Beware Of The Bond Market Swings

The Real Estate Espresso Podcast

Beware Of The Bond Market Swings

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Beware Of The Bond Market Swings

Welcome to the Real Estate Espresso Podcast, your morning shot at what’s new in the world of real estate investing. I’m your host, Victor Menasce. On today’s show, I want to share some guidance that I gave you on the podcast only a few days ago. I’m not here to triumph any victory or anything like that. I’m experiencing a phenomenon where I make a prediction or an observation on the podcast, then lo and behold, a few days or a few weeks later, we’re reading about it in the Wall Street Journal. The purpose is to help you see what I’m seeing, so you can see it too.

Headlines are usually the result of an event that catches attention. All of the news organizations sell advertising and their ad revenue is linked to the number of eyeballs on the website. Most advertisers pay for impressions, that’s the number of times an ad was shown to a visitor to the website. If a news organization is going to survive or maximize revenue, they need a hook, something that’s going to draw the reader or the viewer into their orbit.

You’ll notice that all of the discussion in the media has been tariff, tariff, tariff, and very little else. Through all of this, I’ve been telling listeners to the show that they need to pay attention to the bond market and to currency rates. Politicians and Central Bankers have very little influence over these two markets, they don’t set the bond yields and they don’t set currency exchange rates. Sometimes they try to, but they usually fail.

On Thursday morning, the Wall Street Journal reported on the factors that led to the White House’s decision to introduce a 90-Day Pause to its broader tariff implementation. The U.S. has a vulnerability right now. They need to refinance $8 trillion of U.S. debt in 2025—of which about $6 trillion still needs to be done. The deficit is still over $2 trillion, so they need to find buyers for $10 trillion in U.S. papers.

Janet Yellen had previously focused the auctions primarily on T-Bills, short-duration paper, to reduce the risk of the U.S. Treasury locking into higher interest rates for the next ten or next thirty years. We witnessed a spike in U.S. bond yield since the tariff announcement; this means it was a massive sell-off of U.S. bonds. Fewer buyers mean the price for those bonds drops, and therefore the yield goes up. That affects the cost of financing for businesses, real estate, and the U.S. government.

The big question is, who is ditching U.S. Treasuries? There’s a lot of speculation in the media that sellers are international sellers looking to dump U.S. dollars and U.S. investments in general. That might be part of it – the falling U.S. dollar supports that argument. If there’s no international buyers, then who in the U.S. is going to buy those bonds?

(p>To be continued…

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