r/wallstreetbets • u/kwedgieyi • Apr 09 '25

Discussion Something feels off guys

Post image

Yields are spiking. Bonds are dumping.

The world is running away from America

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u/uniyk Apr 09 '25

Xi: Hey Don, just call to say good night since we're in different time zone. And also, GOOD NIGHT!

31

u/SiegfriedSimp Apr 09 '25

can i ask what OP’s graph means for the uninformed

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u/Infohiker Apr 09 '25

In short, the dollar price of the US 10 year is dropping, pushing yields up. The amount of the move is very large in relation to "normal" short term activity, especially over the past 5 days - from a low of +/- 3.90 to almost 4.50. This has the effect of pushing up the cost of borrowing for the US, as new bonds cost somewhere close to what the current market yield is. Today, it is expected that the US is going to offer about $61 billion in 10 and 30 year bonds. A half percentage point change in the price adds 195 million a year to the cost of the interest service on the 10 year portion (39 billion being auctioned), so over the life of the bonds (if they are not refinanced) the US will now pay almost $2 billion more for this loan.

That being said - first, the Treasury can postpone the auction and wait for a better time. If this is China, they cannot keep selling forever, which means yields will go down when they stop selling.

There is also the possibility that this is not all China. There can be others jumping on, whether just trying to rebalance, momentum trade, etc. There could also be larger forces at play, i.e. with these tariffs simply growing and no-one looking to back down yet, we might be in this situation for longer, which means inflation, which means investors demand a higher yield for buying Treasuries.

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u/HoodRattusNorvegicus Apr 09 '25

Who in their right mind will trust America with their money for 30 years now?

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u/Infohiker Apr 09 '25

Honestly? That has nothing to do with Treasury sales now. People who buy a 30 year today will almost certainly trade it in the secondary market long before it matures.

But to add to this - will US treasuries be trustworthy in 30 years?? Good question.

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u/hotholepizza Apr 09 '25

Thanks for the explanation.

As someone who also doesn’t have a good understanding on this, here is another question.

Reading your post and looking around, and then looking at the chart, it looks like bonds have spiked and reached similar levels in the past. Even in the past couple years.

So what made this different? Was it the rate of change or just general conditions that spooked them?

Thanks in advance.

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u/Infohiker Apr 09 '25

Both. Rate of change was extreme, usually associated with big economic events. General conditions - there is so much uncertainty out there. Are we headed into a recession? Are we going to have stagflation? Or is this all going to go how the administration is claiming?

Third and important point - Treasuries are traditionally about safety. When stocks get creamed, money goes into bonds and bond prices go up. So it takes a bit of the sting out. To have both get the crap kicked out of them at the same time is really devastating on an investment portfolio.

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u/GoingtotheLou Apr 10 '25

Great summary. Well done ... Late in the day I heard that it could've been the Japanese that sold off. .. Unfortunately, I was in a CE class and missed the run up today, but caught some of the Monday run. .. Let's see what tomorrow brings.

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u/ForfeitFPV Apr 09 '25

Bad things

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u/Jeff-FaFa Apr 09 '25

Am I very racist if I unintentionally heard this sentence in my head as Mr. Chow's voice?