Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Further Gold Price Pressure as the USDX Is About to Rally - 23rd Oct 20
Nasdaq Retests 11,735 Support - 23rd Oct 20
America’s Political and Financial Institutions Are Broken - 23rd Oct 20
Sayonara U.S.A. - 23rd Oct 20
Economic Contractions Overshadow ASEAN-6 Recovery - 23rd Oct 20
Doji Clusters Show Clear Support Ranges for Stock Market S&P500 Index - 23rd Oct 20
Silver Market - 22nd Oct 20
Goldman Sachs Likes Silver; Trump Wants Even More Stimulus - 22nd Oct 20
Hacking Wall Street to Close the Wealth Gap - 22nd Oct 20
Natural Gas/UNG Stepping GAP Patterns Suggest Pending Upside Breakout - 22nd Oct 20 -
NVIDIA CANCELS RTX 3070 16b RTX 3080 20gb GPU's Due to GDDR6X Memory Supply Issues - 22nd Oct 20
Zafira B Leaking Water Under Car - 22nd Oct 20
The Copper/Gold Ratio Would Change the Macro - 21st Oct 20
Are We Entering Stagflation That Will Boost Gold Price - 21st Oct 20
Crude Oil Price Stalls In Resistance Zone - 21st Oct 20
High-Profile Billionaire Gives Urgent Message to Stock Investors - 21st Oct 20
What's it Like to be a Budgie - Unique in a Cage 4K VR 360 - 21st Oct 20
Auto Trading: A Beginner Guide to Automation in Forex - 21st Oct 20
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Greece Armageddon, Financial Ebola Sweeps Through Global Bond Markets

Interest-Rates / Global Debt Crisis Apr 30, 2010 - 08:37 AM GMT

By: Mike_Larson

Interest-Rates

Best Financial Markets Analysis ArticleWhat does the end of the bond market world look like? Something like this …


Bond Market Armagenddon Strikes Greece

The chart above shows the yield on the benchmark 2-year note in Greece. Just a few short months ago, Greek sovereign yields were hovering around 2.1 percent. On Wednesday, they shot up as high as 18.9 percent!

Translation? The cost of borrowing for the Greek government — not some subprime mortgage customer or deadbeat credit card holder — shot up almost NINE-FOLD in the span of six months.

During this same time, the price of Greece’s 6 percent 10-year notes due July 19, 2019 plunged from 112.4 to 68.1. That’s a loss of more than 39 percent. Not on some dot-bomb stock … not even on a high-yield, or “junk” piece of paper …

… but on a sovereign government bond!

Folks, THAT is bond market Armageddon. And it’s playing out now. Right on the trading screen of every investor around the world.

Think Greece Is Alone?

Think Again!

Worse, the pain isn’t confined to Greece …

Portugal’s benchmark 2-year note yield just blew out to 4.82 percent from 1.58 percent. That’s a tripling in interest rates in less than a month.

Ireland? Its 2-year yield rocketed to 3.83 percent from 1.62 percent in 23 days.

Even bigger European economies, like Spain, are getting whacked. Yields there recently shot up to 2.08 percent from 1.36 percent.

S&P has cut the debt ratings of several EU members.
S&P has cut the debt ratings of several EU members.

Standard & Poor’s has taken the hatchet to its sovereign debt ratings in response. The agency cut its Spanish debt rating to AA just a day after slashing its Portuguese debt rating by two notches to A-. It also cut its Greek debt rating by three notches to BB+, “junk” territory.

Bottom line: A virulent sovereign debt contagion is spreading like wildfire throughout the euro zone. In the short run, that will likely get the Germans to back down on their bailout opposition.

They’ve been holding up a package that would give Greece up to $60 billion in aid from richer European Union nations and the International Monetary Fund. The crisis may temporarily take a breather if the package gets approved.

But here’s the thing: If the Greeks get bailed out, who’s next? And where the heck is all the bailout money going to come from? Policymakers may need to cough up almost $800 billion to “save” everyone, according to economists at firms such as Goldman Sachs and JPMorgan Chase.

The problem is that nobody has that kind of money laying around! So it’ll have to be borrowed. And if it has to be borrowed … from a European bond market that’s already falling apart at the seams … what’s likely to happen? Even more selling, which would drive bond prices down and interest rates up!

Coming Soon to a Bond Market Near You: Financial “Ebola!”

So far, this is predominately a problem for continental Europe. Our Treasury prices actually rose a bit during the worst of the European debt selling.

But I believe it is woefully ignorant, provincial, and arrogant for us to assume something similar can’t or won’t happen here.

The way politicians are burning through our money, interest rates are sure to skyrocket.
The way politicians are burning through our money, interest rates are sure to skyrocket.

Even the Secretary General of the Organization for Economic Cooperation and Development likened the crisis to the “Ebola” virus, saying “it’s threatening the stability of the financial system.”

When you think it through logically, you can’t help but ask: Why wouldn’t the Grim Reaper eventually come knocking at OUR door?

After all, OUR deficits are out of control! OUR debt level is through the roof! OUR politicians are burying their heads in the sand, just assuming they’ll be able to keep funding their profligacy at rock-bottom rates forever. Those are precisely the same problems that built up in Greece for months on end.

Then one day, the lid blew!

Think about it:

  • Our total debt load is set to double to $18.6 trillion over the next decade,
  • Weekly benchmark Treasury auctions have surged from $20 billion to $30 billion to more than $120 billion,
  • And we’re dumping more than $375,000 in debt onto the market every second in some weeks, all in an effort to fund a budget deficit that’s closing in on $1.6 trillion!

Do I expect a nine-fold rise in U.S. 2-year note yields? A 40 percent plunge in bond prices in just a couple of months? Not really.

But I do believe the bond market will force us to take our fiscal medicine. I do believe a sovereign debt crisis is brewing here. And I do believe it will be just one reason our interest rates will head significantly higher.

So please, invest and prepare accordingly. By the time the bond market bleeding starts, it’ll be too late.

Until next time,

Mike Larson

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules