Much as been made of the US 10 year bond yield pushing through 5% for the first time since 2007.
And much has been made of the fact that net interest payments are much larger than defence payments, and closing in on social security payments.
But a weird thing is happening. The US tends to devalue when it is bust. Back in the 1970s, the value of the US dollar collapsed against the Swiss Franc, and again in the 2010s. But as of today the Swiss Franc is around the level it reached back in 2011, and is actually losing value to the US dollar this year.
Even the one currency that Scott Bessent explicitly told us should rally, the Japanese Yen has been selling off again.
My preferred measure, GLD/TLT, we are not seeing rampant default risks being priced in by markets (yet).
What I think the market is pricing in, is that growth in the US is going to be even stronger next year. Despite higher yields, debt issuance does not look like it is slowing down.
A good live indicator of AI trends is pricing of DRAM - which has become a bottleneck. There is no sign of weakness here.
What I see is growth surprising to the upside, and hence yields getting smashed. For industries and companies already suffering from high interest rates, tough luck. AI is crowding out the capital markets, and looks likely to continue to do so.
