The Bond Market Rout Continues

Treasury rates spiked on Wednesday to multiyear highs in what was the biggest one-day move for the 10-year Treasury yield in nearly 18 months. There were a number of reasons cited for the sudden move higher:

Much stronger-than-expected surveys on U.S. economic activity, especially in the manufacturing sector

Hawkish commentary from a top Federal Reserve official

A U.S. Treasury auction for five-year notes that was met with poor demand

Stubbornly high oil prices with WTI crude rising 2%

The 10-year Treasury note yield

 popped more than 13 basis points to 5.104% and reached a level not seen since July 2007. The move gained steam after the 10-year yield broke through the key 5% level. It marked the benchmark yield’s biggest one-day move since April 7, 2025 — when it surged 16.6 points.

The 2-year Treasury note yield

, which is most sensitive to expected changes in Fed policy, jumped more than 11 basis points to 4.889% and hit its highest level since May 2024 as traders increased their bet the Federal Reserve would need to hike again in October.

The 30-year Treasury

 yield gained more than 9 basis points to 5.398%. It hit the highest level since June 2007. One basis point is equal to 0.01%, and yields and prices move in opposite directions.

“This is the market telling us we’ve entered a genuine re-tightening cycle, said Tony Miano, global investment strategy analyst at Wells Fargo Investment Institute. “The Fed’s 25 basis point hike last week to 3.75%–4% was its first increase since 2023, and the dot plot signaled another this year.”

“A week ago you could argue that was a one-and-done insurance move or a one and maybe December hike). Today’s price action says investors no longer believe that,” he added. Bottom line, “you can’t fool or hide in the bond market – unless the Fed gets inflation under control the long end of the curve is going to continue to come under pressure.”

Read the rest here.

See also this for a more detailed discussion of the recent craziness in the markets.

Ambrose Evans-Pritchard Sees Serious Threats to the Global Economy

Four powerful shocks are hitting the world economy at the same time. They are escalating and feeding on each other, driving a commodity spiral that can end only in an inflationary blow-off.

The effects are ripping through the global bond markets and confronting central banks with an impossible dilemma. Yields on 10-year US Treasuries have surpassed 5pc, smashing through the Maginot defences of Scott Bessent, the US treasury secretary.

The Bloomberg commodity index has risen 48pc this year, accelerating in pace and spreading in breadth from energy to industrial metals and grains. The fever has spread to shipping and freight.

Lloyd’s List says the cost of a giant VLCC oil tanker on the Baltic Exchange has hit $1m (£740,000) a day, eight times the cost in January. “What is happening is truly unprecedented,” said Erik Broekhuizen, the head of shipping at Poten & Partners.

The futures markets are no longer pricing in a quick return to normal, as they were in those first insouciant weeks of the Iran war, when traders still believed in the all-conquering might of the US navy. Brent futures contracts are over $90 a barrel all the way out to the spring of 2027.

European gas futures are locking in prices through the winter that are three times higher than last winter. Wheat, maize and soybeans are all in “contango”: futures prices are well above today’s spot prices.

Read the rest here.

Trump is threatening military intervention against a new target... the Bond Market.

You just can't make this stuff up.

US sells 30-year bonds at highest borrowing costs since 2001

The U.S. government on Thursday auctioned $25B in 30-year Treasury bonds (US30Y) at a yield of 5.216%, marking the highest rate for this tenor since 2001.

This quarter-century high underscores investors' growing demand for increased compensation to finance the nation's expanding fiscal deficit.

While the auction met with decent demand, there were clear signs of slight hesitation from buyers. The bid-to-cover ratio slipped to 2.39 from July’s 2.44, tracking below the recent average. Additionally, indirect bidding dropped to 66.9% from a near-record 77.7% in July. The final yield also landed slightly above prevailing pre-auction market levels, indicating that overall demand narrowly lagged expectations.

This comes a day after a 10-year Treasury (US10Y) auction that drew its highest financing costs since 2007.

The broader surge in long-term yields is heavily driven by investor anxiety that rising energy prices, fueled by conflict in the Middle East, will sustain inflation and force the Federal Reserve to keep interest rates elevated.

Meanwhile, 30-year yields (US10Y) dipped by roughly five basis points to 5.21% at press time, as cooling oil prices and tame producer price data prompted traders to scale back expectations for another Fed rate hike this year. Still, that's up from 4.85% at the start of the year.

Read the rest here.

Russia Halts Bond Auctions

Russia's Finance Ministry has suspended federal government bond auctions indefinitely as borrowing costs climb and investor demand weakens, complicating efforts to finance a widening wartime budget deficit.

The ministry said on Monday it was halting its regular weekly auctions of government bonds, known as OFZs, "to facilitate the stabilization of market conditions." It did not say when sales would resume, saying only that it would announce their restart at a later date.

OFZs are ruble-denominated government bonds that underpin Russia's financial system. They are the government's primary source of domestic borrowing to cover budget deficits, while banks hold them to manage daily cash needs and foreign investors buy them for returns.

The Finance Ministry has relied heavily on domestic borrowing to help finance a budget deficit that reached 5.7 trillion rubles ($72.39 billion) at the end of June, while military spending continues to outpace initial government plans.

Prices of OFZs have fallen sharply since mid-June. The RGBI government bond index has dropped from around 119 points to about 110, its lowest level this year, while yields on bonds with maturities longer than 10 years have climbed above 16.5%.

Read the rest here.

See also... Could Russia's Wartime Debt Boom Trigger a Banking Crisis?

The S&P 500 is flashing a warning sign

With all of the volatility in the stock market this year, most investors probably don't realize the S&P 500 (SNPINDEX: ^GSPC) is sitting at a precarious peak. The index's cyclically adjusted price-to-earnings (CAPE) ratio now hovers near a reading of 41 -- a territory that historically signals serious trouble ahead.

The CAPE ratio captures something deeper than daily price movements: It reveals how much investors are willing to pay for every dollar of long-term earnings power. At its current level, the S&P 500 appears to be pricing in unprecedented levels of optimism while quietly laying the foundation for a painful reckoning.

The CAPE ratio was originally developed by economist Robert Shiller. The metric divides the current S&P 500 price by the average inflation-adjusted earnings per share (EPS) over the previous 10 years. By doing so, the CAPE ratio smooths out any temporary spikes or dips caused by recessions, economic booms, or one-time events. This approach gives a clearer picture of sustainable valuation across the index as a whole.

At face value, the price-to-earnings ratio can appear deceptively attractive in years of strong profitability. But the CAPE forces investors to look across full business cycles. The underlying data for the CAPE ratio stretches back to 1871 -- more than 155 years of market history.

Across that span, the long-term average CAPE has hovered between 17 and 18. As the chart indicates, when the CAPE ratio climbs well above the 25 to 30 range, it has repeatedly warned that future stock returns will be disappointing.

Read the rest here.

The bond market is flashing a warning sign for the global economy

New York —  Take it from President Donald Trump himself: Stocks and commodities can throw easily ignored tantrums, but when the bond market gets “yippy,” you pay attention.

Ultimately, it took a sharp bond market selloff in April of 2025 to get Trump to pump the brakes on his sweeping “reciprocal” tariff agenda.

Once again, the bond traders are barking. But this time, it’s not clear whether Trump can do much to calm the market anytime soon.

“The bond market is basically reacting to the uncertainty created by oil prices, and (Trump) seems not to know how to get out of the problem he’s put us in,” said Daniel Alpert, managing partner at investing firm Westwood Capital, in an interview.

Put another way: Bond traders are starting to think that the recent inflation spike — largely a result of the war shutting off oil flows through the Strait of Hormuz — may not be as “short-term” as Trump has claimed. And that will likely depress bond prices even more.

Read the rest here.

Amateurs obsess over the stock market. Professionals watch the bond market.

The SpaceX IPO

See also...

Report: SpaceX IPO gives Musk unchecked power and forbids investor lawsuits

SpaceX insiders will get to sell shares earlier than usual after the IPO

A direct quote from the prospectus...

“We believe the next paradigm shift for humanity is the creation of a resilient, perpetually expanding spacefaring civilization that drives continuous innovation across new frontiers, ultimately propelling us to Kardashev Type II status—we believe we are capable of unlocking an era of unprecedented economic expansion, while also contributing to the safeguards of humanity’s future against existential risk.”

This sounds like a bad imitation of a Star Trek novel.

Jamie Dimon warns of ‘some kind of bond crisis’

CEO Jamie Dimon on Tuesday warned that rising government debt levels could trigger a crisis in the bond market, urging policymakers to act before markets force their hand.

Dimon’s statement was in response to a question about whether he was worried about rising levels of government debt “around the world and in your country.”

“The way it’s going now, there will be some kind of bond crisis, and then we’ll have to deal with it,” Dimon said at an investment conference held by Norway’s sovereign wealth fund, the largest in the world.

“I’m not that worried we’ll be able to deal with it,” Dimon said. “I just think maturity should say you should deal with it, as opposed to let it happen.”

Dimon, who runs the world’s largest bank by market cap, said history has shown that today’s growing mix of risks could combine in unpredictable ways. While the timing is uncertain, failing to address those pressures increases the odds that adjustment comes after upheaval rather than deliberate policy moves.

Read the rest here.

The Economic Risks From Trump's War Are Real and Growing

The Economic Implications of Trump's War

This is one of the best explanations I have seen for what is going on, and what might be coming down the road.

Underestimating the Potential Energy Shock

It is hard to decide which is the bigger disaster: the unfolding car crash in the global gas market or the mounting danger that entire countries will run out of oil.

The benchmark TTF contract for gas in Europe was €29 (£25) per megawatt-hour (MWh) in mid-February. Bank of America says it could reach €500 this winter if the Strait of Hormuz remains closed for 10 weeks, as it may well do.

That would blow through the record high seen after Russia’s invasion of Ukraine and amount to a full-blown economic emergency for Europe, the UK, Japan, South Korea and South Asia.

The picture is dramatically worse after Israel attacked Iran’s South Pars gas field, adding upstream gas and oil infrastructure to the menu of targets on both sides of the Gulf.

Iran’s missile retaliation on Qatar’s Ras Laffan has inflicted serious damage to the giant complex, which alone produces a fifth of the world’s liquefied natural gas (LNG).

It will be months before shipments start again. Qatar Energy says 17pc of production is lost for three to five years. It will have to declare force majeure on LNG supplies to Italy, Korea, China and Belgium.

It is just as bad for oil. The paper market that we all follow does not capture the drama. Physical deliveries are under far greater stress than Brent futures, at about $113, would suggest.

Actual barrels of the Dubai basket and Oman’s Murban are fetching close to $170 a barrel as Asian refiners scramble to buy anything they can. Jet fuel deliveries have hit $210 in Rotterdam and $240 in Singapore.

Kurt Barrow, the vice-president of oil at S&P Global Energy, says it may become physically impossible to obtain supplies. “If the Strait stays closed for two months, you’ll have plants without feedstock and we’ll get real rationing. We’ll have panic buying and hoarding,” he said.

“This is the largest supply disruption ever. Net, we’re around 15 million barrels a day (b/d) short in the market. Crude gets the headline but the actual impact is further downstream in refined products, diesel, jet, fuel or naphtha. There are 68 refineries in the war zone.”

Read the rest here.

The federal debt is a stealth tax on every American

In response to concerns about affordability, President Trump proposed capping interest rates on credit cards at 10 percent. But the federal government’s own credit card — the national debt — is already making life less affordable for all Americans. 

U.S. consumers paid $160 billion in credit card interest in 2024, averaging just under $1,200 per household. That’s a lot of money, but it’s only one-sixth as much as the $1.028 trillion we paid in net interest on the federal debt in fiscal 2025. 

At $7,600 per household, interest on the federal government’s debt costs more than the average household spent on retirement contributions ($1,991), gas ($2,411), healthcare ($6,197) or groceries ($6,224) in 2024. Even as housing costs have surged, federal borrowing is costing Americans the equivalent of three and a half months of mortgage or rent payments.

One might argue that Americans aren’t really paying $7,600 per household in interest each year, because taxes haven’t risen to cover those costs. That is true — for now — because the federal government is adding its interest costs to the debt, the fiscal equivalent of not even making the minimum credit card payment. 

But Americans are already paying higher interest rates on everything from home mortgages to small business loans to credit cards, because, as the Congressional Budget Office has explained, when federal borrowing increases, “the amount of funds available for private investment would decline (a phenomenon known as crowding out), and interest costs would increase.”   

Read the rest here.

Gold Corrects and Silver Crashes

What a difference a day makes. Gold off 8% and Silver down ~30%. Both still up YTD. Not terribly surprised. Both metals were basically going parabolic. But the catalyst for the bull market in precious metals remains. Trump is still going to be president for another three years. 

Gold is the New Trump Trade

https://www.axios.com/2026/01/27/trump-gold-rally-risk

What is going on in the financial markets?

Ray Dalio warns that the monetary order is breaking down, leaving us with a terrible choice: ‘Do you print money or let a debt crisis happen?

The looming debt crisis

Gold tops $5,000 for the first time in 'breathtaking and profoundly scary' rally

Just as a quick historical note; the last time the US had a financial panic that did not center on the stock market, was way back in 1893. And it was U G L Y. 

‘Sell America’ trade: Dollar drops, gold surges as Trump’s Fed pressure campaign raises fears about U.S. system

Precious metals are jumping to records. The U.S dollar is dropping. Stocks are choppy.

Monday is all about the “Sell America” trade after Federal Reserve Chair Jerome Powell’s bombshell announcement that he’s under criminal investigation — which market participants see as a sign of President Donald Trump’s interest in stripping away the central bank’s political independence.

“This is unambiguously risk off,” said Krishna Guha, head of global policy and central bank strategy at Evercore ISI.

Guha said a so-called “Sell America” trade could play out similarly to what was seen in April, when the stock market cratered after Trump first announced his plan for broad and steep tariffs. Global investors will place a higher risk-premium on U.S. assets, while safe-haven trades like gold should take a leg up as a response to the turmoil, he said.

The Dow Jones Industrial Average fell nearly 500 points at one point in morning trading, while the U.S. dollar index shed 0.3%. But the popular safe-haven trades of gold and silver surged to all-time highs in the session.

“Clearly, the market doesn’t like it,” Ed Yardeni, president of Yardeni Research, told CNBC on Monday.

Read the rest here.

Gold and Silver Rise Sharply

Gold and silver prices soared to new highs on Monday.

Gold was last seen at a record $4,445.8 per ounce while spot gold was last trading at $4,414.99. Prices are up nearly 70% since the start of the year.

The metal has soared this year, smashing consecutive price records as risk assets lost ground. Gold is typically viewed as a safe haven asset in times of economic or geopolitical turbulence...

Read the rest here.

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Gold Posts New Record

Gold currently trading at ~$3,566 /oz amidst expectations of the Fed cutting interest rates (whether by choice or under presidential coercion), and the risks of a weaker dollar and higher inflation. 

Update: Gold closed at $3,599 /oz.