The Rightful Return of Bond Vigilantes

This was supposed to be a period of fiscal sanity. It's turning into the same fiscal nonsense that we're used to out of Washington.

Good morning:

We’re back to bond risk again this morning… How fast the narrative shifts.

I’ll discuss it when we go live at TheoTrade at 8:45 ET (and I’ll be appearing on Stansberry’s Investing Hour on Monday). Click the link above to join me.

The House Ways and Means Committee had passed a bill that's projected to increase the federal deficit by $3.8 trillion (1.1% of GDP) through 2034.

But that’s just a conservative guess...

It could expand much more. Remember… this was supposed to be a period of reducing budgets and cutting costs. Oh well… back to our regularly scheduled program of currency debasement and higher gold prices.

I don’t get angry about it. This is the game. People fall for it over and over…

Meanwhile, the bond vigilantes are taking notice.

Yesterday, the 10-year Treasury yield hit a three-month high at 4.54%, and 30-year Treasury bonds climbed to nearly 5%. These were the same levels we saw in April when "yippy" investors revolted against Trump's reciprocal tariffs.

Fiscal hawks are alarmed (although I’m sure there are stronger words there).

Stephen Jen, a bond investor heading Eurizon SLJ Capital, called the growing U.S. debt "a disaster" in the making.

He’s comparing the situation to Liz Truss's disastrous UK budget, which led to the 2022 GILT Crisis and her subsequent term as British Prime Minister. "It may be necessary to have a repeat of what happened to Liz Truss to force everyone to do the right thing," he told Bloomberg. I agree…

House Republicans remain divided over the bill that includes $5 trillion in tax breaks alongside $1.5 trillion in cuts to Medicaid, food stamps, and green energy programs.

Rep. Chip Roy from Texas described the disagreement as "a gulf" and indicated that "a significant number" of conservatives couldn't support the bill in its current form.

I want to emphasize that this represents the most significant macroeconomic challenge of the year ahead.

We have trillions of dollars to refinance at much higher rates, which will impact our liquidity.

The Fed is already engaging in Quantitative Support with direct bond purchases (but claiming it’s not QE). They’ll find another name for a program to help keep pumping capital in the system. However, I am telling you now that this is the crisis for later this year or next year.

This wall is coming… and the bond buyers are very upset (as they should be) with this increasing risk.

Now… let’s dig into the worldview that you can’t unsee…