The Debt Market Knows What Is Coming.
From Greg M
There is an adage that goes like this, “The Debt Market Is Always Right.”
Well… The US debt market can taste an imminent US strike on Iran…
The 10 year yield is plummeting.
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But it’s also FED day
What ever happened to “T-bill and chill”? The 10-year and even 2-year seem like way too much worry in such an uncertain, volatile environment to bother with, especially considering the magnitude of loss if the Fed surprises to the upside. Imagine holding at 4% and change in an increasingly inflationary environment for ten years? 😂😂 Besides, as I understand, the amount of profit that would have to be made to overcome the difference with month after month or year after year of higher gains on the 4- or 8-week bills, is enormous. Rates would have to go lower and lower over time to compensate, wouldn’t they? Is that worth betting on?
Just buy 4- and 8- week bills with the plan to hold to maturity, scoop up some of the yield from time to time, trade your paper profits for gold and silver, and relax. Sell if the end looks pretty imminent. If that’s the case, nobody’s going to want anything, especially long bonds, so having bills won’t be any handicap. At least you’ll have a better chance of sneaking some bonds in under the wire with a string of contiguous 4-week maturities if the US makes rumblings of a potential outright default.
Unless there’s really solid reason to believe the Fed will rapidly slam rates down to 0 or go negative, the 10-year isn’t worth it on an inverted curve and deflationary forces battling inflation, IMO. Given the presidential selection cycle coming to a head in 10 months, I don’t trust even the 2-year. I think the monetary death spiral will be so entrenched by then that going out two years for yield will be foolish. If we make it to November, even with war pulling cash into the now the whole time (questionable if there’s that much cash even available any more), the rug will get pulled shortly after. Even if Trump gets in and tries again to jigger the markets by deepening the deficit, he won’t be able to do it. The shell game is coming to an end. Nothing but hard assets will matter soon. So get yield while you can, then skim it off and turn it into PM’s in your hand. That’s my thinking, anyway. Would be interested in comments.