The Bond Bubble

NEW -> Contingent Buyer Assistance Program
Schools First is my credit union and they have my wife and I both perma-approved for $50k car loans with no credit checks needed.  I think they do a soft pull, but not a hard pull and tailor the rate based on that.  I haven't checked after the most recent rate increases, but I'm sure the car loans are still in the low 2%'s.
 
eyephone said:
Did they run his credit in advance? It?s like receiving blank checks from credit cards. (just taking a guess)
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Well, CCs will charge you like 25%+ interest and a usage fee for using those checks, so they mitigate that risk by loan sharking your face.

I'm with NSR, is there a balance with the CU that justifies this no credit check loan?

Although I found that getting a loan though a CU is pretty easy, I could easily get a $50k loan from them without having a balance... but they do pull credit for new members. Maybe as an existing member it's a soft pull like LL said.
 
School first is so funny. I did the same thing in 2006 when I bought a suburban. They asked me over the phone how much I wanted, told them $35000, and I was astonished that the cash showed up in my account the next day. I called them and the guy told me they?d send me a payment booklet in a week or so. I could have run off to Vegas with the dough and they would take weeks to figure it out. I love that place.
 
2006 was a different time.

You can get $1m to buy a home without many hoops to jump through. I was self-employed during that time and it wasn't that hard.
 
The "quoted" rate was 3.99%, but due to LTV and direct payment withdrawal I walked out with 3.49% for a used vehicle loan. 
Not sure if they did a soft pull, but the lending agent and I had a pretty clear conversation about "running my credit".  I told her to wait to pull my credit until the purchase was certain and, after punching a few things into her magic station, she informed me they would not have to run my credit at all.  There may have been a soft pull involved, but I would have thought she would mention it at the time.

I have been a member there for 20 years.  Long, long ago they may have seen 6 figures in my accounts, but for probably at least 10 years now I rarely had more than $15k in my accounts at any time.  The interest difference I get from other banks is too great to ignore.  I've never had a mortgage with them, just 2 proir car loans, the last of which closed 10 years ago.
 
This is a lending bubble if at all not a ?bond bubble ? ? two totally separate things

And this is the direct result of loose regulation post 2016 ? witness the ?bubble ? in direct  online lending to consumers

Autos, personal loans = loose ,  kinda like 06
Housing = still nowhere near 2006

And small regional banks are a LOT more aggressive than the big national mega banks

But let?s grant that there is a ?lending bubble? - what happens when it bursts ? do bond prices go up or down ? 
And then think of what generally happens to prices of anything when a so called bubble in that ?thing? bursts ... there is your answer !
 
Cares said:
And our yield curve is inverted!
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Well, one part of the yield curve is inverted: 3Yr over 5Yr.  I think traditionally Wallstreet watches the 2Yr over 10Yr as a sign of recession.  Personally, I like the 3-month T-Bill over the 30Yr.  That's when you know all hell is about to break loose.
 
I had a similar experience as before buying a(nother) car from CarMax today.

Told my CU what I wanted to do, and the agent emails me back with a preapproval for $50k, again without running my credit.  Rate quoted @ 3.65% for a used car, though I'm not sure that included the direct payment withdrawal discount.

So I'm out at a CarMax in BFE, and unlike my prior experience, they refused to hold the car for me, even though I was willing to sign a purchase contract.  I've been looking for months to find this car, and I didn't want it to get away, plus it's a long drive back from BFE, so I finance the whole thing at CarMax.  After running my credit (bummer!) they gave me a 2.95% rate.  I intend to just pay it off in 2 days with a check from my CU, so I fax my CU the purchase agreement, and my CU comes back with 2.99%, which is their absolute floor per the agent, and still without running my credit.  Close enough.  I drove home in my forever vehicle, and I'll pick up a check from my CU tomorrow and pay off the CarMax loan on Saturday.
 
Now back to our regularly scheduled bond implosion.

This Is Now The Worst Drawdown on Record for Global Fixed Income

The Bloomberg Global Aggregate Index, a benchmark for government and corporate debt total returns, has fallen 11% from a high in January 2021. That?s the biggest decline from a peak in data stretching back to 1990, surpassing a 10.8% drawdown during the financial crisis in 2008. It equates to a drop in the index market value of about $2.6 trillion, worse than about $2 trillion in 2008.
https://www.bloomberg.com/news/arti...es-deepen-to-11-from-2021-high-most-on-record
 
For 45 years, from 1952-1997, the ratio of household net worth to GDP was in a tight range between 320-400%.  Starting with the dotcom bubble, and continuing with the subprime bubble, and now the current collection of bubbles, this ratio has continued making new highs.  Notice the enormous jump in household net worth that occurred in 2020. 

We were already in a pretty solid "everything bubble" from 2014-19 thanks to QE infinity, but the unprecedented money printing that began in 2020 sent household net worth into the stratosphere.

For household net worth to get back in line with historical averages, all investable assets (stocks, real estate, bitcoin, etc) would need to fall 35% simultaneously.

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Poor IrvineCommuter used to argue that there was no bond bubble.  I wonder if he still believes that.

The Great Bond Bubble Is ?Poof, Gone? in Worst Year Since 1949

Week by week, the bond-market crash just keeps getting worse and there?s no clear end in sight.

?Bottom line, all those years of central bank interest-rate suppression -- poof, gone,? said Peter Boockvar, chief investment officer at Bleakley Advisory Group. ?These bonds are trading like emerging market bonds, and the biggest financial bubble in the history of bubbles, that of sovereign bonds, continues to deflate.?
https://www.bloomberg.com/news/arti...-bubble-is-poof-gone-in-worst-year-since-1949
 
Liar Loan said:
Poor IrvineCommuter used to argue that there was no bond bubble.  I wonder if he still believes that.

The Great Bond Bubble Is ?Poof, Gone? in Worst Year Since 1949

Week by week, the bond-market crash just keeps getting worse and there?s no clear end in sight.

?Bottom line, all those years of central bank interest-rate suppression -- poof, gone,? said Peter Boockvar, chief investment officer at Bleakley Advisory Group. ?These bonds are trading like emerging market bonds, and the biggest financial bubble in the history of bubbles, that of sovereign bonds, continues to deflate.?
https://www.bloomberg.com/news/arti...-bubble-is-poof-gone-in-worst-year-since-1949
Click to expand...

this is the root story for all asset valuation distress and volatility we're currently witnessing
 
OCtoSV said:
Liar Loan said:
Poor IrvineCommuter used to argue that there was no bond bubble.  I wonder if he still believes that.

The Great Bond Bubble Is ?Poof, Gone? in Worst Year Since 1949

Week by week, the bond-market crash just keeps getting worse and there?s no clear end in sight.

?Bottom line, all those years of central bank interest-rate suppression -- poof, gone,? said Peter Boockvar, chief investment officer at Bleakley Advisory Group. ?These bonds are trading like emerging market bonds, and the biggest financial bubble in the history of bubbles, that of sovereign bonds, continues to deflate.?
https://www.bloomberg.com/news/arti...-bubble-is-poof-gone-in-worst-year-since-1949
Click to expand...

this is the root story for all asset valuation distress and volatility we're currently witnessing
Click to expand...

Yes, absolutely... And it's been more than a decade in the making.  Not only did it distort asset prices, but it distorted investor's perceptions of the world, which is why there's still so much hope that this downturn is over. 

Unfortunately, the Fed and Treasury have been running up the credit card for 20 years and now the bill has finally come due.  There's no way this downturn can finish unwinding in a matter of months.  We have years of PAIN in store.
 
I'm more interested in how our federal government is going to borrow money at these higher rates.


Interest-national-debt-july-2022-chart-3.jpg



Does this matter?
 
Peterson is the most chicken-little outfit that exists.

let me guess, they are projecting interest rates only go up, forever?
 
The worst year for bonds in US history is upon us.

NYT: Bonds May Be Having Their Worst Year Yet

Vanguard posts handy benchmarks for broad stock and bond returns on its website that go back all the way to 1926. It has found that the worst calendar year for bonds in that period was 1969, with a return of negative 8.1 percent. That means that if 2022 were to end today, it would be much nastier for bond investors than what has until now been the worst year in nearly a century.

In fact, this year?s misery looks extraordinary on a much longer historical scale. Professor McQuarrie has compiled U.S. bond returns going all the way back to 1794. ?You can safely say that through Tuesday,? he said, ?U.S. bond returns are the worst ever recorded.?
https://www.nytimes.com/2022/09/30/business/bonds-market.html
 
Once the Fed is about done with raising rates, it might be a good time to buy 2-year bonds if they are offering 4.50% - 5.00% yields.  If you get a Fed pivot within a year you can also get price appreciation on the bonds too and double dip.
 
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