Bond Market Vigilantes Will Ensure a Fed Shift Back to QE

Bond Vigilantes Ensure a Fed Shift Back to QE

BY BILL GRIFFO

October 9, 2023

Hey Income Hunters,

Back in the 1980's when inflation was rising and policy makers were manipulating the markets ...? a new voice arose to protest these policies and take matters into their own hands.

This group was known as the Bond Vigilantes.

Bond Vigilantes are bond traders who sell large amounts of bonds to call BS on the Treasury for lying about the state of the economy.

I was trading bonds for Bear Stearns in the 80's with a massive edge in the markets having insight into the true agenda of the Treasury.

Today, I am able to write about this and help traders see the truth to what is going on behind the scenes so you can gain that edge for yourselves.

The manipulation and deceit by Janet Yellen is worse today than during the 80's and I'll lay out why in this post below.

Higher Rates, Recession, then QE on Steroids

As you can see below in the '80s bond vigilantes pushed rates massively higher as inflation rose:

I am calling for a similar result for markets in the weeks/months ahead ... Yellen will be forced to boost bond prices using Treasury General Account (TGA) funds held at the Fed.

The result is much less clear today and in my opinion will be much worse than the '80s for 3 main reasons:

1. ?In the 1980s debt was much, much lower so the Fed was able raise rates to 16% because debt was 30% of GDP. Today with debt/GDP at 130%, raising rate much higher risks government insolvency.
2. Today, foreigners own many trillions more of USD-denominated assets and must sell them to boost their own currencies, which can crash the UST market.
3. The BRICS network is united in their quest to build an alternative neutral reserve currency ... Collectively they can sell enough bonds to break the UST market in New York minute.

The Debt Feedback Loop is?Accelerating

The cycle below illustrates the debt doom loop in the US due to the crippling government debt plus still high inflation.

Government spending over the past 13 years has now trapped the Fed and is accelerating the debt feedback.

This debt feedback loop with the help pf the bond vigilantes will the UST yields much higher with the government forcing to Fed back to QE and bond buying to hold yields down.

Next week's price action is critical as Yellen may already be adding liquidity to the bond market .. Stay Tuned!

The #1 signpost to watch for an injection of liquidity into the market is Bond Volatility (MOVE index). Just type in MOVE and watch for a rise above 150 ...

It is trending higher once again and when we get there buy TLT and QQQ for a nice swing trade higher ...

Better yet join my product Power Income at Option Pit. Call 888-872-3307 and speak to the Option Pit customer care team.

These are historic times and I will help you not just protect your wealth .. I will help you build generational wealth in spite of our policy makers manipulation.

Live and Trade With Passion My Friend,

Bill Griffo