Eurodollar University URGENT: The Bond Market JUST Flashed a MAJOR Warning
May 23, 2025
Long-term bond yields are on the rise, challenging common beliefs about inflation and fiscal deficits. The complex dynamics of global bond markets and central bank actions are scrutinized for potential risks. Gold emerges as a reliable asset amid economic uncertainty, with discussion on leasing gold for yield. Historical reactions of the Federal Reserve to inflation are linked to current yield uncertainties, emphasizing established economic fundamentals rather than a complete shift in the economic landscape.
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Long-Term Yields Rise, Not Deficits
- Long-term bond yields are rising globally, but short-term rates like the two-year treasury remain steady.
- This pattern indicates the move isn't driven by government deficits but something broader in the bond market.
Fed Waffling Drives Long Rates
- The rise in long-term rates is mainly due to "waffling," or uncertainty about Fed policy.
- Short-term rates reflect clearer fundamentals while long-term rates act as an outlet for uncertainty.
Fed Creates Monetary Uncertainty
- Fed actions often create uncertainty and confusion rather than clear stimulus or tightening.
- When economic weakness is obvious, markets expect rate cuts, reducing uncertainty at the short end.