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Gold reserves measured in years of interest on debtThis chart depicts the US gold reserves divided by the interest on debt. The interest on debt is calculated as a proxy by multiplying the 10 year interest rate with the total federal debt. Whether this is accurate or not is not so important as we just want to compare this ratio with its historic values. It is important to note that official US gold reserves have remained unchanged since the closing of the gold window in the early 70's. This metric has risen and fallen quite a bit. First this metric rose during the stagflation of the late 70's. The gold reserve of 262 million ounces hit a high of 222 billion whilst the yield did a first peak to 13.5% with the debt, barely over 900 billion our proxy interest was about 120 billion and thus the gold reserve was almost able to pay it off twice. It is my belief that the rise in gold prices and with it the value of the US gold reserves is what cooled the debt market causing it to revert course into a 4 decade long bull. Interest rates plummeted, federal debt rose faster, and gold also went down in price. At the turn of the century gold found itself trading at 290 dollar, the gold reserve reduced to 76 billion, the US debt grown to close to 6 trillion and the treasury rate reduced but at times peaking to close to 7%, the ratio hit a low of just 0.2 years of interest on debt that could be paid by the gold reserve. The next 11 years were marked with a continuing of the bond bull run whilst also gold rallied to a new all time high. By 2011 and 2012 the ratio hit close to 2 years again thanks to gold trading at 1800 and the yield as low as 1.5%. Since then, rising yields and declining gold prices have hit this ratio back to about the middle range. Technically, not much can be said where we go from here so we'll have to take a look at the fundamentals. While multiplying the 10yr with the debt is a nice workaround to picture the interest on debt by tradingview the real interest on debt is more difficult to compute. The US debt consists of bonds with various denominations running from 30 year bonds to bonds with maturities of less than 1 year. This means that of the 30 year bonds, most have been issued in the 1990's and 2000's and the interest paid on them is the yield of those bond at the time of issuing. In fact the 30 year bonds that are maturing today have been issued exactly 30 years ago with a yield of almost 9%. When they mature, they are rolled over in new bonds that -even if we had a small tick upwards in the last couple of years) - have a significantly lower interest of just over 2%. The same holds for 10 year bonds which 10 years ago had a yield of 3-4% vs 2.6% today. This effect is what caused the actual interest on debt (www.treasurydirect.gov) to not even double from 214 billion/year in 1988 to just 402 billion/year as recent as 2015 whilst the federal debt exploded over 20 fold from 900 billion to 19 trillion dollars. However, all good stories must come to an end and this one is no different. The bond market has been topping out for the better part of a decade now and yields have seen some upward momentum. This has meant that a lot of treasury auctions saw the treasury forced to roll over their 5, 3 and 1 year bonds into new bonds with a higher yield than the old one. Whilst the treasury can steer and man-oeuvre a little bit by opting to sell short term bonds when yields are high and long term bonds when yields are low there is ultimately no escape from market reality. This has become clearly evident from the last prints of interest expenses on debt outstanding that have risen with 9.1% per year for the last 3 years and show now signs of abating with another 8.6% rise for the first five months of this financial year. This is in stark contrast with the 2.36% increase of the previous 27 years. I would venture to guess that if nothing is done on a policy level to tackle the accumulating debt and rock the bond markets gently to sleep once more we will enter a spiral of increased debt issuance met with stable or declining demand which will push up yields which in turn will create the need of issuing more debt. This viscous circle will only end through a spectacular rise in the price of gold. In a previous analysis I had already outlined a possible scenario of the 10 yr yield hitting its magnet level of 7% by 2025. Given the current debt of 22 trillion, which is increasing at 1 trillion a year, it seems likely that by the start of 2025 we will be looking to a national debt in excess of 30 trillion dollar. At a ratio of 1.8 for our gold reserve to interest expense on debt ratio we learn that the US gold reserve should be valued at 3.8 trillion dollars. For this gold would need to rise to at least 14500 dollar. If for some reason the debt markets stay irrational for a very long time before going in overdrive it could very well be that the US ends up with a 50 trillion dollar debt by 2035 when this scenario fully comes to fruition. In such a scenario I see no reason to expect that the 10 yr yield would only stay limited to 7% but could easily hit the 1980 value of 13.5% again. In order to calm the debt markets at these yields and these levels of debt gold would have to rise to about 45000 dollar to repeat the 1980 scenario. Hold on, its going to be a hell of a ride.
FX:XAUUSD
by fatjohn
1
TWO is a good REIT to considerI like this name because of its massive dividend yield. This isn't uncommon in REITs, but TWO carries one of the larger yields in the industry. Their financial statements are healthy and the primary risk here is the state of interest rates in the US. My harmonic analysis shows two sin waves: a red and a pink. The red represents a macro trend wave and until the FED raised rates incessantly in 2018 this curve fit well to the price action. However, we can see that the trend was disobeyed mid to late 2018, something I attribute almost entirely to the interest rate risk every investor was fretting about at the time. REITs were hit hard during this period. The pink wave represents a mico-trend and still fits very well with the price action. Rates have cooled significantly since their 2018 highs, and so I believe this ticker has room to the upside. This is a long term play, so if you don't intend to store this capital for 3+ years then avoid this name as the volatility for day trading and options plays is relatively non-existent. However, with a 10+ year horizon one can capture an outstanding dividend yield while adding to positions at the troughs of the sinusoidal pattern. Doing this successfully will likely bolster dividend yields with capital gains. The primary risk here is that US interest rates are still near historic lows. Unless the FED sees need to continue quantitative easing the path of least resistance is up. This bodes ill for REITs and could invalidate the $5 trading range I've highlighted. Until then, however, I see no reason why this name would deviate from its historic price pattern. As always, scale in near the lows.
NYSE:TWO
by HyerQuality
Interest Rate Spikes Precede CorrectionsNotice the downward trend in the US10Y since the 80's, while government, corporate and consumer debt has exploded to all time highs. The achilles heel of massive debt levels are high interest rates, which end up causing slowed growth and economic contraction. With ever higher levels of debt, the level of interest required to put the economy in pain falls over time - thus why we see crashes and corrections even as the US10Y spikes to levels far below the historical average (~6.18%). Last year we popped above the "danger zone" trend line and we saw what happened. Watch out for interest rate spikes, it can save your ass.
SP:SPXEducation
by Derivati_Capital
3
US 10Y Yield - towards 3%Technically a bullish yield scenario is building up. The implications are interesting for Stocks and FX both. - Selling US bonds -> weakening effect on USD - Yields climbing up -> risk-on sentiment, equities up - Yields climbing up -> markets reevaluate Fed message and start to reprice rate hike -> USD supportive Contradictory messages are visible from the bond markets, the reason for yields moving up will be crucial (FED pricing, or bond selloff) Action: Correlation between FX and Bond market is dubious, check eco data instead for clues. Weaker US data -> more dovish Fed -> weaker DXY
TVC:US10Y
by RobertSoos
Yep, lower mortgage rates for 201910 year yield is dropping with a quickness to match only stock sell-offs. Might be a good time to look at some REITS? Rates look to me like they will decline for the next 2-3 years. Yields hit .382 fib support today and bounced very slightly higher. News of the end of the Gov shut down could provide the catalyst needed to send yields back to .236 level (2.80%), especially if combined with "favorable" "CHINA!" news. Such a bounce will be temporary and yields will continue to drop lower. Zoom out and you can see we're on a 35+ year trend of lowering rates. Next support fib is 2.29 followed by a more significant one at 2.06. Strongest support at 1.75 where we have fib, gann fan and support/resistance trends all converging.
TVC:US10Y
by jdharward
2
EUR/JPY DE10Y vs. JP10YIncreased spread between Germany 10-year bond yield vs Japan 10-year yield could indicate a slide in the Euro against the Yen. Even though the yield is higher for European bund, the risk appetite is declining, while the global economy is projected to have a slow growth rate through out 2019. This means that investors seek safe heaven assets like the Yen and JP10 bonds, that’s why we could see lower yield on the JP10Y. While the bond buying program from ECB is slowly decreasing - will increase the DE10Y yield. Maybe we could see a negative JP10Y yield this year, as it happened in 2016 and was the reason behind the slump of the pair from 128 to 111. I see a weak risk appetite, more demand on JP10 or even lower Japanese bonds, and a higher supply of European bonds. If the risk appetite is weak, we will also see a lower S&P and positive correlated indices with the S&P lower. European stocks is a risk in 2019 = less demand for the euro. If the risk sentiment is changing, then we could see a higher EUR/JPY. I am closely monitoring this factor. A range throughout 2019 of the pair is also possible. Holding shorts, and will add more if we break 123,400 and 121,500.
Short
by Fx-AlphaStrats
Yields and Equities at critical junctureTop black line is the major resistance line. If yields break this, the US is majorly fucked and signals an end to "cheap money" at a time with debts and unfunded liabilities at all time highs. Yellow line is the support line of the 37+ year channel going back to the early 1980s. Red line is the more recent resistance line which began in June 2007 at the eve of the GFC. The election of Trump provided the catalyst required to push yields above this resistance line. A year later, the 2017 tax cuts and more specifically, deficit spending provided the catalyst needed to push yields to firmly break out of this pattern and test the long term resistance. Tax reform resulted in nearly year long sugar high in equities and rising interest rates for all. Resistance proved too strong, for now. What to expect going forward: In any event, long term yield will likely only go lower. Yields breaching the long term black line, at a time of all time high debt, means much pain and could even lead to war, so will likely be avoided at all cost. The end game is zero and negative. Currently, yields are resting more or less, exactly at the .786 fib support line; currently 2.85%. As support lines go, this one is pretty weak and won't need much of a catalyst to break and send yields lower to 2.52% What could send yields back up to test 3.26? An announcement of a trade deal and/or removal or decrease in tariffs could provide the catalyst needed to send yields back to 3.26 and possibly breach black line of death. This would be bad long term and any such deal will likely prove short lived. The US and China seem to be on an unstoppable path to eventual conflict/war. More likely, no deal is reached and trade relations continue to deteriorate sending both equities and yields lower. Or, such a deal is short lived and fails. 10 year reaches 2.52% and from here has an opportunity to crash straight to 2.07% or bounce back to 2.80-2.85 before ultimately going down to 2.07% (and below) anyways. Sorry. In short, no matter how one looks at it, yields are either going to continue their 37+ year trend LOWER or we're going to break that black line of death and then the US will REALLY begin to feel the (debt) squeeze. RSI suggest we will eventually test that black resistance line, at some point in the future.
TVC:US10Y
by jdharward
Spread national US bund 3 and 5 years, medium signal An inverted yield curve means a market situation in which the yields offered, for longer maturities, are lower than the yields of the short-term portion of the curve (in this case the "short" is usually considered as the rates up to 2 years). This is a situation that is at first sight counter-intuitive. Those who have studied Finance will certainly remember the mantra for which 1 euro today is better than 1 euro tomorrow; an inverted curve, instead, says exactly the opposite: better 1 euro tomorrow. This means that investors, on average, are moving towards long-term investments, despite lower yields than short-term investments.
TVC:US05YShort
by albertus76
Interest rates to rise and top out a year from now?Looking at the 10yr treasury as a gauge for the overall rate environment and the revised GDP data, I'm predicting the US will see rates rise for roughly the next year before coming to a peak around 3.75% on the 10yr before beginning a new wave lower, just in time for the coming recession in the summer of 2019. Expect to see 30 year fixed US Mortgage rates above 5% for 2019 with a peak level of 5.5% to 6%. Central bank action could delay peak yields to the summer of 2020, ahead of US Presidential election. History predicts a recession occurring within 18 months (or less) of short + long term yields inverting. I expect we'll see this inversion of the yield curve occur in December 2018, following what will be the Fed's 4th rate hike of the year. This next recession will be a real doozy, likely putting 2008 to shame with the Fed likely responding with (what else?) QE on steroids, sending rates down to (or below) the lows witnessed in June 2016 following "Brexit".
TVC:US10Y
by jdharward