Bonds!

[gfp]

TNX with a 3-handle...  Thank god they balanced the budget and satisfied those powerful bond vigilantes.

[TwoCitiesCapital]

10 minutes ago, gfp said:

TNX with a 3-handle...  Thank god they balanced the budget and satisfied those powerful bond vigilantes.

 

+1 

 

Bonds are trading sardines now. I wouldn't want to own for 10-years, and expect higher yields than 5% following the next 'crisis', but lower yields until then IMO. 

 

Jobs and housing both deflationary - much more so than tariff pressures. 

[Eldad]

Sold the few T20s I bought on Monday. Pretty good for no risk.
 

Blake bought a bunch of investment books I think and then he was gone. Good for him, probably a better use of his time with the market in mania mode. 

[Gregmal]

Blake was an awesome contra. Too bad he retired 

[cubsfan]

2 hours ago, Gregmal said:

Blake was an awesome contra. Too bad he retired 

 

Definitely miss him. Good kid!

 

[Libs]

On 9/11/2025 at 7:41 AM, gfp said:

TNX with a 3-handle...  Thank god they balanced the budget and satisfied those powerful bond vigilantes.

Great call GFP. Can't imagine how you had so much confidence in this, but, hey, scoreboard baby. Well played.

[WayWardCloud]

Some French blue chip companies bonds now yield less than French government bonds. Isn't that interesting? The textbook idea that government borrowing is "risk free" and that every other debt necessarily has to be priced with a spread above that floor could come into scrutiny given how well run many blue chips are and how financially irresponsible many governments are.

Edited September 15, 2025 by WayWardCloud

[Kizion]

2 hours ago, WayWardCloud said:

Some French blue chip companies bonds now yield less than French government bonds. Isn't that interesting? The textbook idea that government borrowing is "risk free" and that every other debt necessarily has to be priced with a spread above that floor could come into scrutiny given how well run many blue chips are and how financially irresponsible many governments are.

 

It's what @Gregmal also said couple of months ago that could happen in US with some US mega caps (Apple, Microsoft, Alphabet, ...) 

[Gregmal]

8 hours ago, Kizion said:

 

It's what @Gregmal also said couple of months ago that could happen in US with some US mega caps (Apple, Microsoft, Alphabet, ...) 

Yea idk just seems rather obvious. I don’t know why people act like government guarantees mean much more than anyone else’s….Apple or Microsoft have way more credibility than the Trump/Biden administrations. And I only see the administration credibility issue getting worse from here out. 

Edited September 15, 2025 by Gregmal

[Eldad]

12 hours ago, WayWardCloud said:

Some French blue chip companies bonds now yield less than French government bonds. Isn't that interesting? The textbook idea that government borrowing is "risk free" and that every other debt necessarily has to be priced with a spread above that floor could come into scrutiny given how well run many blue chips are and how financially irresponsible many governments are.

Yeah those texts book were written by Americans during our golden age (1950s) Truth is kingdoms, nations throughout history have defaulted fairly often. 

[TwoCitiesCapital]

12 hours ago, WayWardCloud said:

Some French blue chip companies bonds now yield less than French government bonds. Isn't that interesting? The textbook idea that government borrowing is "risk free" and that every other debt necessarily has to be priced with a spread above that floor could come into scrutiny given how well run many blue chips are and how financially irresponsible many governments are.

 

I expect at some point that may be true of US treasuries vs similar tenor mortgages in the US if they don't get spending under control. 

[wabuffo]

Yeah those texts book were written by Americans during our golden age (1950s) Truth is kingdoms, nations throughout history have defaulted fairly often. 

 

I feel this bears constant repeating.   A sovereign cannot default on bonds/securities issued in a currency it controls and is in a floating regime (ie, not pegged to another currency or gold).   

 

I don't know anything about France but I know they no longer print francs and so do not control the currency in which their bonds/securities are issued.

 

I expect at some point that may be true of US treasuries vs similar tenor mortgages in the US if they don't get spending under control. 

 

And yet I watch long US Treasury security prices keep going up (and yields down).  Maybe the world actually wants and needs more US Treasury securities...

 

Bill

 

 

 

Edited September 15, 2025 by wabuffo

[Eldad]

28 minutes ago, wabuffo said:

Yeah those texts book were written by Americans during our golden age (1950s) Truth is kingdoms, nations throughout history have defaulted fairly often. 

 

I feel this bears constant repeating.   A sovereign cannot default on bonds/securities issued in a currency it controls and is in a floating regime (ie, not pegged to another currency or gold).   

 

I don't know anything about France but I know they no longer print francs and so do not control the currency in which their bonds/securities are issued.

 

I expect at some point that may be true of US treasuries vs similar tenor mortgages in the US if they don't get spending under control. 

 

And yet I watch long US Treasury security prices keep going up (and yields down).  Maybe the world actually wants and needs more US Treasury securities...

 

Bill

 

 

 

Yes you will be paid but you may have to use it as TP or as a fire starter. 

[Red Lion]

2 hours ago, TwoCitiesCapital said:

 

I expect at some point that may be true of US treasuries vs similar tenor mortgages in the US if they don't get spending under control. 

 

Wouldn't the US just print more dollars if it ever came to a default? I don't think France has such an easy out with the Euro. Why would mortgages yield less than a treasury obligation? Or would the theory be that Congress just refuses to coin money and lets the country default? 

 

It seems like if the Congress was willing to let the country default to avoid printing money, it would be more likely to cut spending and prevent a default in the first place. I feel like the most likely scenario would be Congress continuing spending, letting the treasury and fed pull off any financial maneuvering, and then print money as a last resort. 

 

I feel like mortgages and treasuries would both be a bad investment under these scenarios, but I'm sure someone smarter than I am could make a bunch of money playing derivatives. 

[TwoCitiesCapital]

6 minutes ago, Red Lion said:

 

Wouldn't the US just print more dollars if it ever came to a default? I don't think France has such an easy out with the Euro. Why would mortgages yield less than a treasury obligation? Or would the theory be that Congress just refuses to coin money and lets the country default? 

 

That is the most probable course of action unless if you get a hung Congress. Given that 'Trump was sent to destroy the "Establishment"', I don't view the latter at 0% probability. 

 

But the point doesn't have to be if it WILL default. The point would be that enough people assume that it's a high enough probability to warrant wanting the extra protection of an additional payee on the bond. Right now mortgages trade exceptionally wide of treasuries, but I can envision a future where they trade at a slight negative spread of confidence is wanting in the Federal government. 

6 minutes ago, Red Lion said:

 

It seems like if the Congress was willing to let the country default to avoid printing money, it would be more likely to cut spending and prevent a default in the first place. I feel like the most likely scenario would be Congress continuing spending, letting the treasury and fed pull off any financial maneuvering, and then print money as a last resort. 

 

 

Show me the last time Congress cut spending

 

I think that's probably a less likely outcome than a hung Congress. Especially since I we have a President who rules by decree. Why not just decree all bonds coming due to be due in 20-years instead?

 

"It's not a "real" default! You'll get your money!"

 

 

6 minutes ago, Red Lion said:

 

I feel like mortgages and treasuries would both be a bad investment under these scenarios, but I'm sure someone smarter than I am could make a bunch of money playing derivatives. 

 

Sure. Nobody is saying buy mortgages. Just that I envision a non-zero probability that they'll be less risky than treasuries at some point in the future. 

Edited September 15, 2025 by TwoCitiesCapital

[gfp]

The only thing the treasury accepts in return for buying their bonds are government IOUs.  Don't get too bogged down in imagining a big difference between your checking account and your savings account.  It's all government IOUs whether you think you made a conscious decision to "lend" it to the government or not.

 

Motgages can generally be prepaid when it is bad for the "investor."  That makes them less attractive than bonds that protect the investor from pre-payments when you least want them.

[Eldad]

Corp bonds could be issued in another currency or could be backed by or pay interest in gold, Bitcoin, etc. if things got really bad. 
 

US gov could force bond holders to take a haircut in exchange for protection as was discussed in Mar-a-Lago accord rumors. 
 

A lot of things could happen and probably will if the US remains such a bad debtor. 

[wabuffo]

Corp bonds could be issued in another currency

 

Well that happens all the time - but as a natural hedge to business operations in the same country.  See also BRK issuing debt in JPY to offset its ownership of the Japanese trading firms.

 

could be backed by or pay interest in gold, Bitcoin, etc. if things got really bad. 

 

When has the ever issued Treasury securities denominated in anything other than US dollars?  Why would it...ever...?

 

the US remains such a bad debtor. 

 

Lol - the US is such a " bad debtor" that the rest of the world willingly net exports to the US in order to save a portion of its rising wealth in US dollars and US dollar assets.

 

Bill

 

 

Edited September 15, 2025 by wabuffo

[Eldad]

2 minutes ago, wabuffo said:

Corp bonds could be issued in another currency

 

Well that happens all the time - but as a natural hedge to business operations in the same country.  See also BRK issuing debt in JPY to offset its ownership of the Japanese trading firms.

 

could be backed by or pay interest in gold, Bitcoin, etc. if things got really bad. 

 

When has the ever issued Treasury securities denominated in anything other than US dollars?  Why would it...ever...?

 

the US remains such a bad debtor. 

 

Lol - the US is such a " bad debtor" that the rest of the world net exports to the US in order to save a portion of its rising wealth in US dollars and US dollar assets.

 

Bill

 

 

There were US Civil War bonds with interest and principal paid in gold. Many other examples Pine Creek Railway company bond interest paid in gold. Confederate bonds paid in cotton. Very common in hyper-inflation for bonds to switch to a commodity. 

[Red Lion]

1 hour ago, TwoCitiesCapital said:

 

That is the most probable course of action unless if you get a hung Congress. Given that 'Trump was sent to destroy the "Establishment"', I don't view the latter at 0% probability. 

 

But the point doesn't have to be if it WILL default. The point would be that enough people assume that it's a high enough probability to warrant wanting the extra protection of an additional payee on the bond. Right now mortgages trade exceptionally wide of treasuries, but I can envision a future where they trade at a slight negative spread of confidence is wanting in the Federal government. 

 

 

Show me the last time Congress cut spending

 

I think that's probably a less likely outcome than a hung Congress. Especially since I we have a President who rules by decree. Why not just decree all bonds coming due to be due in 20-years instead?

 

"It's not a "real" default! You'll get your money!"

 

 

 

Sure. Nobody is saying buy mortgages. Just that I envision a non-zero probability that they'll be less risky than treasuries at some point in the future. 

All this makes sense, and I hope you’re right about tightening mortgage spreads. I agree congress won’t cut spending, but it seems more likely to me than allowing the country to default. 
 

The new populist maga crowd might not be so opposed to printing money to payoff the national debt. Maybe the one thing we could get bipartisan support for in this day and age. 

[Eldad]

https://www.bundesbank.de/resource/blob/616602/e6a2f4aef2190c3ae1d28fe0fb6e9534/472B63F073F071307366337C94F8C870/rye-money-and-rye-loans-during-the-weimar-republic-data.pdf
 

Interesting blip about Rye and other commodity backed bonds in the Weimar Republic.

[gfp]

32 minutes ago, Red Lion said:

printing money to payoff the national debt

 

You guys don't seem to get it.  "money" is the national debt.  The only thing the government accepts when you "loan" them money is their own IOUs.  There is no big difference between a dollar in a your checking account, Berkshire's 3 month treasury bills, or a 30 year bond they had to find kind stranger creditors to buy.  It's all government IOUs.

 

 

[Red Lion]

16 minutes ago, gfp said:

 

You guys don't seem to get it.  "money" is the national debt.  The only thing the government accepts when you "loan" them money is their own IOUs.  There is no big difference between a dollar in a your checking account, Berkshire's 3 month treasury bills, or a 30 year bond they had to find kind stranger creditors to buy.  It's all government IOUs.

 

 

 

I do actually get this, at least on an amateur level. 

 

But I was talking about hypotheticals since we were talking about French government debt trading at a higher yield than French corporate debt. I think it's a very different situation than France which isn't borrowing in a currency where it maintains complete control. You said it way better, the only thing the government accepts is their own IOU. 

 

In a theoretical world Congress can just say, screw it, we are going to coin money to pay IOUs instead of refinancing them. I don't think this is actually going to happen, but I don't think France has the same flexibility. 

[Gregmal]

I think all yall are missing the point. A junk bond might trade at a huge spread and eventually be repaid…no harm no foul. It’s perception of creditworthiness that drives a lot of the “in between” from issuance to extinguishing. I can and do sometimes own long duration things for short or mid duration purposes. In such an instance a bond or note with 15 years til expiration might behave better or worse depending upon the microphone of the moment.

[bizaro86]

5 hours ago, wabuffo said:

Yeah those texts book were written by Americans during our golden age (1950s) Truth is kingdoms, nations throughout history have defaulted fairly often. 

 

I feel this bears constant repeating.   A sovereign cannot default on bonds/securities issued in a currency it controls and is in a floating regime (ie, not pegged to another currency or gold).   

 

 

 

A sovereign could CHOOSE not to repay debt denominated in a security it controls.

 

Personally, I'd have more faith that the US courts would make Microsoft pay me if it could but didn't want to vs making an administration (of any party) pay me if it could but didnt want to.