.
Central banks buy U.S. Treasuries because they need reserves; hedge funds buy because the trade is profitable.
Once it stops being profitable, they will leave.
That means marginal buyers are becoming increasingly sensitive to price.
If 30-year yields keep rising, the impact won’t be confined to the bond market.
Stocks, real estate, #BTC—every asset will have to be repriced.
