There has been a lot of focus on the performance of the stock and cryptocurrency markets over the past year or two as the trillions of dollars that have been printed into existence since the start of the COVID pandemic have driven new all-time highs, but analysts are now increasingly sounding the alarm over warning signs coming from the debt market.
Despite holding interest rates at record low levels, the cracks in the system have become more prominent as yields for U.S. Treasury Bonds “have been rising dramatically” according to markets analyst Dylan LeClair, who posted the following chart showing the rise.
U.S. Treasury bond yields across duration. Source: Twitter
“Since November yields have been rising dramatically — bond investors begun to realize that w/ inflation at 40-year highs, they are sitting in contracts programmed to decline in purchasing power.”
This development marks a first for the U.S. debt markets as noted in the February letter to investors released by Pantera Capital, which stated “there has never been a time in history with year-over-year inflation at 7.5% and Fed funds at ZERO.”
Matters get even worse when looking at real rates, or the interest rate one gest after inflation, which Panteral Capital indicated is “at negative 5.52%, a 50-year low.”
Pantera Capital said,
“The Fed’s manipulation of the U.S. Treasury and mortgage bond market is so extreme that is it now $15 TRILLION overvalued (relative to the 50-year average real rate).”Treasure and mortgage bonds overvaluation. Source: Pantera Capital
At the same time as treasury bond yields have been rising, Bitcoin (BTC) and altcoin prices have steadily fallen, with BTC now down more than 45% since Nov. 10.
BTC/USDT 1-day chart. Source: TradingView
The declines in the crypto market have thus far been highly correlated with the traditional markets as noted by Pantera Capital, but that could soon change as “crypto tends to be correlated with them for a period of roughly 70 days, so a bit over two months, and then it begins to break its correlation.”
According to Pantera’s report,
“And so we think over the…..