Bonds in Crisis! Is This the End of Traditional Finance as We Know It?!

E=mc…Oh Dear The Markets Are Acting Funny

Greetings fellow thinkers! Albert Einstein here reporting from the bewildering world of finance. It seems my simple equation of energy and mass is easier to grasp than what's happening with these 'bond funds' everyone's chattering about. This fellow Dave Nadig a 'financial futurist' no less claims that U.S. tariffs are causing a global trade slowdown. I always said that compound interest is the most powerful force in the universe. However perhaps tariffs is now!

Unwinding Traditions: A Shock We've Never Seen!

Apparently these 'capital holding requirements' – whatever those may be! – that once drove everyone to buy U.S. Treasuries are now 'unwinding'. As Nadig notes 'the traditional math of things are bad for stocks [and] everybody is going to buy bond just isn't working out this time because the kind of shock we're seeing is one we've never seen before.' It seems even the invisible hand of the market needs a good spanking! Everything is relative of course; including the speed at which my hair turns grey.

The Curious Case of the 10 Year Treasury Note

Now pay attention because this is where it gets 'interesting'. The 'benchmark 10 year Treasury Note yield' (sounds like something out of a science fiction novel doesn't it?) has shot up to 4.4% on Thursday a 10% increase in just one week! Last Friday it was a measly 3.86%. This is like discovering that the speed of light is suddenly fluctuating – a truly unsettling proposition. This reminds me of the time I almost got stuck in a revolving door quite a shock.

Slowing Trade Shrinking Bond Holdings!

Nadig in his infinite wisdom believes that slowing trade will continue to impact market activity. 'When you have less trade you need to finance less trade,' he proclaims. And he continues 'Historically people have needed to finance dollars. That's why every country in the world buys U.S. Treasurys. It helps them manage their international trade with the United States. So if we're slowing down the amount of international trade we should expect in aggregate the holdings of bonds to probably come down.' In other words less trade less need for bonds. It's all relative you see and relatively concerning.

A Simpler Explanation! Because Science!

Here's a simpler way to think about it even I can understand this. Imagine a world where everyone is trading delicious strudel. If people suddenly stop trading strudel they no longer need 'strudel bonds' to facilitate the transactions. And thus the strudel bond market collapses! Maybe.

The Future is Uncertain But Relativity Endures!

So what does this all mean? Well I'm a scientist not a fortune teller. But one thing is clear: the universe of finance is just as unpredictable and mind boggling as the universe itself. The only thing that truly endures is my theory of relativity and perhaps the enduring appeal of a good strudel! Now if you'll excuse me I have some equations to ponder... and maybe a pastry or two.