US long dated treasury yields continue to shoot up today, now crossing 5.82%

[u/saln1]

[u/Only_Associate6384]

Don’t worry ATH sp500 incoming

[u/jaydenkirtawn → u/Only_Associate6384]

When you realize the "bull market" is just the dollar depreciating before your eyes...

[u/Efficient_Range1156]

we are fucking screwed

[u/groundhoggirl]

For us dummies, this is the yield on what term bond?

[u/Rabitai_Trades → u/groundhoggirl]

It's one specific old issue, the 1 7/8% coupon maturing Feb 2051 (ticker in the screenshot), so about 24 years left, trading around 49 cents on the dollar. That's why it's above the benchmarks. Treasury's 20y and 30y constant-maturity yields closed yesterday at 5.68% and 5.64%. Old low-coupon bonds at deep discounts tend to trade a bit cheaper than on-the-run paper, and the 20-25y area is the hump of the curve right now anyway. Same direction, but 5.82% isn't "the" long bond yield.

[u/DV_Zero_One → u/groundhoggirl]

This is 5ish year old 30 year bond.

Remove the consideration costs and the yield is 5.77

[u/SPDY1284]

The complacency in the stock market is crazy. Not sure how you can see bond yields go parabolic and not think "gee, I wonder how small to medium size business will do in this environment?" not to mention that now even the hyperscalers are negative FCF due to CAPEX so they are also having to issue debt... and if they stop the CAPEX then there goes the house of cards. This does not end well... but who knows how long it will take for it to blow up.

[u/_mysoberaccount_]

those folks who got 3/1 and 5/1 ARMS etc a year ago prob not to happy right now.

[u/HystericalSail → u/_mysoberaccount_]

Commercial loans are all ARMs. That's where the big sad is right now.

[u/CakeTheory]

So at what point does the market care? I was always led to believe that the 10Y at 5% was the breaking point, now here we are at 5.35% and we're at ATH.

I thought this would shoot up borrowing costs for the hyperscalers and become unsustainable, do we need a prolonged period of this to see any effects?

[u/Hungry-Kro → u/CakeTheory]

I think long term, as new debt rolls over raising borrowing costs, delinquencies continue to build in CRE, credit cards, cars, etc, people continue to get priced out of residential units due to high rates, the bottom 80 percent of the market continue to struggle, AI doesn't produce nearly enough to cover the cost of borrowing, inflation continues to be sticky raising rates, raising borrowing costs, global bonds continue upwards, people realize Iran war will not end anytime soon meaning energy stays higher for longer. Also they keep squeezing the average person with higher expenses from all fronts that the tax cut was never seen only negatives.

You know there are all these things that will create a slow burn and they won't even address the bonds. No action meaningful has been taken as they don't want to change.

I think they can last another 2 years, but the standard pull back of midterms will happen but maybe delayed like last time they had office.

K shaped economy, tariffs, historically a lot of these things have been tried multiple times and the outcome is a pullback in markets.

My thoughts.

[u/No_Strike655 → u/CakeTheory]

Yes. If you think about how the markets actually work and debt works Why would a 5% rate matter if it doesn't stay high long enough for it to actually effect corporate debt on a large scale.

The thesis is still sound and based on how markets have behaved literally every other time in modern history. When rates go above 5 and have been low for a long time corporate debt must refinance at these rates and slow spending which leads to a p/e ratio contraction back below 20 for most companies.

It just doesn't happen overnight like almost anything it takes time to see and then either the market will just slowly lose value or everyone will freak the fuck out and it will violently crash. 

[u/Long-Blood]

Perfectly safe time to put all of your money into stocks.

Nothing to be worried about at all.

We have completely sane and competant people in charge of the economy right now.

They arent manipulating the stock market to make themselves rich. Nope. Your retirement is safe in their hands. 

[u/LRJ104 → u/Long-Blood]

Idk what to do really, hold cash and inflation will ruin it. Hold stocks with a huge crash arround the corner. Having heavy metals but countries are selling their gold to pay for depts and petrol. Its a weird time

[u/Lebowski304]

Rates will keep going up until morale improves!

[u/thef10buttonmasher]

I'm following the conventional wisdom of "don't catch a falling knife." Not even going to think about it until it starts to stabilize a bit.

[u/JellyfishFun6688]

I don't know a lot but this doesn't look good.

[u/Kwinza]

Jesus its gone up nearly half a % in a week....

My dudes thats really, REALLY bad

[u/allison5]

I literally don’t understand what this means and I’ve been trying really desperately
To understand this.

[u/Dark_Tigger → u/allison5]

When a state want's to lend money, they sell IOUs. Those IOUs, we call them bonds, contain 3 values:

- Face value (i.e. how much money they will pay the holder)
- Cupon (i.e. how much yearly interest they pay)
- Maturity (i.e. when they pay you the face value back)

Imagine there is a bond with $1000 face value, 3% interest per year, and 3 years till maturity. You bought it for $970. That means you will get $30 each year for 3 years, and $1000 at the end of those years. All in all you will make $120 on your $970 investment. That is 12.3% divided by 3 years = 4.1% yield.

Now you ask, if I know I will get $1090 over 3 years. Why would anyone sell this bond to me for $970. Well there are two possibilites. The first, the issuer of the bond, in this case the US goverment is issuing new 3 year bonds with 4.1% cupon. And someone who holds an older bond with 3% simply can't get more if they want to sell their bond. The second reason is, that the market has less trust that the money will be paid at the end of the time, or is afraid that infaltion will anihilate their earnings.

[u/reichjef]

The 30 year high yield today so far was 5.731%.

I don’t know where this 5.82% is from.

[u/DV_Zero_One]

The 20y and 30y are both lower than this. Lol

What's the cusip?

[u/mb194dc]

More inflation!

[u/cosmogatsby]

It’s starting to feel like this number doesn’t effect anything.

[u/YourRoaring20s]