US Bonds Reach Lowest Returns in 90 Years
US government treasury bonds, often regarded as the safest investment in the world, are now yielding the lowest 10-year rolling returns in nearly 90 years.
Source: Barchart
Experts are labeling this a ‘once in a lifetime’ moment. These treasury bonds serve as a benchmark for nearly all financial instruments globally. However, demand for them is rapidly declining.
Major Buyers Withdrawing
Countries like China and Japan, which were once significant buyers of US bonds, are now reluctant to invest in them and are even selling the bonds they already own. This has created a substantial vacuum in the market. Typically, a lot of money would flow into these risk-free bonds, but that option seems to be diminishing.
Where Will the Money Go?
With treasury bonds no longer being a favored option, the pressing question is—where will the capital be redirected? Will it shift toward gold, bitcoin, or other assets? This has become one of the hottest topics in the global financial landscape today. Although the bond market may not receive as much attention as the stock market, it plays a crucial role in influencing other markets.
Bond Yields and Stock Valuations
Rising bond yields can significantly affect stock valuations. When calculating the future value of a stock, investors use discounting methods based on interest rates. If those rates increase from 2% to 5% or even 10%, the calculated value of stocks could drop sharply. This illustrates the profound impact bond yields have on equity markets.
Potential Global Implications of Rising Yields
Should bond yields continue to rise uncontrollably, governments may be compelled to raise interest rates further to manage the situation. However, this could dampen demand in the economy and negatively impact equity markets. We are currently in a very sensitive phase of the global monetary system, and the future trajectory of the economy remains uncertain.
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