20-year US Treasuries are down ~38% since 2020, the worst drawdown in over a century
What was once seen as the world’s “safest” asset has instead delivered stock-like volatility. Deficits, inflation, and weak demand are forcing long yields higher. Source: stockmarket.news on X
Credit spreads have rarely been this tight.
So why are investors in corporate bonds undeterred despite the significant tightening in risk spreads (chart below)? Two reasons: 1) Higher yields ("risk free" component + spreads 2) More and more investors see corporate bonds as less risky than sovereign bonds Source chart: Bloomberg
France has done nothing to stabilize its fiscal deficit & debt/GDP.
It already has the highest tax burden in Europe. These higher taxes would throttle growth potential even more. With its political paralysis it won’t cut spending neither. Next confidence vote is coming. And OAT spreads seem to start reflecting that. Source: Michel A.Arouet, INSEE
Prime Minister Bayrou is calling for a confidence vote, risking another collapse of the French government.
OAT-Bund spread keeps widening Source: Blokland Research
The German yield curve is steepening.
The gap between 2-year and 30-year bond yields has widened to its highest level since 2019 — driven by growing concerns over a looming surge in German government debt. Source: Bloomberg, HolgerZ
Japan’s 30-year bond yield has spiked to 3.18% - the highest level on record.
A preview of what’s coming for the US if we they don’t get our deficit/debt spiral under control ? Source: CNBC
US Treasury 10y/30y yield curve is at the highest level since September 8, 2021.
Source: Augur Infinity
The ratings agency kept the U.S. at AA+/A-1+ with a stable outlook.
“The stable outlook indicates our expectation that although fiscal deficit outcomes won’t meaningfully improve, we don’t project a persistent deterioration over the next several years,” S&P said in its statement. The firm pointed to broad economic resilience, policy continuity, and strong revenue streams, including what it described as “robust tariff income” - as offsets to fiscal slippage stemming from legislative changes. While acknowledging concerns that tariffs could dampen business confidence, growth, and hiring while spurring inflation, S&P said revenue gains would help balance the ledger, WSJ reports. The agency’s decision comes against the backdrop of a $5 trillion increase in the debt ceiling and projections that net general government debt will approach 100% of gross domestic product, driven by “structurally rising non-discretionary interest and aging-related expenditure.” S&P cited several strengths underpinning the rating, including the resilience of the U.S. economy, effective monetary policy, and a deficit trajectory that, while elevated, isn’t accelerating. Yet the firm also noted risks... “Bipartisan cooperation to strengthen the U.S. fiscal profile - namely to meaningfully lower deficits and tackle budgetary rigidities - remains elusive,” S&P said. Below is a chart of USA sovereign credit risk Source: zerohedge
