The Triggers for a Bond Bubble Pop Are Now in Motion

Published on
February 9th, 2021
Duration
32 minutes

Tesla’s Bitcoin Wager, Rising Yields, and Ed’s Take on the Banks


The Triggers for a Bond Bubble Pop Are Now in Motion

Daily Briefing ·
Featuring Peter Boockvar and Ash Bennington

Published on: February 9th, 2021 • Duration: 32 minutes

Peter Boockvar, CIO of Bleakley Advisory Group, joins Real Vision senior editor Ash Bennington to discuss the oil market rally, signals of incoming inflation and the central bank response to it, and the drop in junk bond yields. Boockvar observes how oil is the last of the major commodities to join the rally as demand starts to catch up and the supply is demonstrating greater discipline, bringing markets into a full commodity rally. Boockvar then zooms out and breaks down the inflationary signals he’s witnessing and expresses his concern about whether an increase in consumer services will contribute to or relieve inflationary pressure. With junk bond yields dropping, Boockvar also explains how this may be due to more investors being pushed out onto the risk spectrum as investment-grade bonds are being perceived to have a Fed backstop. He points out the ever-growing bubble in bond markets and speculates that now is the first time in years where the true triggers for that bubble popping are in motion. He shares what retail investors should be watching out for, how QE has batted away the worst effects of bear markets, what drives the capital flight into the U.S., why the ECB’s and BOJ’s policies have in reality been more restrictive, and whether the Fed will ultimately have to implement yield curve control.

Comments

Transcript

  • GA
    Gary A.
    10 February 2021 @ 23:59
    I don't understand why he says the 30 year bond is the least manipulated by the FED? Isn't one of the bond that they are buying?
    • MV
      Marc-Olivier V.
      21 February 2021 @ 14:53
      they buy more earlier ending maturities
  • KR
    Kevin R.
    21 February 2021 @ 02:46
    So is the fed going to just keep propping the market, so that we have a v bottom crash every time?
  • MT
    MICHAEL T.
    10 February 2021 @ 23:50
    There HAS been consumer price inflation over the past many years!! Think healthcare, college tuition, and for goodness sakes stock prices. I don't know about you, but my utility bill is also way up.
    • AF
      Andre F.
      11 February 2021 @ 06:37
      Stock prices are definitely NOT a part of consumer price inflation. The Joe and Mary Q. public do not make a shopping list of bacon, eggs, baby formula, and Microsoft stock.
    • bf
      bill f.
      14 February 2021 @ 23:11
      you wonder if this is a result of inflation denuding the real economy, which then exacerbates inflation
  • SR
    Steve R.
    10 February 2021 @ 02:01
    I respectfully disagree with his view on bonds. Suggest people watch Steven van Metre's videos on bonds, especially the last couple to really understand what's going on.
    • PG
      PETER G.
      10 February 2021 @ 04:46
      I'm a regular viewer of Steven van Metre's videos, I actually lean toward his thesis, but it's interesting to hear a counterpoint. So if I understand this correctly, Peter Boockvar is saying inflation could crash the market, while Steven van Metre's position is deflation (or disinflation) will eventually crash the market...am I missing something? :)
    • DG
      David G.
      10 February 2021 @ 06:00
      Stagflation?
    • JL
      Johan L.
      10 February 2021 @ 09:00
      ... we need to hear all points of view and base an understanding on that. Steve van Matre has previously said: "Deflation is Coming, Followed by High Inflation"
    • he
      hanni e.
      10 February 2021 @ 15:58
      BOND ROUT!!!!!!
    • SG
      Stuart G.
      12 February 2021 @ 05:30
      Brookvar debates Van Metre, Mar 2021, please.
  • RM
    Robert M.
    12 February 2021 @ 01:31
    Peter is spot on. While there is a good debate between people like Hunt and Rosenberg who argue that debt will keep us in a low inflation world, others have made a good argument for inflation. But above average inflation is the pin and could force the Fed to make a move if it gets out of hand. Higher rates will just drive government deficits higher, burden consumers with higher debt service, and shut down the housing business where homes are already overpriced. High inflation leads to the great reset and not sure the Fed truly understands what can happen if inflation expectations get embedded in the economy.
  • MF
    Matt F.
    11 February 2021 @ 14:27
    this was great, im super interested in understanding how EU life insurance companies get killed on inflation with YCC. Can anyone elaborate on this more? thanks
  • RB
    Robert B.
    11 February 2021 @ 14:09
    The Chart of the SPX was completely mislabelled. The large sell off happened in 2020 - not in 2019 as shown. Ash then goes on to suggest that "all we've seen is a tiny little divot around March and April of 2020". This is completely MIDLEADING and false. The 30% sell off happened in Mar and Apr. Not a tiny divot.
  • AW
    Ayako W.
    11 February 2021 @ 13:08
    Nikkei 225 in US$ recovered to 1989 high. Nikkei 500 surpassed 1989 high. No one is paying attention. 30 year bear market in Japan is almost ending.
  • VA
    Victor A.
    11 February 2021 @ 02:50
    Awesome stuff from Peter , I'm a new macro thinker still wrapping my head around these dynamics. I'm still trying to wrap my head around how inflation expectations and inflation itself cause the market to drive up the long end of the yield curve....
  • CM
    Cory M.
    10 February 2021 @ 21:56
    Love Peter, and some of these written comments are HILARIOUS.
  • LC
    Louis C.
    10 February 2021 @ 00:13
    This might be the most bullish bitcoin video I've seen and they didn't even mention it! haha
    • AB
      Ash B. | Real Vision
      10 February 2021 @ 00:26
      hehe
    • AB
      Alastair B.
      10 February 2021 @ 04:21
      Also keep an eye on what Cardano are doing in Africa
    • PU
      Peter U.
      10 February 2021 @ 18:21
      Louis, do you live in Washington DC!?
  • VB
    Vincent B.
    10 February 2021 @ 09:19
    Peter's assessment of bonds being the ultimate bubble, I cannot quite follow. It's probably the one asset class that is not in a bubble: there is genuine demand for sovereign debt, and all the speculators are actually positioned on the short side.
    • rm
      ryan m.
      10 February 2021 @ 15:04
      Agreed, if fundamentals support yields at these low levels (high bond prices) then it is not a bubble.
  • DL
    David L.
    10 February 2021 @ 12:42
    Always enjoy PB's informed commentary. Thanks.
  • DA
    David A.
    10 February 2021 @ 09:01
    Peter Boockvar is the best of the regular Daily Briefing contributors. As Ash summed up at the end: "the perfect merger of macro and markets".
  • JK
    Jens K.
    10 February 2021 @ 08:13
    Ash, you really need to start asking hard counter questions. Even if the person being interviewed has good points your answer does not always have to confirm the person's opinion. Much more interesting the ask counter arguments from other view points (even if you do not believe in that specific counter argument).
  • MK
    Marko K.
    10 February 2021 @ 07:57
    Excellent stuff. Really liked his arguments and the whole interview was done in a smooth way by Ash. Excellent.
  • BF
    Bret F.
    10 February 2021 @ 07:45
    Powell 2pm Wednesday
  • DK
    Danny K.
    10 February 2021 @ 06:59
    So when they say that if they put wages up, prices go up, they're lying?
  • GC
    Gabriel C.
    10 February 2021 @ 03:50
    Wheres my TG tuesday? lol
    • RA
      Ralph A.
      10 February 2021 @ 04:55
      They decided to bring someone on that can look further in the future than the next 48 hours
    • DG
      David G.
      10 February 2021 @ 05:55
      I Think both are helpful. Why would be need a long term view everyday? This is a good update and interview from the last time PB was on.
  • RR
    Ryan R.
    10 February 2021 @ 05:44
    Seriously good - very helpful tangible empirical sensical insights. Hope to see more with Peter please!
  • RA
    Ralph A.
    10 February 2021 @ 04:54
    Such a good interview please bring Peter on more often
  • FS
    FH S.
    10 February 2021 @ 03:33
    Good analysis by Boockvar, democracies choosing inflation over austerity must face ultimate market consequences, light at end of tunnel could be another train?!
  • EH
    Eric H.
    10 February 2021 @ 03:13
    *Insert standard anti-fed rhetoric*
  • DC
    David C.
    10 February 2021 @ 00:32
    Ask Peter what that chart is behind him. Looks interesting.
    • MK
      Michael K.
      10 February 2021 @ 03:12
      Connecticut coast?
  • NI
    Nate I.
    10 February 2021 @ 03:03
    Peter is right about inflation being the thing that will finally end 50 years of central bank monetary madness. When exactly we don't know, but hand out enough free money and inflation is inevitable. A new generation will get to learn about the misery index except this time it will be on steroids compared to last time. #gold #bitcoin #EEM
  • CB
    Camille B.
    10 February 2021 @ 01:14
    I keep stopping and backing up to hear again, so as not to miss a word from Ash and Peter. I believe Peter used the term "hot potato" to refer to long treasuries in a previous show. Now he leaves me on inflation watch - because it may unravel a whole host of events and possibilities needing consideration. So good.
    • AB
      Ash B. | Real Vision
      10 February 2021 @ 01:51
      Thanks, Camille. Peter was great. Really enjoyed this one.
  • MC
    Mark C.
    10 February 2021 @ 01:10
    Great RVDB! Thanks guys!
  • SH
    Sin H.
    10 February 2021 @ 00:50
    On the subject of inflation: Stating the obvious, some things have increased in prices and some things haven't. And that is dependent on your socio-economic background and geographical location too. I work in the e-commerce industry. I can tell you that our profit margin since mid 2020 has expanded greatly -> which is attributed to the fact that we are charging higher prices to the consumers and there is a definite higher level of spending by said consumers. Suppliers are now adjusting to this reality due to higher raw material costs and transport costs, so will our profit margin shrink OR can we keep increasing the prices to offset the increase costs? On the subject of wage increase to match inflation: I cannot speak for other employers / industries, but typically we do our annual reviews around this time and wages will adjust accordingly based on performance, standard of living adjustment, etc. So I suspect we may get a clearer picture when businesses complete their tax filings and figure out what is left in the pot and what can be redistributed to employees, then we'll see what happen to wages.
  • PG
    Philippe G.
    10 February 2021 @ 00:48
    Fantastic - enjoy Peter B.'s explanations!
  • GA
    Gary A.
    10 February 2021 @ 00:42
    I appreciate what Mr. Boockvar has to say but the evidence we have seen these past 10 months I am still leaning towards Lacy Hunt's and David Rosenberg's reasoning that we are still in deflation for the time being.
  • CL
    Carlos L.
    9 February 2021 @ 23:27
    Last time I was this early GME was at $4. Bonds are the most deceitful, surprisingly complex instrument ever.
    • CL
      Carlos L.
      10 February 2021 @ 00:42
      I'm genuinely confused. How can we have both a liquidation event and BTC at all time highs. Lack of liquidity as discussed by Mike Greene but a coming dis-inflationary catastrophe by excess liquidity as described by Steven van Metre. DXY technically failing but EUR on the red as well.A steep yield curve but high stock prices because there's no inflation. Then again high stock prices because we finally have inflation. I'm so confused right now. I'm at the point that I can use all scenarios to push any view. Nothing matters but it might matter all at once, may be, may be next month because TGA or may be in the next 2 years. I need to lay down.
  • SS
    Sunny S.
    10 February 2021 @ 00:30
    Seems like everything he is suggesting would lead to a high quality bond run straight after such a pop. If covid is gone and people move to purchasing power to services over goods then this is deflationary. If the bond market pops and interest rates go up then corporations and individuals find it tough to pay off the service costs on the debt which leads to mass defaults. That's then a run for safety on high quality sovereign bonds which leads to low yields on safety assets and everything else going to junk and a squeeze in financial market liquidity. i.e. no dollars in the non government markets, so no jobs, no loans. Supply chain cost push is happening because of the covid related geopolitical/ health supply related issues but the inflation component is happening because there is still liquidity. Looking at a scenario past the bond market "pop" with no cash in the financial markets. How then is a world where no one has liquidity inflationary?