Investors Start To Panic As A Global Bond Market Crash Begins

Panic Keyboard - Public Domain

Is the financial collapse that so many are expecting in the second half of 2015 already starting? Many have believed that we would see bonds crash before the stock market crashes, and that is precisely what is happening right now. Since mid-April, the yield on 10 year German bonds has shot up from 0.05 percent to 0.89 percent. But much of that jump has come this week. Just a couple of days ago, the yield on 10 year German bonds was sitting at just 0.54 percent. And it isn’t just Germany – bond yields are going crazy all over Europe. So far, it is being estimated that global investors have lost more than half a trillion dollars, and there is much more room for these bonds to fall. In the end, the overall losses could be well into the trillions even before the stock market collapses.

I know that for most average Americans, talk about “bond yields” is rather boring. But it is important to understand these things, because we could very well be looking at the beginning of the next great financial crisis. The following is an excerpt from an article by Wolf Richter in which he details the unprecedented carnage that we have witnessed over the past few days…

On Tuesday, ahead of the ECB’s policy announcement today, German Bunds sagged, and the 10-year yield soared from 0.54% to 0.72%, drawing a squiggly diagonal line across the chart. In just one day, yield increased by one-third!

Makes you wonder to which well-connected hedge funds the ECB had once again leaked its policy statement and the all-important speech by ECB President Mario Draghi that the rest of us got see today.

And today, the German 10-year yield jump to 0.89%, the highest since October last year. From the low in mid-April of 0.05% to today’s 0.89% in just seven weeks! Bond prices, in turn, have plunged!  This is the definition of a “rout.”

Other euro sovereign bonds have gone through a similar rout, with the Spanish 10-year yield soaring from 1.05% in March to 2.07% today, and the Italian 10-year yields jumping from a low in March of 1.03% to 2.17% now.

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Yelitza Orta Chirinos 3 years ago Member's comment

We shall all move to China

Harish Kanani 3 years ago Member's comment

if it comes true and may come and that would be worst than 1930 depression period harish from india

Joe Erisman 3 years ago Member's comment

For a debit to exist, there must be intent to pay. Anything else is theft. Do you believe there is intent to pay the so-called national debt? attributed to Dave Wilber 2013

Mohammed Karim 3 years ago Member's comment

Growing National Debt with no intention to repay is illegal,but who is going to enforce it! International Court of Justice!M.Karim.

Walter Buller 3 years ago Member's comment

The USA cannot afford higher interest rates. How can they possibly pay the interest on $18 trillion? Won't happen. As the great unwashed make decisions on anticipated rising rates, the tall foreheads, knowing better will take advantage.

James Rogers 3 years ago Member's comment

Not a problem, as the US Treasury sells the bonds to the federal reserve who keeps them off the market. Eventually the government can unwind that debt into zero

Dennis Dragomir 3 years ago Member's comment

Those yields are so tiny the % change is irrelevant. The derivatives are far more deadly.

Admin Nice 3 years ago Member's comment
Good information, thanks for share
SurfTheWorld 3 years ago Member's comment

BRICS countries will soon join the bandwagon. That will include the current favourite India too. India currently seems to be riding high in their new PM Modi's euphoria. Most of the reforms announced are too difficult to achieve in reality or are imaginary. They still remain either oral or on paper. There are no concrete actions taking place and this will soon result in the market crash as investors withdraw.

Navaratna Rajaram 4 years ago Member's comment

Quantitative easing is a camaflouge for printing money. So there is a lot money without value.

Laurent Eliane 4 years ago Member's comment

Central banks (FED, BoJ, ECB, BoE) have played with the devil. Devil are governments which are just kids with credit cards. Pouring money made out of thin air and lowering interest rate till zero or less is a help for the biggest borrower which are unable to maintain their budget, I mean government.

You can play that till investor realize that both, government bond and currency, worth nothing. If Greece were alone (not in the euro zone), this country would have been bankrupted while ago. Some others too.

And USA doesn't have a better place neither Japan.

And when you realize that the paper you have in hand is going into a spiral of distrust, war is in the corner in order to blame the neighbor. And all the violence you would have against your politicians (see the percentage of people who trust their government with the latest pool. The lowest on record!) is diverted to an external (cause as the politicians will say) and as a time of war, you will have to choose your side. Tougher rules will limited your financial movement (see the central banks want to suppress the cash!)

ECB saw that coming as central bank are not stupid. But politicians brought us is this situation with their imbalance budget and are the only responsible for the distortion of the market that will lead in very high wave and breaker. As you said 2008 was a warm up as central banks don't have anymore black powder in their gun.

Robert Cooper 3 years ago Member's comment

I am afraid that I dont understand a word of this article. Please explain in "layman's talk" or better still blue collar working mans language.

Nick Dee 3 years ago Member's comment

I think what the article is saying is: The interest rate offered to investors on government bonds is rising and the face value (market price) of the bonds is falling. This occurs when governments increasingly struggle to find lenders due to a lack of investor confidence. Therefore the governments must improve their offerings to attract bond investors by offering higher interest rates. At the same time, the face value of the bond falls because of reduced demand by investors (since bonds are often sold like an auction). It all points to rising interest rates and borrowing costs, which means it will become more difficult for governments to meet their loan obligations. Currently, the indebtedness of govts is being supported up by low interest rates. Once interest rates rise, governments have higher borrowing costs. Once investor confidence falls, govts find it more difficult to find lenders (bond buyers). This means governments will approach bankruptcy. Further, the current stock market is being propped up by low interest rates, since not only is borrowing money to buy shares cheap but the dividend yield shares pay is very attractive compared to low interest interest rates. As interest rates rise, dividends and shares become less attractive in comparison, causing share prices to fall.

Laurent Eliane 3 years ago Member's comment

By article you mean my comment or the article of Mr.M Snyder. I must agree that I've made some shortcut but by reading twice (may be you have) slowly, this would help.

In summary, the currency war and low int. is a pushing the can till the real war happens. The low int. rate serves the gov. The central banks play with the politicians and the saving account pay the bill. If you are angry against your politicians/gov., they know this fact (pool) and they will divert your "bad feeling" and "violence" against a enemy. A war. Then you will have to choose a side and big restriction will apply (money transfer/control) and the situation of gold will be like we have seen once already. Nobody will be allowed to have some. Gold is a barometer of the trust in a currency. So, if we distrust the politicians and the central bank play with politicians, one day we will distrust the central bank.More deficit....more distrust till a breaking point. Can be USA, Japan or Zimbabwe.

Nobody speaks anymore of the "uncharted" water but here we are.