nextbigtrade
Stage Analysis Trader, Creator of Next Big Trade Premium Newsletter
US Treasuries remain unattractive despite retail bond-fund buying: Fidelity's Jurrien Timmer reports end investors accumulating bond funds, while retail buyers risk becoming exit liquidity before the debt cycle capitulates. Rising debt and debt-supply-led inflation are expected to push long-end yields higher even after the midterms. Junk-credit stress adds to the risk of a wider debt-market selloff, leaving bonds a risky equity-crash hedge. x.com x.com x.com x.comÂ
Hyperscaler credit stress and weak financials-versus-staples leadership warn of downside risk in the S&P 500 consolidation. Spreads have broken July wides, though an upside breakout is probable if financials stabilize. So far, tech weakness has lowered yields as Fed hikes are priced out, letting defensives rally and the S&P chop. If the Fed signals Nasdaq weakness won't stop tightening without better data, the tech-yield link could break in an uncomfortable, 2018-like direction. x.com x.com … Show more
High-yield bonds will be among the first assets sold once private credit blowups force redemptions in mixed mandates, because liquid holdings are always the funding leg. Their resilience amid the private-credit carnage, noted by @yieldsearcher, holds only for now. x.comÂ
High debt and rate hikes make a big US equity correction likely. Warsh said nothing useful despite hot CPI and PPI after two weeks of hawkish rhetoric, while the rest of the Fed fence-sits. A debt crisis is incoming, and some funds will blow up soon. Big caps are the last leg; the bigger correction could be something like 20%. It is not a good time to buy dips. x.com x.com x.com x.com x.com x.com x.comÂ
Long-dated US Treasuries have further to fall because bonds have not reached capitulation and may still be in denial. Treasury prices have hit fresh lows, and the selling plausibly comes from anyone who needs to repay US-dollar-denominated debt. x.com x.com x.comÂ
US stocks face a quiet but serious risk from the bond market, where the 30-year Treasury yield hit its highest level since 2007. Rising yields act like a slow tax, making borrowing costlier and pulling money from stocks; they reflect heavy borrowing, sticky inflation and a flood of corporate debt. The government had to announce large buybacks of long-term bonds to push yields down, which worked for now. A high yield is not a crash by itself, but it is a warning light. x.comÂ
Regional banks rejected a double top at their 4Q21-1Q22 peak, and pumping them now is market foolishness. Rising yields, falling high-yield and investment-grade corporate bonds, and collapsing real estate all argue against owning them. x.comÂ
US Treasury and aggregate bonds are risky because rates are more likely to go up than down, whatever their current level. In that scenario, bond math works against holders. Oaktree's Howard Marks argues these are among the lowest rates of the last 50 years, but the direction matters more than the level. x.comÂ
US stocks could face a meaningful correction because the macro backdrop is deteriorating across bonds and inflation. The secular bull market is still expected to continue afterward, with a key factor potentially limiting the correction's severity. x.com x.comÂ
Long-dated US Treasuries benefit from falling long-end yields as the Fed's inflation response becomes a policy error. The Fed looks likely to hike again to defend its credibility despite a supply shock; 5% rates are unsustainable, and current price action points to financial damage followed by a hard pivot. A one-year rate freeze could instead let long yields rise by giving the economy a breather and making later hikes more likely. x.com x.com x.com x.comÂ