There is a popular saying, that says: “If you want to understand the United States, look at a professional wrestling party.” Although it can be a bit simplified and a bit more simplified, it seems “sound” true, since the financial markets of the United States now exhibit traits similar to the concept of “Kayfabe” Pro-Wrestling.
Kayfabe means an illusion that the action guided in the ring is real, and the audience bought the same while suspending its belief for entertainment.
A similar dynamic has been developed in the financial market for at least a decade, where the United States government has repeatedly reached its self -imposed debt roof, or a indebtedness limit, a fiscal crisis sign. Even so, investors continued to give money to the Government with ultra low yields, even in times of stress in the global economy, thus keeping the Kayfabe that the government is a safe and reliable borrower.
Recently, however, bond market participants have exposed Kayfabe, as the legendary merchant Paul Tudor Jones had warned, weakening the illusion and strengthening the case to invest in assets with refuge and appeal of the value store such as Bitcoin (BTC) and gold.
The links exploit the Kayfabe
The great news of this week is the treasure performance of 30 years from the United States. However, we have been there before in October last year, according to the TrainingView data source.
Read more: US to 30 years of treasure performance of 5% in the middle of the Moody’s rating rating, tax concerns
The true story is the increase in values of values (advice) protected by treasure inflation. Its main amount adjusts for inflation.
The performance of the 30 -year -old tips recently rose above 2.7%, the highest since 2001. In other words, investors demand at least 2.7% greater than inflation in exchange for lending money to the government for three decades.
This occurs as the growth of the consumer price index (CPI) continued to decrease towards the 2% objective of the Fed, and market -based road inflation measures such as Breakevens remain stable in the family ranges observed since 2022. In addition, the war rate of the United States dinner supposedly inflation has decreased.
Divergence is a clear indicator that investors seek the most expensive real performance due to concerns about fiscal policy and not inflation, tariffs or growth dynamics.
“The world says that we do not trust its long -term fiscal career and we want to be compensated for it,” said Pseudonym Analyst Endgame Macro in an explanator about X.
As of May 19, the US national debt, also known as the total public debt, was $ 36.22 billion. It is projected to increase at $ 22 billion in the next 10 years, with GDP debt that reaches 156% by 2055according Analysis performed by the Eye and Ey quantitative statistics (Quest) practice. Quest’s report also said that the flourishing debt will weigh a lot about economic growth.
Robin Brooks, a senior member of the Global Economics and Development Program at the Brookings institution, said the five -year real interest rate as evidence of bond players who question tax sustainability.
“The real interest rate of 5y5y Forward is now 2.5%, which is the highest level that dates back to 2010. The most important thing is that you far exceed the levels seen during the episodes of the Hawkish Fed, such as the” Terrum Taper “of 2013 or the 2022/23 walk cycle after the Covid influence cycle,” Broks said in an ATTAC Stacability in 5y5 and 5 and 5 and
“That makes it even more likely that many years of irresponsible fiscal policy are updated with the United States, adding urgency to the need to put our fiscal house in order,” Brooks added.
FX-Bond correlations are dead
Another sign that the market is awakening to the fact that the emperor has no clothes is the collapse in the traditional correlation between the currency markets (Forex) and the bonds.
In general, the increase in bond yields increases the attractiveness of home currency, which makes it appreciated against other fiduciary currencies. For example, the EUR/USD has historically tracked the propagation between the yields of the government of two years of German and the USA.
But not anymore. The EUR/USD has increased abruptly since the beginning of April despite the narrowing of the two -year performance differential, led by a strong increase in the performance of two years of the US.
The degree of sun, is evident in the options market, which is now more optimistic in EUR/USD from COVID. According to Brooks, it is unusual for the option market to grant a greater premium in the euro than the inconvenience.
Bitcoin and Alcista Gold
Historically, governments that face tax concerns have resorted to inflation and paying debt by printing more money. They will probable will resume the same path, encouraging the demand for hard assets such as gold and bitcoin.
“All roads lead to inflation. That is historically the way in which each civilization has come out is that they inflated their debts,” said Tudor Jones last year, while appointed BTC, gold and products as preferred holdings in bonds of longer duration.
Two years ago, economist Russell Napier expressed a similar opinion, saying: “We need to prepare for an era of growing financial repression and persistently high inflation.”
Financial repression refers to government policies that direct private sector funds to the public sector to help reduce national debt. The scenario is characterized by the inflation rate that exceeds the performance of savings, capital controls and the limits of the interest rate, all of which could be a good omen for Bitcoin and Gold.
The limits of interest rates are generally implemented through policies such as the control of the performance curve, which the Central Bank has a specific level for the long yields of the bonds, say 5%. Each time, the performance seems to rise above that level, the Central Bank increases the purchase of bonds, injecting liquidity into the system.
Arthur Hayes, CIO and founder of Maelstrom, has said that the control of the performance curve will eventually be implemented in the US, including a record rally in Bitcoin.
Hayes recently said that President Donald Trump’s decision to water trade tariffs after early April, panic in financial markets is evidence that the financial system is too leveraged for difficult reforms and guarantees additional money creation.
“They can call it as you want, do not call it that, but it has the same effect: liquidity increases and the benefits of Bitcoin,” said Hayes.
The imminent rally will not be soft
The upward case for BTC does not necessarily mean that there are no problems.
The US Treasury market serves as a global finance base and greater volatility in these bonds could cause financial tightening, which could cause a global career for cash that sees investors selling all assets, including Bitcoin.
From now on, however, the movement index, which represents the implicit or expected volatility of 30 days in the United States Treasury notes, remains in a bearish trend.
