Squall for stocks rooted in rise for US bond yields
“Weakness in Treasuries undermines the appeal of the long bull run in equities. . .”
USAGOLD note: Rising rates present problems at many levels in financial markets, not least the cost of carry on all sorts of trades and positions, corporate debt of all kinds and sovereign debt. Positions established in the zero per cent interest rate environment become increasingly a burden as rates rise and create the potential for significant, rapid liquidations – particularly if/when counter-parties make margin calls forcing asset sales. The events of the past two days serve as a healthy reminder of the dangers that come with leverage and derivatives.
As for gold, the potential for a leverage problem is on the short side of the market. For details on what it might unleash, please see. . . .
Gold – A reverse bubble in search of a pin
The victim could quickly find itself the beneficiary