Closing Bell — Will US Bonds Implode?

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In today’s Money Weekend…foreign demand for US treasuries is waning…we are already seeing US tech stocks creaking…the next leg lower could be a doozy…and more…

I have been warning you about the sell-off in US bonds for months, and we are now heading into the pointy end of proceedings with the US Fed not far off describing to the market how it envisages running off its US$9 trillion portfolio.

Foreign demand for US treasuries is waning, and the hoard of investors who have been front-running the Fed as they supported the yield curve with printed money must be thinking now is a good time to head for the exits.

The highest yield traded in the US 10-year bond over the past decade is 3.25%. There is the possibility that we see some panicked selling of bonds above that level, at least in the short term.

US stocks won’t be able to ignore such sharp rises in rates, and we are already seeing US tech stocks creaking.

The collapse in Netflix during the week is a stark reminder that extrapolating growth as far as the eye can see when valuing stocks can be a bad idea. When the growth stops, the valuation can look absurd.

The S&P 500 is confirming that the weekly downtrend is active, and the next leg lower could be a doozy.

I show you the current state of play in the ‘Closing Bell’ video below by analysing the US 10-year bond yield, the Australian dollar, Netflix, the S&P 500, and ASX 200.

Fat Tail Investment Research

Until next week,

Murray Dawes Signature

Murray Dawes,
Editor, Money Weekend

PS: Due to the ANZAC Day public holiday, there will be no Monday edition of Money Morning. We hope you enjoy the long weekend with friends and family.

About Murray Dawes

Murray Dawes is the Editor of Pivot Trader and contributing Editor at Money Morning. He was one of five, from 5,000 applicants, chosen for a graduate position with the Swiss Banking Corporation — now part of banking giant UBS. The bosses quickly cottoned on to his potential and pushed him…

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