Bond Breakdown

I’ve been warning for months that government bonds around the world looked like they were getting ready to break higher in yields (lower in price). I see this as one more step along the path of a Sovereign Debt Crisis that will likely be one of the defining characteristics of our time, through 2032.

Japan has been at the forefront of the Sovereign Debt Crisis for decades — not only because it has a higher debt/GDP than most governments, but also, because other governments seem to end up doing what Japan does, eventually. Japan was the first to go to effectively zero interest rates, known as “ZIRP” (zero interest rate policy). The whole world followed after 2008. Japan invented the term “quantitatve easing” in the 1990s. (In Japanese it was “ryouteki kanwa”) Today, Japan’s government bond market is basically coughing up blood, although yields still have a long way to go higher.

Germany:

Britain, trying out 6% on the 30yr.

The US 10yr is still below the highs of 2023, but broke a significant technical barrier.

The US 30yr yield made new highs.

I’ve been saying that government bond yields are likely to go north of 6% across the board. First in the 30yrs; then the 10yrs; maybe eventually in the 2yrs.

The fundamental reason for this is a persistent decline in the value of currencies worldwide, best expressed in the amount of currency required to buy an ounce of unchanging gold.

We are on course to reach a 5% official CPI rate by the end of 2026.

Higher oil prices in 2H26 would make this worse, not better.