The 10-year Treasury note yield is climbing and the financial press has decided this means something always breaks. Not sometimes. Not occasionally. Always. Like a f*cking law of physics.
History shows financial calamities occur when rates rise rapidly. History also shows financial calamities occur when rates fall rapidly. And when rates stay flat. And when the Fed sneezes. And when Jupiter aligns with Mars. Turns out markets collapse whenever someone needs to write an article about markets collapsing.
The yield spiked to levels not seen in years. Years. Which years? Doesn't matter. Could be three years. Could be five. The point is your portfolio is about to get murdered because a bond you don't own moved in a direction you don't understand.
Retail traders are panic-selling their tech stocks to buy I-bonds their uncle told them about at Thanksgiving. They're Googling "what is a Treasury yield" and "can bonds go negative" and "how to delete Robinhood account." They're learning that interest rates and bond prices move in opposite directions, a concept so complex it requires a full weekend of YouTube videos to grasp.
Something always breaks when rates rise this fast. Last time it was banks. Time before that it was mortgage lenders. Time before that it was a hedge fund nobody had heard of until it exploded. This time it'll be something new and stupid that everyone will pretend they saw coming.
The technical analysis is clear: if the 10-year crosses above the 200-day moving average of the VIX divided by the sum of all retail tears, we're f*cked. If it doesn't, we're also f*cked but for different reasons that will be explained after the fact.
The real calamity is that someone got paid to write "something always breaks" as if that's analysis and not just the financial equivalent of saying "everybody dies eventually."
Photo by Brett Jordan on Unsplash
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