The strange thing about this market is that the bond market is starting to look more interesting than the stock market. Long-term Treasury yields surged with the 30-year briefly above 5.30% and the 10-year ending the week at 4.74%. The Treasury responded by doubling its long-bond buybacks. Deutsche Bank described the move, together with the earlier intervention to support the Yen, as evidence of “administration unease” and a soft form of financial repression.
Investors appeared to have their own answer. They moved into assets governments cannot simply print more of. Bitcoin jumped 23%, the yellow metal gained 5.5%, while oil rose more than 6% as the Iran stalemate kept a geopolitical premium in the price.
Interestingly, bonds settled down but gold did not. That is the part worth watching. If gold were simply trading the interest-rate story, higher yields should have been a problem. Instead, it kept climbing.
Perhaps the market is increasingly looking beyond interest rates and towards something rather less comfortable. Yeah, the Treasury can influence the long end of the curve but it cannot dictate it. The bond market still gets the final vote and it appears increasingly willing to use it.
I have maintained a strategic allocation to gold for a number of model portfolios. I’m also long the Euro and Yen.