What would a US bond market crisis look like?

[Anonymous]

I think some of the TDS posters several weeks ago screaming about the tariffs and a stock market crash didn't have any luck so now they just shifted their focus to bonds

[Anonymous]

Anonymous wrote:

Anonymous wrote:Check this out for an idea what can happen to our bond market:

“UK Gilt Market Crisis of 2022”. Very similar to what is currently being proposed for taxes and cuts in the BBB that got passed in the house.

Interesting. The UK's 45 day prime minister recently wrote an op-ed in the WSJ claiming Trump is on the right track and if only voters in the UK Z hadn't booted her out they would be in a golden age.

Ha! Liz Truss was the shortest PM in UK history. Like Trump, she spooked the bond markets. But unlike the UK, we can’t quickly boot out incompetent leaders.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Bond yields rise and dollar falls. Inflation increases. At that point it depends on the fiscal policy response. Higher yields increases government borrowing costs and hence the deficit. If they take credible action to contain the deficit then the situation stabilizes. If not we enter a negative spiral that involves the same elements of rising interest rates, spiraling deficits, falling dollar, increasing inflation etc.

This is the theory, but present day reality is the opposite as far as bond yields go. Even w/ the “big beautiful bill” expected to add trillions to the total debt, rates are lower compared to Jan. 1. There is no panic in the bond market. Go figure.

I suspect that it means that the market doesn’t think the bill will be passed as is. There is also some move to bonds as nervousness about equities persists. Look at how the cost of credit default swaps on US government debt have increased for evidence that all isn’t well in the bond market.

But I don’t disagree with you. The point is that it is an unstable equilibrium. Once things start moving, they could move quickly.

Rates have been a lot higher in the past, and no one thought that it was unstable. If you drew line through the middle of the 10yr over time, it would about 6-7%. No one thought that was unstable, and it has been even higher than that.

And there really is nothing to replace the US Treasury bond market, it’s to deep and trades 6 days a week all hours of the day. There is no bond market or currency on par w/ the US. No one is ever going to hold their wealth in Chinese bonds, and the EP countries are too small.

It's not about the yield. It's about the spread.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Bond yields rise and dollar falls. Inflation increases. At that point it depends on the fiscal policy response. Higher yields increases government borrowing costs and hence the deficit. If they take credible action to contain the deficit then the situation stabilizes. If not we enter a negative spiral that involves the same elements of rising interest rates, spiraling deficits, falling dollar, increasing inflation etc.

This is the theory, but present day reality is the opposite as far as bond yields go. Even w/ the “big beautiful bill” expected to add trillions to the total debt, rates are lower compared to Jan. 1. There is no panic in the bond market. Go figure.

I suspect that it means that the market doesn’t think the bill will be passed as is. There is also some move to bonds as nervousness about equities persists. Look at how the cost of credit default swaps on US government debt have increased for evidence that all isn’t well in the bond market.

But I don’t disagree with you. The point is that it is an unstable equilibrium. Once things start moving, they could move quickly.

Rates have been a lot higher in the past, and no one thought that it was unstable. If you drew line through the middle of the 10yr over time, it would about 6-7%. No one thought that was unstable, and it has been even higher than that.

And there really is nothing to replace the US Treasury bond market, it’s to deep and trades 6 days a week all hours of the day. There is no bond market or currency on par w/ the US. No one is ever going to hold their wealth in Chinese bonds, and the EP countries are too small.

So debt dynamics are interesting. They are a function of the interest rate, the debt-to-gdp ratio, the inflation rate, the current deficit, and future deficits, as well as the global demand for US bonds. Moreover it is about perceptions of sustainability, not just the numbers. 15 percent might be sustainable when your nominal gdp growth rate is very high. But 7 percent would be unsustainable if your nominal growth rate is 5 percent and your fiscal policies are crazy (including potentially taxing foreign investors at high rates, as the current bill proposes).

I agree it would take a lot to dethrone the US bonds market. But this administration is brewing up the perfect storm of measures to do it. If they don’t, it will be because the Senate saves them.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Bond yields rise and dollar falls. Inflation increases. At that point it depends on the fiscal policy response. Higher yields increases government borrowing costs and hence the deficit. If they take credible action to contain the deficit then the situation stabilizes. If not we enter a negative spiral that involves the same elements of rising interest rates, spiraling deficits, falling dollar, increasing inflation etc.

This is the theory, but present day reality is the opposite as far as bond yields go. Even w/ the “big beautiful bill” expected to add trillions to the total debt, rates are lower compared to Jan. 1. There is no panic in the bond market. Go figure.

I suspect that it means that the market doesn’t think the bill will be passed as is. There is also some move to bonds as nervousness about equities persists. Look at how the cost of credit default swaps on US government debt have increased for evidence that all isn’t well in the bond market.

But I don’t disagree with you. The point is that it is an unstable equilibrium. Once things start moving, they could move quickly.

Rates have been a lot higher in the past, and no one thought that it was unstable. If you drew line through the middle of the 10yr over time, it would about 6-7%. No one thought that was unstable, and it has been even higher than that.

And there really is nothing to replace the US Treasury bond market, it’s to deep and trades 6 days a week all hours of the day. There is no bond market or currency on par w/ the US. No one is ever going to hold their wealth in Chinese bonds, and the EP countries are too small.

So debt dynamics are interesting. They are a function of the interest rate, the debt-to-gdp ratio, the inflation rate, the current deficit, and future deficits, as well as the global demand for US bonds. Moreover it is about perceptions of sustainability, not just the numbers. 15 percent might be sustainable when your nominal gdp growth rate is very high. But 7 percent would be unsustainable if your nominal growth rate is 5 percent and your fiscal policies are crazy (including potentially taxing foreign investors at high rates, as the current bill proposes).

I agree it would take a lot to dethrone the US bonds market. But this administration is brewing up the perfect storm of measures to do it. If they don’t, it will be because the Senate saves them.

So Dethrone in favor of what? That really is the question.

Also, Biden ran 2T deficit and no one cared, least of all the bond market.

I think this can go for a long time.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Bond yields rise and dollar falls. Inflation increases. At that point it depends on the fiscal policy response. Higher yields increases government borrowing costs and hence the deficit. If they take credible action to contain the deficit then the situation stabilizes. If not we enter a negative spiral that involves the same elements of rising interest rates, spiraling deficits, falling dollar, increasing inflation etc.

This is the theory, but present day reality is the opposite as far as bond yields go. Even w/ the “big beautiful bill” expected to add trillions to the total debt, rates are lower compared to Jan. 1. There is no panic in the bond market. Go figure.

I suspect that it means that the market doesn’t think the bill will be passed as is. There is also some move to bonds as nervousness about equities persists. Look at how the cost of credit default swaps on US government debt have increased for evidence that all isn’t well in the bond market.

But I don’t disagree with you. The point is that it is an unstable equilibrium. Once things start moving, they could move quickly.

Rates have been a lot higher in the past, and no one thought that it was unstable. If you drew line through the middle of the 10yr over time, it would about 6-7%. No one thought that was unstable, and it has been even higher than that.

And there really is nothing to replace the US Treasury bond market, it’s to deep and trades 6 days a week all hours of the day. There is no bond market or currency on par w/ the US. No one is ever going to hold their wealth in Chinese bonds, and the EP countries are too small.

So debt dynamics are interesting. They are a function of the interest rate, the debt-to-gdp ratio, the inflation rate, the current deficit, and future deficits, as well as the global demand for US bonds. Moreover it is about perceptions of sustainability, not just the numbers. 15 percent might be sustainable when your nominal gdp growth rate is very high. But 7 percent would be unsustainable if your nominal growth rate is 5 percent and your fiscal policies are crazy (including potentially taxing foreign investors at high rates, as the current bill proposes).

I agree it would take a lot to dethrone the US bonds market. But this administration is brewing up the perfect storm of measures to do it. If they don’t, it will be because the Senate saves them.

So Dethrone in favor of what? That really is the question.

Also, Biden ran 2T deficit and no one cared, least of all the bond market.

I think this can go for a long time.

It's not only about the deficit. It's just as much, if not more, about democracy. It will be a slow process but it has started.

Who do you trust more to repay their debt - Microsoft or the United States Government under Trump?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Bond yields rise and dollar falls. Inflation increases. At that point it depends on the fiscal policy response. Higher yields increases government borrowing costs and hence the deficit. If they take credible action to contain the deficit then the situation stabilizes. If not we enter a negative spiral that involves the same elements of rising interest rates, spiraling deficits, falling dollar, increasing inflation etc.

This is the theory, but present day reality is the opposite as far as bond yields go. Even w/ the “big beautiful bill” expected to add trillions to the total debt, rates are lower compared to Jan. 1. There is no panic in the bond market. Go figure.

I suspect that it means that the market doesn’t think the bill will be passed as is. There is also some move to bonds as nervousness about equities persists. Look at how the cost of credit default swaps on US government debt have increased for evidence that all isn’t well in the bond market.

But I don’t disagree with you. The point is that it is an unstable equilibrium. Once things start moving, they could move quickly.

Rates have been a lot higher in the past, and no one thought that it was unstable. If you drew line through the middle of the 10yr over time, it would about 6-7%. No one thought that was unstable, and it has been even higher than that.

And there really is nothing to replace the US Treasury bond market, it’s to deep and trades 6 days a week all hours of the day. There is no bond market or currency on par w/ the US. No one is ever going to hold their wealth in Chinese bonds, and the EP countries are too small.

So debt dynamics are interesting. They are a function of the interest rate, the debt-to-gdp ratio, the inflation rate, the current deficit, and future deficits, as well as the global demand for US bonds. Moreover it is about perceptions of sustainability, not just the numbers. 15 percent might be sustainable when your nominal gdp growth rate is very high. But 7 percent would be unsustainable if your nominal growth rate is 5 percent and your fiscal policies are crazy (including potentially taxing foreign investors at high rates, as the current bill proposes).

I agree it would take a lot to dethrone the US bonds market. But this administration is brewing up the perfect storm of measures to do it. If they don’t, it will be because the Senate saves them.

So Dethrone in favor of what? That really is the question.

Also, Biden ran 2T deficit and no one cared, least of all the bond market.

I think this can go for a long time.

It's not only about the deficit. It's just as much, if not more, about democracy. It will be a slow process but it has started.

Who do you trust more to repay their debt - Microsoft or the United States Government under Trump?

The Federal government can simply turn on the printing press, and print as many dollars as it takes to pay a bond maturity and interest. They can also raise taxes and fees (e.g. tariffs). Microsoft cannot. They have to make every dime.

BTW, Bond yields down again today. 10 yr below 4.4%. BBB is having no effect. Not saying that is good, but it is what it is.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Bond yields rise and dollar falls. Inflation increases. At that point it depends on the fiscal policy response. Higher yields increases government borrowing costs and hence the deficit. If they take credible action to contain the deficit then the situation stabilizes. If not we enter a negative spiral that involves the same elements of rising interest rates, spiraling deficits, falling dollar, increasing inflation etc.

This is the theory, but present day reality is the opposite as far as bond yields go. Even w/ the “big beautiful bill” expected to add trillions to the total debt, rates are lower compared to Jan. 1. There is no panic in the bond market. Go figure.

I suspect that it means that the market doesn’t think the bill will be passed as is. There is also some move to bonds as nervousness about equities persists. Look at how the cost of credit default swaps on US government debt have increased for evidence that all isn’t well in the bond market.

But I don’t disagree with you. The point is that it is an unstable equilibrium. Once things start moving, they could move quickly.

Rates have been a lot higher in the past, and no one thought that it was unstable. If you drew line through the middle of the 10yr over time, it would about 6-7%. No one thought that was unstable, and it has been even higher than that.

And there really is nothing to replace the US Treasury bond market, it’s to deep and trades 6 days a week all hours of the day. There is no bond market or currency on par w/ the US. No one is ever going to hold their wealth in Chinese bonds, and the EP countries are too small.

So debt dynamics are interesting. They are a function of the interest rate, the debt-to-gdp ratio, the inflation rate, the current deficit, and future deficits, as well as the global demand for US bonds. Moreover it is about perceptions of sustainability, not just the numbers. 15 percent might be sustainable when your nominal gdp growth rate is very high. But 7 percent would be unsustainable if your nominal growth rate is 5 percent and your fiscal policies are crazy (including potentially taxing foreign investors at high rates, as the current bill proposes).

I agree it would take a lot to dethrone the US bonds market. But this administration is brewing up the perfect storm of measures to do it. If they don’t, it will be because the Senate saves them.

So Dethrone in favor of what? That really is the question.

Also, Biden ran 2T deficit and no one cared, least of all the bond market.

I think this can go for a long time.

It's not only about the deficit. It's just as much, if not more, about democracy. It will be a slow process but it has started.

Who do you trust more to repay their debt - Microsoft or the United States Government under Trump?

The Federal government can simply turn on the printing press, and print as many dollars as it takes to pay a bond maturity and interest. They can also raise taxes and fees (e.g. tariffs). Microsoft cannot. They have to make every dime.

BTW, Bond yields down again today. 10 yr below 4.4%. BBB is having no effect. Not saying that is good, but it is what it is.

Right. I did not ask about the ability to pay. I asked about the willingness to pay. Should also add that there's a proposed provision in the tax bill to give the President the ability to tax foreign bond holders at his discretion.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Bond yields rise and dollar falls. Inflation increases. At that point it depends on the fiscal policy response. Higher yields increases government borrowing costs and hence the deficit. If they take credible action to contain the deficit then the situation stabilizes. If not we enter a negative spiral that involves the same elements of rising interest rates, spiraling deficits, falling dollar, increasing inflation etc.

This is the theory, but present day reality is the opposite as far as bond yields go. Even w/ the “big beautiful bill” expected to add trillions to the total debt, rates are lower compared to Jan. 1. There is no panic in the bond market. Go figure.

I suspect that it means that the market doesn’t think the bill will be passed as is. There is also some move to bonds as nervousness about equities persists. Look at how the cost of credit default swaps on US government debt have increased for evidence that all isn’t well in the bond market.

But I don’t disagree with you. The point is that it is an unstable equilibrium. Once things start moving, they could move quickly.

Rates have been a lot higher in the past, and no one thought that it was unstable. If you drew line through the middle of the 10yr over time, it would about 6-7%. No one thought that was unstable, and it has been even higher than that.

And there really is nothing to replace the US Treasury bond market, it’s to deep and trades 6 days a week all hours of the day. There is no bond market or currency on par w/ the US. No one is ever going to hold their wealth in Chinese bonds, and the EP countries are too small.

So debt dynamics are interesting. They are a function of the interest rate, the debt-to-gdp ratio, the inflation rate, the current deficit, and future deficits, as well as the global demand for US bonds. Moreover it is about perceptions of sustainability, not just the numbers. 15 percent might be sustainable when your nominal gdp growth rate is very high. But 7 percent would be unsustainable if your nominal growth rate is 5 percent and your fiscal policies are crazy (including potentially taxing foreign investors at high rates, as the current bill proposes).

I agree it would take a lot to dethrone the US bonds market. But this administration is brewing up the perfect storm of measures to do it. If they don’t, it will be because the Senate saves them.

So Dethrone in favor of what? That really is the question.

Also, Biden ran 2T deficit and no one cared, least of all the bond market.

I think this can go for a long time.

It's not only about the deficit. It's just as much, if not more, about democracy. It will be a slow process but it has started.

Who do you trust more to repay their debt - Microsoft or the United States Government under Trump?

The Federal government can simply turn on the printing press, and print as many dollars as it takes to pay a bond maturity and interest. They can also raise taxes and fees (e.g. tariffs). Microsoft cannot. They have to make every dime.

BTW, Bond yields down again today. 10 yr below 4.4%. BBB is having no effect. Not saying that is good, but it is what it is.

Right. I did not ask about the ability to pay. I asked about the willingness to pay. Should also add that there's a proposed provision in the tax bill to give the President the ability to tax foreign bond holders at his discretion.

If they don’t pay, all the banks fail, given that’s how they hold their Tier 1 capital. They are not that dumb.

I don’t care if they tax foreign bond holders. I hold foreign stocks any pay foreign taxes on dividends, and then also US taxes, so seems equal treatment.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Bond yields rise and dollar falls. Inflation increases. At that point it depends on the fiscal policy response. Higher yields increases government borrowing costs and hence the deficit. If they take credible action to contain the deficit then the situation stabilizes. If not we enter a negative spiral that involves the same elements of rising interest rates, spiraling deficits, falling dollar, increasing inflation etc.

This is the theory, but present day reality is the opposite as far as bond yields go. Even w/ the “big beautiful bill” expected to add trillions to the total debt, rates are lower compared to Jan. 1. There is no panic in the bond market. Go figure.

I suspect that it means that the market doesn’t think the bill will be passed as is. There is also some move to bonds as nervousness about equities persists. Look at how the cost of credit default swaps on US government debt have increased for evidence that all isn’t well in the bond market.

But I don’t disagree with you. The point is that it is an unstable equilibrium. Once things start moving, they could move quickly.

Rates have been a lot higher in the past, and no one thought that it was unstable. If you drew line through the middle of the 10yr over time, it would about 6-7%. No one thought that was unstable, and it has been even higher than that.

And there really is nothing to replace the US Treasury bond market, it’s to deep and trades 6 days a week all hours of the day. There is no bond market or currency on par w/ the US. No one is ever going to hold their wealth in Chinese bonds, and the EP countries are too small.

So debt dynamics are interesting. They are a function of the interest rate, the debt-to-gdp ratio, the inflation rate, the current deficit, and future deficits, as well as the global demand for US bonds. Moreover it is about perceptions of sustainability, not just the numbers. 15 percent might be sustainable when your nominal gdp growth rate is very high. But 7 percent would be unsustainable if your nominal growth rate is 5 percent and your fiscal policies are crazy (including potentially taxing foreign investors at high rates, as the current bill proposes).

I agree it would take a lot to dethrone the US bonds market. But this administration is brewing up the perfect storm of measures to do it. If they don’t, it will be because the Senate saves them.

So Dethrone in favor of what? That really is the question.

Also, Biden ran 2T deficit and no one cared, least of all the bond market.

I think this can go for a long time.

It's not only about the deficit. It's just as much, if not more, about democracy. It will be a slow process but it has started.

Who do you trust more to repay their debt - Microsoft or the United States Government under Trump?

The Federal government can simply turn on the printing press, and print as many dollars as it takes to pay a bond maturity and interest. They can also raise taxes and fees (e.g. tariffs). Microsoft cannot. They have to make every dime.

BTW, Bond yields down again today. 10 yr below 4.4%. BBB is having no effect. Not saying that is good, but it is what it is.

Right. I did not ask about the ability to pay. I asked about the willingness to pay. Should also add that there's a proposed provision in the tax bill to give the President the ability to tax foreign bond holders at his discretion.

If they don’t pay, all the banks fail, given that’s how they hold their Tier 1 capital. They are not that dumb.

I don’t care if they tax foreign bond holders. I hold foreign stocks any pay foreign taxes on dividends, and then also US taxes, so seems equal treatment.

And that's why central banks and foreign investors are lowering the amount of treasuries they own.

Lol, it's not the same and if you can't see why then there's no point in going on. Suffice it to say, it is completely logical for foriegn investors to diversify away from the US.

[Anonymous]

They’re banking on huge productivity gains from AI and other tech advancements to keep the GDP growing. If GDP stops increasing we’re screwed

[Anonymous]

Anonymous wrote:The dismantling of the US government and the erratic foreign trade policy have caused the major foreign creditors to lose faith in the stability of the US economy and government. They are pulling out of the US.
--> the USD is no longer the preferred reserve currency
--> Interest on US bonds is skyrocketing
--> it will be more and more expensive to service the debt
--> services will be cut, taxes stay high, the government will print a lot more money, causing high inflation
--> savings will become worthless
--> everybody will be poorer except for the very rich

First ---there was no real dismantling of the US Government. Rehires wills tart soon.

USD has to be the reserve currency -- there is no alternative. May rim US but cannot pull out.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Bond yields rise and dollar falls. Inflation increases. At that point it depends on the fiscal policy response. Higher yields increases government borrowing costs and hence the deficit. If they take credible action to contain the deficit then the situation stabilizes. If not we enter a negative spiral that involves the same elements of rising interest rates, spiraling deficits, falling dollar, increasing inflation etc.

This is the theory, but present day reality is the opposite as far as bond yields go. Even w/ the “big beautiful bill” expected to add trillions to the total debt, rates are lower compared to Jan. 1. There is no panic in the bond market. Go figure.

I suspect that it means that the market doesn’t think the bill will be passed as is. There is also some move to bonds as nervousness about equities persists. Look at how the cost of credit default swaps on US government debt have increased for evidence that all isn’t well in the bond market.

But I don’t disagree with you. The point is that it is an unstable equilibrium. Once things start moving, they could move quickly.

Rates have been a lot higher in the past, and no one thought that it was unstable. If you drew line through the middle of the 10yr over time, it would about 6-7%. No one thought that was unstable, and it has been even higher than that.

And there really is nothing to replace the US Treasury bond market, it’s to deep and trades 6 days a week all hours of the day. There is no bond market or currency on par w/ the US. No one is ever going to hold their wealth in Chinese bonds, and the EP countries are too small.

So debt dynamics are interesting. They are a function of the interest rate, the debt-to-gdp ratio, the inflation rate, the current deficit, and future deficits, as well as the global demand for US bonds. Moreover it is about perceptions of sustainability, not just the numbers. 15 percent might be sustainable when your nominal gdp growth rate is very high. But 7 percent would be unsustainable if your nominal growth rate is 5 percent and your fiscal policies are crazy (including potentially taxing foreign investors at high rates, as the current bill proposes).

I agree it would take a lot to dethrone the US bonds market. But this administration is brewing up the perfect storm of measures to do it. If they don’t, it will be because the Senate saves them.

So Dethrone in favor of what? That really is the question.

Also, Biden ran 2T deficit and no one cared, least of all the bond market.

I think this can go for a long time.

at least another 50 years.

[Anonymous]

Anonymous wrote:Massive inflation.

If the bond market requires more debt than the U.S. can get ahold of or if payments get difficult for the government, the government can always dig its way out by forcing inflation, printing copious amounts of money and thus devaluing the amount of debt that the government is holding.

Yep. It’s either this or decrease the interest rate (which is also pro inflationary) and spending and try to pay it down. Since Rs are currently more interested in a money grab for themselves instead of actually decreasing spending & paying down debt, expect a slow moving crisis that at some point will pick up in pace and spiral out of control.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Bond yields rise and dollar falls. Inflation increases. At that point it depends on the fiscal policy response. Higher yields increases government borrowing costs and hence the deficit. If they take credible action to contain the deficit then the situation stabilizes. If not we enter a negative spiral that involves the same elements of rising interest rates, spiraling deficits, falling dollar, increasing inflation etc.

This is the theory, but present day reality is the opposite as far as bond yields go. Even w/ the “big beautiful bill” expected to add trillions to the total debt, rates are lower compared to Jan. 1. There is no panic in the bond market. Go figure.

I suspect that it means that the market doesn’t think the bill will be passed as is. There is also some move to bonds as nervousness about equities persists. Look at how the cost of credit default swaps on US government debt have increased for evidence that all isn’t well in the bond market.

But I don’t disagree with you. The point is that it is an unstable equilibrium. Once things start moving, they could move quickly.

Rates have been a lot higher in the past, and no one thought that it was unstable. If you drew line through the middle of the 10yr over time, it would about 6-7%. No one thought that was unstable, and it has been even higher than that.

And there really is nothing to replace the US Treasury bond market, it’s to deep and trades 6 days a week all hours of the day. There is no bond market or currency on par w/ the US. No one is ever going to hold their wealth in Chinese bonds, and the EP countries are too small.

So debt dynamics are interesting. They are a function of the interest rate, the debt-to-gdp ratio, the inflation rate, the current deficit, and future deficits, as well as the global demand for US bonds. Moreover it is about perceptions of sustainability, not just the numbers. 15 percent might be sustainable when your nominal gdp growth rate is very high. But 7 percent would be unsustainable if your nominal growth rate is 5 percent and your fiscal policies are crazy (including potentially taxing foreign investors at high rates, as the current bill proposes).

I agree it would take a lot to dethrone the US bonds market. But this administration is brewing up the perfect storm of measures to do it. If they don’t, it will be because the Senate saves them.

So Dethrone in favor of what? That really is the question.

Also, Biden ran 2T deficit and no one cared, least of all the bond market.

I think this can go for a long time.

at least another 50 years.

Maybe. But to paraphrase Ernest Hemmingway, countries go bankrupt gradually, then suddenly. We are in the gradual stage. It is slow. The next stage will be very quick.