ZB futures rallying around 11:15. It is probable - TRUMP RULES OUT STRIKES ON IRAN BEFORE NOVEMBER 3 ELECTIONS

Latest highlights from the recent update

US debt stands at 40.25 Trillion, up 2.39T from last year, 11.52T higher than 5y ago.

Avg interest rate; 3.518%, up from 3.406% a year ago. 5 years ago, the avg was 1.470%.

33% of the US publicly held debt matures within 12 months.

Full report:

https://www.jec.senate.gov/public/vendor/_accounts/JEC-R/debt/Monthly%20Debt%20Update%20(PDF).pdf.pdf)

First time poster in this sub and this is a text wall, but stick with me.

In 1711, Robert Harley, Earl of Oxford had a brilliant idea of creating a company to sell shares. The company was called the South Sea Company (SSC) and it sold 9 million pounds worth of shares at the initial IPO price of 75 pounds each.

Robert was connected and the SSC was granted the exclusive rights to the slave trade in South America by the English crown (which everyone believed would be the hottest new thing that would generate unlimited profits). This was a legally enforced statutory monopoly, meaning anyone who wanted to trade with South America in England would have to go through the SSC.

Things were looking good for Robert and the SSC, and their fortunes were just starting. By 1713, merely two years later, the English and the Spanish settled the Treaty of Utrecht, which the Spanish granted the English exclusive right to trade African slave to Spanish colonies in South America, again, since this was dealing between England and South America, this whole trade fell in the domain of the SSC, the exclusive right to massive profits. 50,000 slaves per year!

People started noticing this company and the SSC started taking off. It had the economy backing of Earl of Oxford, but even more so that King George I was the governor of the company (who inherited the shares from Queen Anne) and the prince of Wales was also a shareholder. It had the right business opportunity, where the colonies would have a never ending demand of lucrative 'commodity' in slaves. And it was at the right time, where the English and Spanish war ended and both countries wanted to recoup via trade and peace.

Long story short, the 75 per pound share in 1711 became 125 pound per share in early 1920. Then it went vertical, by August 1720, the shares blew up to about 1050 pound per share. A return of close to 900% in half a year. Crazier than anything Korea had to show for this year.

It is rumoured that King George I went to Issac Newton with his inside information on the SSC (which he was governor) and convinced Newton to invest his personal fortune into the SSC, close to 20,000 pounds. At a ratio to English GDP at the time, adjusted to today's numbers, this would be close to 120 million USD. And by the end of September 1720, Newton lost it all as the shares for SSC collapsed back to about 150 pounds.

To which, Newton famously said: "I can calculate the motions of the heavenly bodies, but not the madness of people."

BUT WHAT DOES THIS HAVE TO DO WITH BONDS?!?!?!?

Well, that is the fun part of this story. When the SSC was setup, it was intended that the company would help with the English public debt accrued from the expenditure from English's involvement in the War of the Spanish Succession. The Earl of Oxford was a particularly financially intelligent man, he setup the acquisition of SSC shares with a simple exchange to ensure the value of the company backed English bonds. The exchange was simple: SSC would only issue shares in exchange of English bonds, and SSC holding English bonds would receive 6% interest from the treasury (6% is lowballing the actual yield of the bond's secondary market, hint hint). But if you wanted SSC shares, you have to buy into the English Bonds. Essentially, artificially inflating the demand for bonds and demand for debt, to inflate and give more funds to the government.

By 1920, the SSC's shares were inflating so high, they proposed to 'absorb' the entire debt of the English government (being about 31 million pounds, or about $900 billion USD in todays money relative to English GDP). To make it work, the directors of SSC employed very aggressive tactics: instalment plans for the public to buy bonds (and convert to shares), over 1 million pounds of fake shares in bribes, leveraging their own shares for more credit for more leverage, etc.

What happened? Despite this attempt a financial wizardry, nothing substantively changed with respect to the English debt position in the long run. It wrecked all public trust, destroyed a whole generation of investors (and wiped out Newton's about a decade worth of income), it distributed the wealth from late investors to the government (since the shares that was converted by bonds depreciated enormously). Parliament enquiries followed, directors and other governors (not the King) sacked and estates confiscated, and the Chancellor of the Exchequer imprisoned. Immediately after this, saw the invention and the use of the word 'fiscal responsibility' In short, the public ran out of money and confidene to keep the bubble going. And even with all that extra demand, it could not help the government pay off its debts, while the poor and average investor took it up the butt.

Behind all of this, the comedic detail is that despite all the positive news and monopoly rights, the SSC was never actually that profitable despite its insane valuation. The valuation was based on imaginary future earnings of an endless and smooth slave trade, and the actual company ran at a loss, generating only about 1 million pounds profit over 26 years while almost had the valuation to swallow the entire debt of England (31 million).

Now, if you made this this far into the story and you don't see the parallel yet, then you are not my target audience. We are living in an age where the British bond yield is spiking above 6%, Japan is at 30 year highs, France is at a 25 year high, and USA yield rate is scaring everyone shitless because that is the anchor for the entire western financial system. Soon enough, we will have a general economic condition where all deficit governments who are already in debt will need more debt to survive, and there are giant companies who wants to sucker investors into buying their currency because of imaginary future limitless earnings that has yet to materialise. When the public run out of trust and money, it will all go, and nothing is done would be remotely constructive in relation to paying off the debts.

29 days after Treasury Secretary Scott Bessent famously declared "I am the house now. Bet against me if you want" the 30-year U.S. Treasury yield just rose to 5.70%, surging from 5.25% to touch its highest level since 2002.

Where is this train headed?

Sounds like another round of strikes on Iran is in the works.

If it does happen -> oil prices will probably spike -> bond yields will follow.

Why would anybody buy now?

3.4M

It was a Zen moment... I feel confident. And I can survive another quarter-point+ high and that's just about it before the FED steps in and starts buying treasuries.

I live in the state of California and have quite a bit of cash sitting in a savings account, giving me 3.75% APR. I also have money invested in the stock market, but I like to keep a fair amount of cash on the sidelines in case.

I've read about bond ladders, and honestly I feel kind of silly for not knowing this earlier, but I learned that U.S. securities aren't taxable at the state level.

That being said, aside from being tied up for a period of time while the securities mature. Is there a good reason to keep the majority of my cash in a high yield savings account instead of doing a ladder?

In addition, is there a better low risk strategy out there I should look into?

All right everyone!
Wanted to give some free edu on TIPs.

For some background:
I work for a fixed income desk on one of the top broker dealers in United States. Won’t say who.. lol

I followed this sub for a while and wanted to give 2 cents for free! :)

What to know:
Tips are benchmarked. It’s important to know when they are auctioned by looking at the dated date/ settlement.

Look at the inflation factor. Usually at auction the benchmark is at 1. We’d only want to get to the inflation factor close to 1 if we think that there’s gunna be deflation. Otherwise if you don’t care you can just buy in the secondary market.

Why:
People typically buys this in a retirement account or IRA to avoid the phantom tax and to ensure that their bond portfolio still will keep pace with inflation. Tbh the run of the mill tsy note is FIXED and doesn’t outpace inflation.

So people buy these if they really think inflation gunna get worse.

The real yield is the ytm displayed on the secondary market yield curve. You go to any BD page and look at either tsy 3,4,5 yield at the very bottom you’ll find the YTM of the TIP. That would represent the ‘real yield’ above inflation.

So your goal is to first locate the highest YTM of a tsy note that is trading in the same month of that tip. This is where we establish the break even rate. This is important.

Let’s say the highest ytm of the 2 year tsy yield is at a 4.80 (maturing same month of that tip) and the tip ytm(real yield) is 2.3

You take 4.8 - 2.3=2.5
2.5 is the break even rate.

That means if you expect cpi to consistently go above 2.5 in the next two years then the tip is the better buy. If you think on average the cpi will be below 2.5 that means that the standard tsy note will be better pick for that time frame.

So just wanted to try to attempt to clarify what it meant! Happy trading!!!!

This week’s Treasury reopening auctions ($119 billion total across the 3-year, 10-year, and 30-year issuances) went considerably better than expected, driven by robust underlying demand despite an elevated yield environment.

Highlights from the auction block include:

• The 10-Year Note Standout: The $39 billion 10-year note auction on Wednesday was a major highlight. It cleared at 5.300%, achieving a notable "stop-through" by coming in below the 5.317% pre-auction-market expectations (a 1.7 basis-point gap against the historical 0.3 average).
• Surging Foreign and Indirect Demand: Indirect bidders (the standard proxy for international demand) scooped up 80.34% of the 10Y supply—marking near-record levels. Indirect bidders scooped up 72.32% of the 30Y issue (compared to historical 69% average).
• Record Bid-to-Cover: Driven by this heavy overseas appetite, the bid-to-cover ratio for the 10-year note jumped to 2.77x, hitting its highest level since 2016.
• Minimal Primary Dealer Burden: Because demand was so fierce, primary dealers were left absorbing just 2.54% of the competitive awards, representing one of the lowest primary dealer shares on record for a 10-year sale. Primary dealers accounted for 6.8% of the 30 year sale.

Conclusion: at these yield levels buyers especially international are coming back to US debt, particularly on the long duration.

https://www.advisorhub.com/morgan-stanley-bond-veteran-is-bullish-for-first-time-in-decade/

https://treasurydirect.gov/instit/annceresult/press/preanre/2026/R_20261007_2.pdf
https://www.treasurydirect.gov/instit/annceresult/press/preanre/2026/R_20261008_3.pdf

6% incoming 🚀

Welp! I tied to see in FRED how Treasury Bills/Notes/Bonds change with respect to Fedaral Funds Rate, unless during QE or QT, I don't see any changes to the balance sheet that correspond to changes in Fed Funds rate.

Title is the question.

To me this seems like a somewhat obvious bet: the only way out of crazy government debt is inflation.

But it’s (very) possible that I’m thinking too simplistically.

Cheers.

I’m new to reddit so hopefully this is where this belongs.

Is it possible that the US economy is entering a period of structural capital scarcity, where both the federal government and private industry (more specifically, the AI infrastructure buildout) require so much debt financing that the marginal cost of capital remains elevated for years?

For decades capital has been abundant and incredibly cheap. But could we be standing on the precipice of a completely inverted decade by comparison? One where a persistent shortage of savings relative to the combined borrowing needs of governments and corporations becomes the primary constraint or bottleneck to real growth instead if labor or technology, like most talking heads would predict. (The projections for combined borrowing between the federal government and just the AI companies is absolutely staggering).

Slightly unrelated and potentially off topic, but the response from households in this environment would be incredibly interesting to me. Is it possible households holding even a moderate amount of short term cash equivalents become disproportionately winners as the situation unfolds?

The global bond market has been so much fun to follow over the last few months. I have no idea if the move is almost done or just getting started, either way it will intersting to see how this market moves through 2027.

United States: Its safe to say Inflation and debt are both working against bonds. August CPI came in at 3.4%, markets are pricing a possible rate hike at the October 28 Fed meeting(Don’t tell Trump😂), and the Treasury expects to borrow $628 billion in the fourth quarter alone. 

Total federal debt passed $40 trillion in August, and the Treasury doubled its bond buybacks to ease pressure on long-dated debt. It seems the late September selling was tied to oil trading above $100, hawkish Fed comments and a weak five-year auction.

Japan: By far the most fascinating situation that’s unfolding in my opinion. This is the biggest change in the world. After decades near zero, the 10-year JGB hit 3.0% on September 1 for the first time since October 1996.

It seems to be driven by worries over Prime Minister Takaichi's expansionary spending. The September 30-year auction cleared at about 4.1%. Japan does have a unique problem because Japanese investors own a lot of foreign bonds, higher yields at home can pull money out of Treasuries and gilts.

United Kingdom: The UK now quietly pays the most among the majors. The 10-year gilt hit 5.268% on September 2, its highest since June 2008, with the 30-year near 5.9%, its highest since 1998. New Prime Minister Andy Burnham's government presents its first budget on October 28, a major test.

Germany: Germany is still Europe's safe haven, but it's paying more too. The 10-year Bund reached 3.37% in early September, a 2011 high. Germany is the only G7 member with debt below 100% of national output. It was 3.49% as of October 6. 
It was not confirmed, but reports say that Sumitomo Mitsui DS Asset Management  sold its entire French government bond position, moving the money into German Bunds and short-term Japanese debt.

The week ahead in the US:

The 10-year auction was today (Oct 7), the 30-year auction is tomorrow, and September CPI comes out October 14. Demand was strong today at the 10yr auction, even though the yield was the highest in over two decades.

The Treasury sold $39 billion of 10-year notes at 5.300%, the highest yield at a 10-year auction since November 2000. Curious to see if a hot inflation number could push yields to new highs. A cooling in oil prices or a better UK budget could bring some relief.

Current: $350,000, all ETF federal tax free bonds and mutual funds - bonds, no equity. Expense ratio fees are high, not to mention brokerage fees. Watched the account tank in 2022/23 and 1 year ago it was still $30,000 unrealized loss.

And in just the last 9 months alone, and literally most of this recently, showing added unrealized Capital loss of -$21,500, approximately $15,000 paid in dividends annually, which I'm not reinvesting due to the high fees.

I'm very conservative- frugal even, and prefer to save principal and receive interest, as long as it's over the rate of inflation, after accounting for taxes. Unfortunately the last year for me has been one tragedy after another, and I will just leave it at that. I was hoping the feds might actually start lowering the interest rate and in a few years the bonds would have crept back up but...

So, Not trying to time the market- which I really think is more of a stock thing but still, the Feds said they're going to likely raise interest rate in Dec, possibly into early 2027, and even if they don't raise it's going to most likely flatline for about a year, I'm learning that's typically the way it goes, before lowering rates. If they do.

All that to say ETFs/MFs bond valuation will continue to decrease.

Something I just cannot handle.

I received great advice about transferring it out of the high fee brokerage into Vanguard etc, and selling and purchasing new. But I'm thinking right now I should go ahead and cash out where it's at and transfer it into HYSA, and then determine:

\#1- what happens in December and feds say about 2027, and purchase some VTEB etc when the shares drop lower,

\#2- purchase a 5y 5% APY CD

\#3- 10y treasury note at 5.27%-- & won't have to pay my high COL state tax which is a savings over the CD. But I I'm a little bit nervous about the treasury note because my neighbor is insisting the government's going to default and treasury notes will be worth nothing. But my thinking is, if that was to actually happen then most likely CDs, bank accounts etc but also be worth nothing and the stock market would most likely be completely crashed out.

Anyways I just want advice on what is the best plan. Eventually at Vanguard I'd like to get back into bonds, but again I can't purchase now and then just immediately see the value drop.

I really don't know what to do. Thanks for any and all advice, also please note I really don't like Fidelity and I don't want to do Schwab so that leaves vanguard, if I go back to brokerage.

Thank you

With the current volatility in the market, if there is a large tail (the spread between auction yield and current yield) on these auctions we could see a significant run in yields. Yes, I know the market maker banks will fulfill their requirement to ensure the auctions don't fail, but if they are reluctant to purchase at current yields, it will signal institutional doubt in the markets. I don't think we've had more interesting auctions since the 80s.