‘Investors Are Running out of Havens’ — Erratic Behavior in US Bond Markets Points to Deep Recession, Elevated Sovereign Risk

The yields on U.S. Treasuries with long maturities have been volatile this year. This week, the 10-year Treasury yield surpassed 3.5% for only the second time in a decade. The Fed's 75bps rate hike saw 10-year Treasury notes rise to 3.642%, while two-year Treasury notes rose to a record high of 4.090% after the Fed raised their base points rate by 75bps. The curve between the 10- and 2-year notes suggests that the odds of a deep U.S. depression have increased. Recent reports indicate that bond traders have been "confronted by the wildest volatility in their careers strong>

2 Quarters Negative GDP, Red Hot Inflation and Extremely Volatile TF-Notes

After the second quarter of negative gross domestic products (GDP) for the third consecutive quarter, a number economists and market strategists stated that the U.S. was in recession at the end of July. The Biden administration disagreed, and the White House published a White House article that explains the National Bureau of Economic Research's definition of the beginning of a recession. Red-hot inflation is causing havoc in America, and market analysts believe that rising prices are also pointing to a recession.

The yield curve is one of the most important signals. It measures short-term and long-term debts by comparing the yields on two-year Treasury notes. An inverted yield curve, according to many analysts, is one of the most reliable indicators that a recession is imminent. Although the inverted yield curve may seem unusual, it is not common in 2022. This is because bond traders have had to deal with crazy trading conditions this year. The yields of the two-year and 10-year Treasury notes (T-notes) broke records this week. On September 19, the 10-year T note surpassed 3.5% for the first-time since 2011. The two-year Treasury note (T-note) reached a new 15-year high of 3.97% on the same day. This was the highest level since 2007.

Professional traders believe that bond market volatility is a sign that the U.S. economy is weakening. However, they also claim that bond markets have been fun and exciting. Bloomberg's authors Liz Capo McCormick and Michael MacKenzie both say that bond markets are "characterized" by "sudden and sweeping daily swings that are often a favorable environment to traders and dealers. Paul Hamill, head of global fixed-income, currencies and commodities distribution at Citadel Securities, agrees with the Bloomberg reporters

Hamill stated that "We are in the sweet spot of rates being an interesting market with clients being excited about trading," on Wednesday. "Everyone spends all day talking with clients and talking to one another. It's been great fun."

Sovereign risk rises, yield curve between 2- and 10-year T-Notes slips to 58bps — BMO Capital Markets analyst says 'Investors are running out of Havens'

Not everyone believes that the volatility in bond and equity markets is fun and games. Todd Horwitz, chief strategist at bubbatrading.com said recently that he expected to see a "50-60 percent haircut" in equity market. Market strategists are concerned about the looming economic problems because of recent U.S. Treasury yield volatility fluctuations. Michael Gayed (Lead-Lag Report publisher, portfolio manager) warned that an unstable bond market could lead to a sovereign debt crisis as well as "several black Swans" during the first week in September.

Research and empirical evidence have shown that a volatile U.S. Treasury market is bad for countries with U.S. Treasury notes and dealings with large debt issues. Because U.S. Treasury notes can be leveraged for restructuring purposes or as a resolution tool, countries that use these financial instruments for debt restructuring may suffer sudden and sweeping daily swings. In a multitude of countries around the world, sovereign risk has increased since the Covid-19 pandemic and massive U.S. stimulus programmes.

MacKenzie & McCormick, Bloomberg's authors, quoted Ian Lyngen from BMO Capital Markets. The analyst said that there is less of what are called financial safe havens. Lyngen stated that this week would be "a defining week in Fed rate expectations between now & the end of the calendar year." Lyngen spoke just before the Fed increased the federal funds rate 75 basis points. Lyngen noted that investors don't want to wait long for the market. Investors are running out of options as we move to an aggressive monetary policy stance.

The yield curve between the T-notes of the two-year and 10-year-olds fell to 58bps on Thursday. This is a record low since 1982, when it was at its lowest point. The yield curve between the T-notes of the two-year and 10-year is at 0.51% as of the writing. The crypto economy has fallen 0.85% in the last 24 hours, and is now at $918.12 million. The price of gold per ounce has fallen by 0.14 percent and silver by 0.288%. On Thursday, equity markets opened lower as all four major indexes (Dow S&P500 Nasdaq, Nasdaq and NYSE) suffered losses.

What are your thoughts on the unpredictable bond markets of 2022? And the signals that indicate the economy and safe-havens are not reliable these days? Please comment below to let us know your thoughts on this topic.

Frequently Asked Questions

Can the government take your gold

Because you have it, the government can't take it. It's yours, and you earned it by working hard. It belongs to your. This rule may not apply to all cases. You can lose your gold if you have been convicted for fraud against the federal governments. Your precious metals can also be lost if you owe tax to the IRS. However, if you do not pay your taxes, you can still keep your gold even though it is considered property of the United States Government.

How much gold can you keep in your portfolio

The amount you make will depend on the amount of capital you have. A small investment of $5k-10k would be a great option if you are looking to start small. You could then rent out desks and office space as your business grows. You don't need to worry about paying rent every month. You only pay one month.

It's also important to determine what type business you'll run. In my case, I am running a website creation company, so we charge clients around $1000-2000/month depending on what they order. This is why you should consider what you expect from each client if you're doing this kind of thing.

Because freelance work pays freelancers, you won't likely get a monthly income if you do freelance work. This means that you may only be paid once every six months.

You must first decide what kind and amount of income you are looking to generate before you can calculate how much gold will be needed.

I recommend starting with $1k-$2k in gold and working my way up.

What Does Gold Do as an Investment Option?

Gold's price fluctuates depending on the supply and demand. Interest rates can also affect the gold price.

Gold prices are volatile due to their limited supply. In addition, there is a risk associated with owning physical gold because you have to store it somewhere.

How much tax is gold subject to in an IRA

The fair value of gold sold to determines the price at which tax is due. If you buy gold, there are no taxes. It's not considered income. If you sell it after the purchase, you will get a tax-deductible gain if you increase the price.

You can use gold as collateral to secure loans. Lenders seek to get the best return when you borrow against your assets. This usually involves selling your gold. However, there is no guarantee that the lender would do this. They might just hold onto it. They may decide to resell it. Either way, you lose potential profit.

To avoid losing money, only lend against gold if you intend to use it for collateral. It's better to keep it alone.

What proportion of your portfolio should you have in precious metals

This question can only be answered if we first know what precious metals are. Precious elements are those elements which have a high price relative to other commodities. This makes them very valuable in terms of trading and investment. Gold is by far the most common precious metal traded today.

There are many other precious metals, such as silver and platinum. The price of gold tends to fluctuate but generally stays at a reasonably stable level during periods of economic turmoil. It is also unaffected significantly by inflation and Deflation.

In general, all precious metals have a tendency to go up with the market. But they don't always move in tandem with one another. For example, when the economy is doing poorly, the price of gold typically rises while the prices of other precious metals tend to fall. This is because investors expect lower interest rates, making bonds less attractive investments.

Contrary to this, when the economy performs well, the opposite happens. Investors favor safe assets like Treasury Bonds, and less precious metals. Since these are scarce, they become more expensive and decrease in value.

It is important to diversify your portfolio across precious metals in order to maximize your profit from precious metals investments. Furthermore, because the price of precious Metals fluctuates, it is best not to focus on just one type of precious Metals.

What is the best precious metal to invest in?

Answering this question will depend on your willingness to take some risk and the return you seek. Although gold has been considered a safe investment, it is not always the most lucrative. For example, if your goal is to make quick money, gold may not suit you. If patience and time are your priorities, silver is the best investment.

If you don’t want to be rich fast, gold might be the right choice. If you are looking for a long-term investment that will provide steady returns, silver may be a better choice.

Can I buy Gold with my Self-Directed IRA?

However, gold can only be purchased with your self-directed IRA. To do so, you must first open a brokerage account at TD Ameritrade. If you already have a retirement account, funds can be transferred to it.

The IRS allows individuals to contribute up to $5,500 annually ($6,500 if married and filing jointly) to a traditional IRA. Individuals can contribute up to $1,000 annually ($2,000 if married and filing jointly) directly to a Roth IRA.

If you do decide that you want to invest, it is a good idea to buy physical bullion and not in futures. Futures contracts can be described as financial instruments that are determined by the gold price. These financial instruments allow you to speculate about future prices without actually owning the metal. You can only hold physical bullion, which is real silver and gold bars.


  • Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
  • Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
  • The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
  • (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
  • If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)

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How To

Investing gold vs. stocks

Investing in gold as an investment vehicle might seem like a very risky proposition these days. This is because most people believe that it is no longer economically profitable to invest gold. This belief stems from the fact that most people see gold prices being driven down by the global economy. They think that they would lose money if they invested in gold. However, investing in gold can still provide significant benefits. Below are some of them.

Gold is one of the oldest forms of currency known to man. It has been used for thousands of years. It has been used as a store for value by people all over the globe. It continues to be used in South Africa, as a way of paying their citizens.

When deciding whether to invest in gold, the first thing you need to do is to decide what price per gram you are willing to pay. It is important to determine the price per gram you are willing and able to pay for gold bullion. If you don’t know the current market rate for gold bullion, you can always consult a local jeweler to get their opinion.

It's worth noting, however, that while gold prices have fallen recently the cost of producing gold is on the rise. The price of gold may have fallen, but the production costs haven’t.

You should also consider the amount of your intended purchase when considering whether you should buy or not. For example, if you only intend to purchase enough to cover your wedding rings, it probably makes sense to hold off on buying any gold. If you plan to do so as long-term investments, it is worth looking into. It is possible to make a profit by selling your gold at higher prices than when you purchased it.

We hope that this article has helped you gain a better understanding and appreciation for gold as an investment option. It is important to research all options before you make any decision. Only after doing so can you make an informed decision.

By: Jamie Redman
Title: ‘Investors Are Running out of Havens’ — Erratic Behavior in US Bond Markets Points to Deep Recession, Elevated Sovereign Risk
Sourced From: news.bitcoin.com/investors-are-running-out-of-havens-erratic-behavior-in-us-bond-markets-points-to-deep-recession-elevated-sovereign-risk/
Published Date: Thu, 22 Sep 2022 16:00:40 +0000

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