By David Stockman
INTERNATIONAL MAN — After decades of unhinged money-pumping, the Fed has driven real interest rates so low that there are no more bond investors — just traders and suckers.
The former have driven the 10-year yield in recent days to just 150 basis points in nominal terms (and deeply into the red in real terms in the face of surging monthly inflation numbers), because they are “pricing-in” one thing and one thing only: simple and supreme confidence that the spineless fanatics who occupy the Eccles Building will keep buying $120 billion per month of government and quasi-government debt.
Real Yield on 10-Year UST, 1985–2021
These are no longer even “markets” by any historical sense of the term. The bond markets and the stock exchanges are just mindless gambling casinos.
Inflation-adjusted yields had previously meandered around the 10%+ level for several decades. But no more. The real yield is so low that yield starved fund managers are throwing caution to the wind and setting themselves up for massive future losses. […]