Stocks and Bonds Are Finally Plummeting. Here’s How the Big Banks Are Pulling Some Strings

Demand for Treasuries at the weekly Treasury auctions has risen by slightly more than the increase in new issuance lately.

With more buying, which should boost price and push the yield down, why have Treasury yields been rising? Because selling in the secondary market has outstripped demand! 

Securities prices, just like the prices of the everyday goods that we purchase in daily life, are driven by supply and demand. Money is the fuel of demand. Treasury debt is supply. In today’s markets, there’s more supply than there is demand.

In the big picture that I have been painting for you over the past year, the growth of money (what professional investors call “liquidity”) is waning and soon to turn negative, thanks to the Fed and its foreign central bank cohorts.

This is bad news not just for the Treasury market and bond market in general, but for stocks too. The bad news that we have been expecting is starting to happen.

But this bad news wouldn’t be apparent if it were not for the involvement of the Primary Dealers, the legion of big banks that the Fed works with.

That’s why today, I want to take a deep dive into how the involvement of the Primary Dealers is influencing this market downturn.

Click here to see

The Economy Is On “Steroids.” Here’s Why That Will Decimate Stocks and Bonds

Treasury supply continues to bulge, thanks to the yawning Federal budget deficit, and the fact that the Treasury must raise $30 billion per month to repay the Fed.

That’s because, under its program to shrink its balance sheet, the Fed is demanding that the US Treasury pay the money back that the Fed lent to the US Government under QE.

On top of that, the federal budget deficit will top a trillion dollars in the 12 months since the new tax law and spending increases took effect.

The soaring deficit has been steroids for the US economy, but the government must borrow that money before it can spend it. That means that a trillion dollars a year is now hitting, and will continue to hit the market in massive quarterly waves for years. And the money isn’t there to absorb it without prices falling drastically.  That means lower stock and bond prices and higher bond yields.

Right now we are right in the early stages of one of those waves, and it will decimate stocks and bonds. 

Click here to see why