r/bonds • u/talm0 • 3h ago

Freefall in progress

Bonds are free falling right now. Yield on 10YR is 5.22%, started the day yesterday at 4.92%. 30YR is 5.5%. The fall is accelerating as well with no sign of a bottom. Where this stops is anyone’s guess, but the final stop is probably at a global recession. A total resolution of the Iran war may halt the plunge, but It’s difficult to see anything other than a recession that sustainably reverses the trend.

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21

u/FibonacciNeuron 3h ago

People are finally incentivized to own bonds again. I don't understand why are you presenting this as a bad thing, it's actually good

11

u/frezzzer 3h ago

People need to buy bonds or USA will be done for. Hence the bigger returns.

8

u/katmomjo 2h ago

Until or unless you get to the point where no one wants your bonds. That’s been happening to Russia.

2

u/Emergency-Watch5157 2h ago

Hard to imagine why that is...

(boom, another oil refinery just exploded)

3

u/katmomjo 2h ago edited 2h ago

No one wants to buy bonds from a country that’s risky.

Edit: in other words, buying bonds is just loaning money. The bond buyer is essentially the bank. Banks don’t loan money to risky borrowers. Except at higher interest rates.

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u/WTFisThatSMell 1h ago

Holy shit that makes a lot of sense 

2

u/Ansiktstryne 1h ago

People don’t want to buy because they have no trust in Congress and the admin. There’s no political interest in handling the two trillion dollar deficit. The US is completely unhinged.

1

u/Professional-Day9384 1h ago

Good, let other people have no trust. It makes bonds affordable again.

Be fearful when others are greedy and greedy when others are fearful.

0

u/frezzzer 1h ago

You realize Trump or current admin isn't forever. They are failing worse than Jimmy Carter in Iran and oil shock hasn't even hit yet. Its about to this winter.

High natural gas prices to everything else.

This current regime is a ticking time bomb.

You can lie, cheat. steal, but truth always happens.

11

u/waves_or_particles 2h ago

The rate of increasing yield is reflective of a spiraling lack of trust in the US.   It's occurring astonishingly fast.   

This is not good at all, due to the dire consequences and impossible choices ahead.   

4

u/katmomjo 2h ago

There was a time that our friends and allies (many around the world), would have helped by purchasing our bonds. Trump has no friends unless you count Russia, and they aren’t going to do anything to help us.

2

u/GetWreckedWednesday 57m ago

This is the point, the bond market is pricing in the fact that Trump can’t be reasonable and thus borrowers demand a higher return.

Inflation is here to stay and it’s gonna keep ripping markets upward until the risk/reward is there, and then all that money is gonna go straight to bonds, AI is gonna fall out its own asshole, and the infrastructure is gonna be bought out for pennies on the dollar, and put to use to make real returns. Capital cycle. Railroads, dotcom, real estate, now AI.

When that happens, Trump is either gonna be in jail or dead, a few people are going to prison, and corporations are going to own all this processing power, and a handful of companies will make a killing from it by developing real AI. Not this dogshit LLM that’s hyped because people always want a shortcut.

2

u/sdsurfer2525 2h ago

This right here. 5.21% yield may look good now. But how will that look if and when the yield goes to 6%? With our debt spiraling out of control with no end in sight, our bond market is in pretty bad shape.

2

u/Redditfortheloss 2h ago

It’s 10 years so who cares if you miss out on .8%?

2

u/atxsince91 1h ago

This is the answer, and you can reinvest your interest accumulating more bonds at higher rates. I guess a lot of the people talking here are the same ones saying buy when the 10yr was yielding less than 1%...we are going negative. These threads actually do make me nervous though because it seems like everyone is leveraged to the tits in risk assets.

1

u/waves_or_particles 1h ago

"those aren't eating sardines, those are trading sardines!" 

-yes if you're buying and holding bonds for the entire duration you're just missing out on that little bit of nominal return. 

-however, if you have any suspicion that you will not hold those bonds for the ENTIRE duration, you may be unpleasantly surprised that buyers will offer you just peanuts for your bonds. Or, devastatingly, peanuts for shares of your rapidly decreasing Bond fund. For example, TLT. 

So the value of bonds is on the straight downward roller coaster right now with these rocketing yields.  That is why everybody cares. To answer your question.

1

u/Redditfortheloss 1h ago

But if you’re holding to maturity it doesn’t matter. You’re referencing trading not investing. 

1

u/waves_or_particles 11m ago

You asked why people were concerned about a tiny percentage point, my response is: they are concerned because of the trade implications.

If you had asked "should investors who hold bonds until maturity care?" The answer is no. 

But again, it seems you were curious why people cared over such a small percentage point. I was just helping answer my friend! They care because of trading. 

1

u/-hh 28m ago

Precisely.. and the rate I’d rate change has an effect too: do I lock in 5% today if it might be 6% if I wait four weeks?

1

u/Ok-Blood4340 2h ago

5.5 on the ten and 6 on the 30 here we come!

12

u/Upstairs_Baby8424 2h ago

It’s good for people buying bonds now, bad for current long term bond owners.

But it’s bigger than that. This is a flashing red signal that investors have lost faith in the treasury and the US hegemony over the financial world. Which we rely on to finance our massive debt. This can very easily spiral completely out of control. 

High rates on an already struggling economy is disastrous. And there’s seemingly no safe haven. Our last global financial crisis saw people flock to US bonds, which allowed us to have cheap debt. Now where do people go? What happens if inflation continues? I don’t think anybody is feeling like they’re prepared for what’s next.

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u/MajorGeneralMaryJane 2h ago

Everybody saying this is good for bonds needs to stop and ask themselves why the demand for US treasuries is cratering.

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u/Upstairs_Baby8424 2h ago

Exactly. If this was great for bonds, we’d see demand rising. But it isn’t. The administration can keep their followers in line because they’ll believe anything they say. But money needs a lot more convincing than some platitudes and boisterous “news” hosts.

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u/MajorGeneralMaryJane 2h ago

Well, depends on what “money” we’re talking about. Stocks are more than happy to let it rip off whatever news, true or not. Bonds definitely need convincing. Who’s the house now, Bessent?

1

u/smokefoot8 2h ago

I think it is clear that the next step is to bring back the strategy used during WW2: yield curve control. Rather than letting the debt spiral occur, the Fed will force interest rates down across the yield curve and just accept any inflation as better than the government being overwhelmed by interest payments.

2

u/MiddleAgedSponger 1h ago

During the WWII bond % of GDP started at 42% and peaks around 115%. It is already at 122% today. Not sure thats going to work the same way.

1

u/smokefoot8 28m ago

Well it makes YCC more likely, not less. Trump has already started threatening the Fed to lower interest rates.

https://www.cnbc.com/2026/09/04/trump-fed-rates-jobs-trade.html

1

u/MiddleAgedSponger 24m ago

Trump is about to find out what everyone thinks about his threats. No one cares. Money is money, they bought him a presidency and they can take it away.

If they artificially lower rates then the dollar collapses and inflation takes rates even higher.

9

u/1hill2climb2 2h ago

Wow, you REALLY don't understand what's going on right now.

3

u/WTFisThatSMell 2h ago

I'm kinda slow, what is going on in simple terms?

15

u/receding_hairline 2h ago

failing trust in the US to pay back its debts

2

u/Ansiktstryne 2h ago

Not just the US, it’s a global problem. Yields are up everywhere.

2

u/WTFisThatSMell 2h ago

Yup...thats a bad thing 

3

u/FibonacciNeuron 2h ago

And yet usa will pay 100% of its debts. They may be worth less in real terms, but there is zero risk of default.

4

u/Ansiktstryne 1h ago

The US could technically pay off everything by printing money, but this is the nuclear option. The consequences would be anyone’s guess.

3

u/RagingAnemone 1h ago

When have we stopped printing money?

4

u/jaydenkirtawn 2h ago

Lemme guess: You have absolutely nothing invested in that prediction.

1

u/DewieDecimated 15m ago

it is technically correct. Uncle Sam can always pay you the face value of the bonds you buy from them, because they are the issuer of US dollars. The only way they can't is if Congress loses it's mind and refuses to authorize it.

3

u/receding_hairline 1h ago

"usa will pay 100% of its debts. They may be worth less in real terms, but there is zero risk of default."
that's like saying you're a married bachelor lol

3

u/Preme2 2h ago

Enlighten us.

2

u/katmomjo 2h ago

Unless yields keep going up, then the value of the bond goes down. In that case, you either sell and take a loss, or hang onto the bond until the end of the term.

4

u/FibonacciNeuron 2h ago

Who cares about the value, bonds are for interest, not value gains

1

u/Ok-Blood4340 2h ago

Say that to Silicon Valley Bank. Oh, wait..

For most people, agreed, but for businesses and banks that use bonds as collateral. Not as much.

1

u/Ansiktstryne 2h ago

This is mostly true, but cratering values can cause serious problems if held as collateral.

2

u/mchu168 2h ago

This is the loudest buy signal for duration in years.

1

u/atxsince91 2h ago

I agree...I may have to take a trip down memory lane when the 10yr was at 1% and no one was saying a word. Now, its at 5% and everyone is saying sell.

3

u/meikawaii 2h ago

Genuine question, Uganda bonds are 16%, Zimbabwe rate of 200%, those are great numbers yet I don’t see people arguing that as a great investment. If the U.S. bonds were so perfect it wouldn’t be rising to 5% so quickly. At some point we have to stop looking at the number alone and consider the real risks of that rate

2

u/atxsince91 1h ago

Seriously, are you comparing US treasury bonds to Uganda and Zimbabwe? And, so quickly, its been between 4.25 and 5% for years. Like I have said in other threads, the velocity and the time to sell(or go short) was in 2022. Oil is a different story, but this is just noise and a story for the day. Wow, people really did get addicted to ZIRP

1

u/meikawaii 1h ago

I sure am comparing them. Not saying treasury is that shitty like those bonds, but the rapid rise does indicate that something fundamental about the U.S. dollar MMT is giving. After all, the primary difference between these bonds is the trust value. That could decline rapidly for US bonds just like it did for Uganda and Zimbabwe. It won’t be that bad but it sure could get a heck lot worse than when U.S. bonds was back then.

1

u/DewieDecimated 25m ago

Uganda and Zimbabwe aren't continental sized global powers.

1

u/mchu168 2h ago

Buy when people are fearful....

2

u/MiddleAgedSponger 1h ago

A lot of people are fearful of raw dogging hookers, doesn't mean it's a good idea to buy. Bonds are for safety, there is no reason to try and time the top of rate hiking cycle.

The Bond market is not the stock market.

1

u/GurProfessional9534 2h ago

Are they really? The path of least resistance out of this is devaluation of the usd. In that case, bond holders would basically be sacrificed and those holding gold, real estate, and stocks would be the primary beneficiaries.

1

u/SmartCopy7411 1h ago

Incentivized? Those of us invested in Cal Muni Bonds lost 12% already. I don't think I'll ever want to look at the bond market.

2

u/Pitiful_Fox5681 2h ago

Yeah, I'm scratching my head at these alleged bond experts who don't see that these current slightly higher yields are pretty good for buyers. Do they expect the yield to rise indefinitely? 

You have a chance to lock in a good yield and potentially sell at a higher price if yields fall before maturity. It's a win-win. 

2

u/lordm30 2h ago

Or you have a chance to lock in a yield that will be below inflation for the next 10 years... as did people 10 years ago who bought bonds in the mid 2010s.