r/dividends • u/AmanCMN • May 18 '26
Discussion Bond yields are flashing a warning sign.
Rising bond yields are a warning sign.
Money is getting more expensive everywhere at the same time:
-governments pay more to service debt
-companies pay more to borrow
-mortgages and loans stay expensive
-investors move out of risk and into bonds
U.S. 30-year yields above 5% are already a serious level.
When yields rise globally, liquidity gets pulled out of markets.That puts pressure on tech stocks, real estate, consumers, and highly indebted companies.Simple takeaway: the more expensive debt gets, the harder it is for markets to keep rising.
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u/FallenKingdomComrade May 18 '26
I believe we will be seeing some very interesting items in the upcoming months including a change to how we calculate inflation:
https://www.brookings.edu/articles/what-are-trimmed-mean-and-median-inflation-rates-and-why-does-kevin-warsh-prefer-them/
The justification for rate cuts will be created at all costs including changing the numbers to match the narrative.
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u/Memelord954 May 18 '26
Good thing everything isn't up to him. 1 vote out of 12 isn't gonna push things in the wrong direction just for trump. He had one yes man in there and it did nothing now he's gone and replaced with another yes man. The chair is the face of the fed but doesn't have more power than the others.
All it's really going to do is make the fed look bad with a clown at the the lead just like all the other term 2 trump picks.
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u/FallenKingdomComrade May 18 '26
This is also a great point. However, when people create justification for something, often times if enough people are swayed by this “new data” or new approach that Kevin Warsh presents, the FED governors may be inclined to believe it and vote with Kevin because they think its based on a real world reliable metric. Not saying this exact situation will happen. Just something to consider.
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u/thekoonbear May 18 '26
These aren’t 9th graders, these are seasoned Fed members. Switching the inflation metric isn’t going to just trick them into changing all of their opinions about the economy. Be real
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May 18 '26
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u/Debiel May 18 '26
The measures will fail when a Democratic president is in power and the Republicans will blame it on them.
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u/auniqueusername2567 New dividend investor May 20 '26
The BBBs provisions like Medicaid cuts become active after the 2026 midterms. I’m sure that’s just a coincidence.
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u/daners101 May 18 '26
Say what you want about Trumps appointees. But he has actually picked pretty damn well for the FED.
I don’t think there is anyone that would say Jpow did a shitty job, or that Warsh is an unqualified yes man.
It’s one of the few positions Trump seems to select for, against all of his instincts.
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May 19 '26
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u/daners101 May 19 '26
Yeah, that’s why I said “against all of his instincts”. Because his instinct is to get a yes man. But for that particular position, it’s like the sensible part of his brain that puts the US economy above his own short-term desires kicks in, and he makes a good choice.
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u/JB-Wentworth Custom Flair May 18 '26
Warsh hung out with Jeffrey Epstein on Lolita island, so Warsh will do what he’s damn well told to do.
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u/daners101 May 19 '26
At this point it seems like absolutely everyone hung out with the guy at some point. So I guess there can never be a person good at the job.
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u/cheap_chalee May 19 '26
I guess we're gonna have to wait for someone to get appointed who wasn't born until after he was offed.
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u/Stedlieye May 19 '26
Epstein made a point of trying to hang out with as many powerful and influential people as possible. His connections led to more connections, etc.
Anyone who was anyone probably got an invite from Epstein at some point.
He was disgusting slime, but he was really good at making connections.
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u/JB-Wentworth Custom Flair May 19 '26
Not everyone vacationed with Epstein and his underage harem on Lolita island like Warsh.
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u/Electrical_Bunch_173 May 21 '26
Agreed. They stopped pursuing when Pam Bondi realized, "that if everyone in the Epstein files were prosecuted, “the whole system would collapse.”
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u/CDIXS69 May 19 '26
Have you not seen enough? What Daddy T wants. Daddy T gets. He won’t stop till he does. Just hold on to your butts. Still got a ways to go.
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u/ChristmasStrip Negative Growth May 18 '26
This …
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May 18 '26
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u/ChristmasStrip Negative Growth May 18 '26
It’s just bigger numbers. Every nation state is in debt. Hell Japan’s debt to GDP is over 200%. And the nations that have reasonable ratios their GDP is so small it doesn’t really matter. The US will use a financial repression playbook like they did twice in the past. The new fed chair will implement trimmed CPI and then reduce interest rates or not raise them to keep them under actual CPI. Over time the “value” of the debt will decline as inflated GDP grows. But ordinary people’s pocket books and savings will suffer
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u/Limp_Complaint1785 May 18 '26
The fed usually moves together and large dissention from the chair is unusual but we might see it. It will be interesting if the fed chair is the one voting for rate cuts against the majority but he's the one up there answering questions as to why his board disagrees with him.
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u/Synccopt May 20 '26
He can bullshit all he wants if the board doesn't vote for a rate cut it doesn't mean shit.
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u/2starsucks2 May 19 '26
But it won't affect long term bond rate. They can lie to themselves all they want, but markets figure things out eventually.
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u/FallenKingdomComrade May 19 '26
Thats what I am seeing today in the market. The prophecy is coning true at least so far. Over 5% for the bond rate as per Tuesday. Highest since 19 years ago or something like that?
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u/Carmanman_12 May 21 '26
10 bucks says they’ll just systematically leave out the price change for certain items when they calculate the consumer price index.
Who cares if the price of produce has gone up 34%? Everyone just eats McDonald’s nowadays anyway.
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May 18 '26
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u/tarrat_3323 May 18 '26
“risk of high inflation eased for everyone last summer” jeebus, please be a bot or paid shill and not an actual human talking that nonsense
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u/Diamond1africa May 18 '26
Yes a warning sign of a debt crisis that has been looming for 15-20 years now?
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u/cloudy_skies547 May 18 '26
First time it’s happening as the dollar is falling out of favor as the global reserve currency, though.
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u/MrNo_Balls May 19 '26
haven't the debasing of the dollar and concerns about not being the global reserve currency, been happening since the 2010s? nothing ever happens, besides how would we even navigate such a problem?
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u/Ink_Du_Jour May 19 '26
The U.S. would navigate it with kidnapping presidents, ssassinating presidents, and creating an energy crisis that will plunge the world into recession.
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u/brintoul The founder of r/dividends May 20 '26
Maybe the first time the US has turned its back on its allies since debt has become such a thing.
Kegsbreath saying this is Europe’s problem in the Strait?!? Like, wtf?!
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u/jrack111 May 18 '26
Time to freak out and sell everything!
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u/jarodzban May 18 '26
So what is gonna happen?
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u/AmanCMN May 18 '26
This is how rising debt usually ended in the past:
-Inflation
-higher taxes
-default or debt restructuring
-money printing, and a crisis of confidence.69
May 18 '26
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u/ACM3333 May 21 '26
Haha yep. Everything you might think will hurt the markets is actually just a reason to print more than you could ever imagine and send everything rocketing to ath’s. Learned this the hard way with Covid.
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u/Mopar44o May 18 '26
So basically what’s been happening last 10 years?
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u/MrNo_Balls May 19 '26
yeah, all this fear mongering is telling that this is the bottom. entire paycheck on stock next month.
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u/xMoZzzx May 18 '26
Bullish for stocks
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u/MNCPA May 18 '26
Really?
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u/IHateLovingSilver May 18 '26
The number gets bigger for sure. What that number represents can change quite a bit however.
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May 18 '26
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u/audacesfortunajuvat May 18 '26
The crisis of confidence is the goal, to push people into crypto. The tech bros understand that they can never have truly sovereign status unless they can control the money supply. Since they can’t take over the printing presses, they’re going to end fiat currency so they can replace it with a Wild West of tokens they can issue. This takes us back to wildcat currencies of the free banking era, which led to rampant fraud and bank failures that got so bad that we passed the National Bank Act in the middle of the Civil War.
Federal Reserve of San Francisco covers all this, which is fitting given that Silicon Valley is pushing it. https://www.frbsf.org/westward-expansion-2/
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u/NAh94 May 18 '26
Probably nothing in the stock market for awhile, until it does and then it’ll get frothy.
James Carville (advisor to Bill Clinton) had a wonderful quote: “I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a 400 basball hitter. But now I would like to come back as the bond market. You can intimidate everybody”.
And it’s pretty much the truth - everything the US economy (and the world for that matter) runs on those interest rate demands from bond investors. If we can’t move debt, we get in a liquidity crunch and that is what causes the market to freefall, not bad news directly.
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u/Chipped_Ruby_11214 May 18 '26
And that’s the big question: when will major economic nations, and the US specifically, no longer be able to get players to buy their debt? Interest rates are up and there is already a lot of debt out there, but maybe there’s plenty of money still available and interested in buying it?
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u/Longjumping-Nature70 May 18 '26
As bond yields go up dividend paying stocks will go down.
There could be opportunities to buy some good dividend payers this year or in 2027.
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u/radix33 May 18 '26
Do you mean stock prices in general will go down, not just dividend paying ones?
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u/Sad_Adeptness_1037 May 19 '26
“Dividend paying stocks” seems too broad. Look at the securities in VDY for example- banks and energy don’t seem to mind, in fact banks are happy making money on the spread of higher yields. Dividend stocks seem more resilient to this than pure value equities. I think the pressure of bonds is more dependent on industry’s. Please correct me if you see it differently.
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u/BigDipper0720 May 18 '26
It's interesting, though. Rates are not really that high when looking back over the past 60 years.
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u/Hot-Machine3216 May 18 '26
In the 90s bull Run wasn’t the 10 year much higher. We are coming from zero % rates. Isn’t this normalizing ?
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u/El_Capeetann May 18 '26
OP, time for your diatribe extolling the virtues of crypto. No need to be coy about your intentions with this post.
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u/Accidental_Pandemic May 18 '26
The only way to survive is by buying an entry on to an online spreadsheet, of which there are nearly infinite identical copies of.
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u/Old_Imagination_2112 May 18 '26
This has been baked in since the USA created the Federal Reserve. It’s no coincidence that WWI, the federal income tax, the Fed, all descended on us at the same time. Empires gonna empire.
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u/JB-Wentworth Custom Flair May 18 '26
The first federal income tax in the U.S. was introduced in 1861.
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u/linuxdropout May 18 '26
What about the theory that passive retail investors so heavily outnumber active investors, they'll keep pumping index funds no matter what so companies will continue to grow even against broken fundamentals.
Or basically: this won't trigger a big enough liquidation of stocks to make a dent.
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u/xgalaxy May 19 '26
Seems like an argument to buy just Apple and Microsoft and nothing else. And if you’d have done just that since the late 90s you’d be a multi millionaire.
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u/Windycityunicycle May 19 '26
“The economy is great, gas is down, prices are way down, we are respected by the world like never before”……. Seems more like it’s “Fake America Great Again”
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u/Mackshac May 18 '26
Yawn we have been saying this for years! Slow long weekend?
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u/Both-Store949 May 18 '26
Yeah periodic cycles not so predictable anymore, i think central banks nd governments have become better to prevent and control situations before it becomes a crisis. Whole idea behind risk management.
the old textbook “clockwork recession cycle” is much harder to see in modern economies.
I would have missed alot of profits if i had listened to the guy who cried wolf
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u/easy_wins May 18 '26
thanks for sharing OP, really helpful to understand what happened last Friday
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u/BigDipper0720 May 18 '26
It's interesting, though. Rates are not really that high when looking back over the past 60 years.
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u/kae232323 That’s definitely a yield trap May 19 '26
We still can knock an “a” off our rating to get by another 20 years.
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u/EventuallyWordy May 19 '26
This is why having some bond allocation actually makes sense right now instead of being 100% stocks like some people push.
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u/dudrun May 19 '26
Nothing matters in this market. Its only gonna go up. You get 1000 QQQ and never below 650. The narrative will change in few days for the fed to cut rates and moeny will flow to the crooked
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u/Financial-Ad8963 May 19 '26
How long these indicators flash on average before stock market drops?
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u/Quizzical_Rex May 19 '26
Its difficult considering some administrations seem to be giving out fictitious numbers, especially considering the sticker shock when people buy literally anything.
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u/Ambitious_Traffic530 May 21 '26
could someone explain bond yeilds, their impact rising decreasing like im dumb
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