Bonds on Fire!

Western financial fires are spreading fast and the UK could be the next country to blow up.

The tragic fires raging in California are not the only fires engulfing the world. Let's talk about bonds. The dominos have begun to fall and its too late to stop a Western reset at the hands of financial reckoning. While US stocks have temporarily skied higher since the Trump bump, global bond markets are continuing to meltdown, a process many years old at this point.

Its too late to stop a Western reset at the hands of financial reckoning.

Since Fed rate cuts started in September, yields on US Treasuries have soared, rising 100 basis points (equaling the Fed cut). Similar arson is spreading across Europe where governments are descending into debt traps as recession, political chaos, economic mismanagement, open borders, and war in Ukraine are destroying confidence in the credit worthiness of Western governments full stop.

Let's focus on the UK. UK officials are now openly acknowledging the severity of the debt crisis compounded by rising inflation and anemic growth. Basically, Act 2 of the UK Gilt crisis in '22 (remember the “Mini-budget crisis”), which nearly broke the Bank of England and forced Prime Minister Liz Truss to resign barely 90 days into her tenure is about to begin.

"Higher debt and lower growth are understandably now causing real concerns among the public, among businesses and in the markets." Shadow Chancellor Mel Stride

Structurally, the UK is completely bankrupt. The historically unpopular Prime Minister Keir Starmer will be forced to resign just as Liz Truss did, and the Labor Party is headed into the gutter like the Tories before them. This will only add fuel to the fire in a fragile, racially divided country where average Britons have been squeezed into an ever more desperate situation.

Governments in Austria, France, Germany, the Netherlands, and most recently Canada are falling like dominos, one by one by one, and the UK will likely be next. Western governments are in the death grip of broken economic growth, spiraling and unaffordable debt, and the breakdown of social cohesion in the demographically unrecognizable West.

Western governments are in the death grip of a political-economic crisis and the eye of the storm is near.

Remember, as yields rise so do interest payments, but demand for outstanding and new supply of government bonds also falls. Government bonds are ultimately subject to the same market forces as every other market, supply and demand. The bond vigilantes are coming. Market forces are about to turn the current, bastardized "democratic" order completely upside down.

The eye of the storm is near and like so many suffering in the California Palisades, Western governments are bereft of insurance. Watch the UK closely for the next shoe to drop. The only way out is through.

Welcome to the end of cycle.

Stay liquid, stay alert.