U.S. 10-year Treasury Note - Rising Bond Yields Warning

Note: This is a brief excerpt from Bill Bonner's note that talks about the competing camps as relate to explaining the rising bond yields in the US 10-year Treasury Note. You will do well pondering the options. My view is that the endless money creation in sight is driving the rise in bond yields, as investors are seeking a higher inflation risk premium. On a short-term basis, it's reasonable to expect an improvement in economic activity in light of the massive injections of liquidity in the markets. But like all injections, the effects are temporary.   

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YOUGHAL, IRELAND – Over the weekend, the Senate passed the $1.9 trillion COVID-19 boondoggle. And the U.S. 10-year Treasury note – the bedrock of the entire American capital structure – now trades at more than three times the yield it had last August.

There are two overlapping narratives to explain the rise in bond yields. The one favored by Wall Street and Washington is that the economy is entering a fantastic growth phase… with businesses borrowing heavily to keep up with expanding demand (thus pushing up yields).

As long as “growth” is so robust, say the bulls, consumer price inflation won’t be a problem.

The other hypothesis is that bond yields are rising because the feds are increasing the money supply about 15 times faster than GDP growth. Investors are looking ahead and seeking protection against inflation.

Friday’s jobs report allegedly showed a healthy up-tick in hiring. But while jobs in the service sector increased, those in mining and construction actually went down.

And considering that mining and construction jobs pay about three times as much as waiting on tables or handling baggage at an airport, what this really shows is further deterioration of the economy – from one that creates wealth to one that consumes it, by giving people fake money.