Dominos
Macro Perspectives
The U.S. 10-year yield traded up to 4.32%. Let's revisit the events that have occurred over the past year, when the 10-year has traded above 4%.Â
We've stepped through each of these events many times in my notes. Suffice to say that this level of the U.S. 10-year yield, the world's most important interest rate (the anchor for global rates), has revealed vulnerabilities in the global financial system - vulnerabilities that were created from the zero interest rate and QE world (of much of the past 15 years).
For perspective, the last time the 10-year yield traded above 4.30% was last October - on the day the Bank of Japan intervened to both defend the yen, and relieve the pressure in global interest rate markets.
The time before that was 2007, when:
U.S. government debt load was 62% of GDP - currently it is more than double that burden.
Fed's balance sheet was $800 billion - currently it's over $8 trillion.
Clearly, we're in uncharted territory. Will China's highly-indebted property developers be next? It's looking more likely. What has been a slow moving crisis (over years), stemmed by Chinese government intervention along the way, has accelerated over the past week.
The dominos appear to be lining up.