The Name is Bond - Part VI

Currently, in the extreme, debt spreads are narrow, asset prices are high and real and nominal long yields are low.

The global financial services and banking sector, (a euphemism for the debt manipulation sector) is faced with elimination of carry trades by rising rates and yield curve inversions.

Should the US housing ATM close down, what will they do?? As mentioned before in these pages, over three weeks, the PPT bought the 10 year down from 5.17 to 4.99 in anticipation of the next Fed 25 bps bump.

During this period, a lack of liquidity due to the multiplier effect working in reverse had the PPT (plunge protection team) between a rock and a hard place.

Tough decisions had to be made and being spread too thin "they" had to let equities and commodities fall in order to save the dollar and bond. This alowed the bond & dollar to resume their natural state by decoupling from equities & commodities.

In the last week, the PPT caught equities and commodities, but with dwindling liquidity had to let the bonds & dollar fall, sending the 10 yr back to 5.23.

The FED bump will send the 10 year from 5 to 5.25, should the Fed also indicate pause, a dollar and bond sell off could ensue. This would require liquidity to stem the tide and would open the back door for the Bears to have an equities sell off.

With real inflation out of control and advertised core inflation creeping up, the public, bondholders and lenders are seeing a steady erosion of their capital.

The resulting demand for higher interest rates (risk premiums) will make it tougher and more costly to raise capital, resulting in further liquidity drain and slowing economic growth.

As a result the 10 year will head much higher and it is at this point that 30 year mortgage rates may decouple from the 10 year note.

Only time will tell how much of a disaster will be caused by the central banks misapplication of industrial capitalism economics to the new finance "money shuffler" capitalism. More to come in Part VII.

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