Long Term Yields Continue To Rise

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We saw Chamath P. post this chart from Bloomberg on X and its actually a good representation of investors actual rate of interest required for parting with capital for longer periods of time. This path of mean reversion shouldn’t be that alarming, rather what was alarming was the decade of sub 2% long-term interest rates. For us that whole period was nothing short of sheer lunacy on the part of our global central banks. They collectively destroyed any sense of actual risk perception by the investor class via their ZIRP monetary programs. This lead to a decade of absorbing all this continued “free money" which was mainly used to cover and offset over time a lot of the malfeasance from the housing crisis.

We know this was necessary to save the failing system borne out of the GFC and sub prime era. However, the question of necessity is a hard one to swallow because on one hand you have many saying they should have let things fail, let things collapse, so we could rebuild. Then there are those whose hands are closest to the monetary spigot, those left in charge of the leverage and money flow and its these same monetarists who are responsible for such over leverage and profit at all cost mentalities.

What seemed to have occurred was that money printing in the form of QE and accompanied by ZIRP (zero interest rate policy) drove asset prices ever higher, while also destroying the purchasing power of the general consumer. This is the real divide and its the fruits that we are reaping right now as the general consumers utility is strangled by money that is inflating away, becoming ever more worthless.

So when we look at the present rates of long term interest, we actually think this is where the long rate should be, its basically at equilibrium toward perceived longer term risk premium. In fact when we look at the US Govt 30y chart we can see this same level 5.09/5.11% was the high back in Oct. of 2023 and we collapsed from there. Its actually very interesting the narrative now given the fact that longer term rates are exactly where they were a year and a half ago!

Here is the current US Govt yield curve compared to the most recent highs and yield lows. We continue to see a massive steepening occur:

When we look at yesterday’s settles in the US yield curves we can see that the 5s/30 yield curve is 93.5bp and the 2s/30 is 107.3bp wide. We expect the 5s/30 to reach a +250bp by the end of this current rate cut cycle:

As far as the US 10Y we have now moved our pivot line up to 4.40% and a wall of resistance seems to be right here at 4.62/4.65%:

These higher rates should put a damper on the US and global equity advances for now and profit taking and consolidation does make sense. We know there was a 20y bond auction yesterday, didn’t go so hot, but that was just the excuse to use to hit equities, but that was more narrative than substance from our purview. We feel that the rise in Japanese yields is concerning, but that too has been decades in the making and we believe the BOJ has enough bullets to manage an orderly increase there. The BOJ can’t wait for the day the FOMC starts to cut rates again, that we are certain!

Ok as far as yesterday’s action let’s highlight Bitcoin and Monero once again as these are the two Digital Assets that Magnelibra focuses upon, Bitcoin is the Gold standard reserve, and Monero is the standalone privacy coin, scalable for everyday transactions. Here are the updated charts:

Bitcoin is nearing our weekly resistance level at $112.5k and will see if it can hold near there into the weekends close or if it sees some profit taking, but overall Bitcoin is +4.73% on the week:

As far as Monero, the top privacy coin, by which we feel will provide the necessary function of private transactions for the digital future has seen some very chunky real buying the last 2 days. Monero blew past our $377 weekly resistance trading above $400 now and +18.45% on the week:

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