Today, September 21^st marks the official end of the bond market correction that began last fall. Bloomberg’s US Generic Government thirty-year yield index hit 4.57% (all yield and prices per Bloomberg), the highest since 2011. Their ten-year index hit 4.50%, the highest since 2007. The two-year version of the index hit 5.20%, the highest since 2006, and within range of 5.35%, which would be the highest since 2000. The treasury market had been within spitting distance of this breakdown for weeks, as followed in previous letters.

The slow-moving portion of the financial markets, however, belongs to stocks, which are currently trading at the same levels as over two years ago (pick whichever index you like; the story is the same). The bullishness we have witnessed over the past many months has not resulted in higher prices, but instead lower ones. As the reality sets in that the correction in prices since last fall is slipping away (the slow-moving train wreck), expect the price plunge to accelerate as stocks join their highly correlated bond brethren in the continuation of the bear market.

Real economic damage has occurred already. My favorite bellwether US treasury bond, the 1.25% of May 15, 2050, traded at a new low of 48.5 today after trading over 102 three years ago on August 6, 2020. With treasuries of all maturities trading at twelve-plus-year lows, it appears that almost all bond portfolios are underwater, with those portfolios of longer duration significantly underwater. The last time long term bond prices were this low, last October, First Republic Bank, Silicon Valley Bank and Signature Bank collapsed months later. These were three of the four largest US bank collapses in history.