BTC and gold in sweet places as Bond Market smackdown exposes ‘The US Fiscal KayFabe’: Godbole

There is a popular sayingThat goes, “If you want to understand America, watch a pro wrestling match.” Although it can be glib and a little over simplified, it appears ‘ring’ is true, as US financial markets are now showing features similar to the concept of pro-wrestling of “Kayfabe. “

Kayfabe means an illusion that in-ring script action is true, with listeners buying the same while suspending their beliefs for recreation.

A similar dynamic has been played in the financial market for at least a decade, where the US government has repeatedly hit its own self-imposed Ceiling on debtor borrowing limit, a sign of fiscal crisis. However, investors have continued to lend money to the government to ultra-low produce, including times of fatigue in the global economy, thus maintaining Kayfabe that the government is a safe and reliable borrower.

Recently, however, bond market participants were exposed to Kayfabe, as a legendary businessman Paul Tudor Jones warns.

Bonds explode the kayfabe

The big news this week is the US 30-year Treasury yields a maximum of 5% Mark and how it can enable financial markets. However, we were there before October last year, according to Data Source TradingView.

Read more: The US 30-year Treasury Ani violates 5% in the midst of moody ratings, fiscal concerns

The true story is the spike in the produce of Treasury Inflation protected by security (tips). Their basic value is adjusted for inflation.

The 30-year-old tips recently rose above 2.7%, the highest since 2001. In other words, investors demand a harvest of at least 2.7% greater than inflation in exchange for debt money to government for three decades.

This comes as consumer price index (CPI) growth continues to slow down to the 2% Fed target, and market -based inflation measures such as Breakevens will remain stable In the familiar ranges seen since 2022. In addition, the alleged inflationary US-China’s tariff war has eased.

The difference is a clear indicator that investors are looking for the most expensive real yield due to concerns about fiscal policy and non -inflation, tariffs, or dynamic growth.

“The world says, we don’t trust your lasting fiscal trajectory and we want to get paid for it,” Pseudonymous analyst Endgame Macro said In an explanation of X.

On May 19, the US national debt, also known as a total public debt, stood at $ 36.22 trillion. Expected to rise by $ 22 trillion over the next 10 years, including Utang-to-GDP reaching 156% to 2055According to Assessment conducted by EY’s Quantitative Economics and Statistics (QUEST) Practice. The Quest report also said that burgeoning debt is heavy weight loss economic growth.

Robin Brooks, senior fellow at the Global Economy and Development Program at the Brookings Institution, has taught a five -year -old interest rate as evidence of bond players asking for prosecutors.

“The 5Y5Y forward real interest rate is now standing at 2.5%, which is the highest level of going all the way back in 2010. Most importantly, it has exceeded the levels seen during the Hawkish fed episodes, such as 2013” Taper Tantrum “or the 2022/23 hiking cycle after covid inflation scare,” Brooks said in a Posteck PostWhile noticed stability in the 5Y5Y forward inflation breakevens.

“It does everything that is more likely that many years of unreliable fiscal policy are getting the US, increasing the need to get our fiscal in need,” Brooks added.

FX-Bond’s relationships are dead

Another sign that the market is awakening to the fact that the Emperor has no clothing is the breakdown in the traditional relationship between foreign exchange (forex) and bond markets.

Usually, the increase in bond results in the appeal of money at home, causing its appreciation against other fiat currencies. For example, EUR/USD has a history that closely monitors the spread between the produce in German and the US two -year government bonds.

But no more. The EUR/USD has risen since early April despite the spin of two-year harvest differences, led by a sharp increase in the US of the two-year harvest. Destruction of relationships suggests that concerns in fiscal stability are likely to motivate investors to stay away from US properties.

The level of dollar bearishness is evident from the options market, which is now most bullish in EUR/USD since the covid. It is not uncommon for the options market to put a larger premium upside down on the euro than the downside, according to Brooks.

Bullish bitcoin and gold

Historically, governments facing fiscal concerns have conducted inflation and debt repayment by printing more money. They are likely to recover the same road, indicating demand for hard assets such as gold and bitcoin.

“All the roads lead to inflation. That’s the history of the way every civilization obtained is that they have shunned their debts,” Tudor Jones said Last year, while named BTC, gold, and goods as preferred handling the longer duration of bonds.

Two years ago, economist Russell Napier expressed a similar opinion, saying“We need to prepare for a period of increasing financial repression and ongoing high inflation.”

Financial finance refers to government policies that direct funds from the private sector to the public sector to help reduce national debt. The scenario is characterized by the inflation rate that exceeds the return to the thrift, capital controls and interest rate covers, all of which can be well -versed for bitcoin and gold.

Interest rates are usually implemented by policies such as control curve control, with a central bank targeting a certain level for long bond yields, let’s say that 5%. Each time, the yield seems to rise above the said level, the central bank progresses with bond purchases, injection of liquidity in the system.

Arthur Hayes, CIO and the founder of Maelstrom, said the yield curve control will eventually be implemented in the US, prompting a record rally in Bitcoin.

Hayes recently said that President Donald Trump’s decision to overthrow trade tariffs after early April shocked in financial markets is evidence that the financial system is too —lever for poor reforms and warrants of further money creation.

“They can call it whatever they want – don’t just call it QE – but it has the same effect: Bitcoin’s liquidity and benefits are rising,” Hayes said.

The upcoming rally will not be fine

The bullish case for BTC does not mean no hiccups.

The US Treasury market serves as a global financial bedrock and has increased volatility in these bonds can cause financial restrictions, which potentially degrade a global dash for cash that sees investors selling each property, including Bitcoin.

So far, however, the transfer index, which represents the 30-day indicated or expected volatility in the US Treasury notes, remains in a downtrend.