Investors Flee U.S. Treasury Bonds

Benchmark 10-year United States Treasury yields hit a 16-year-high last month after the Federal Reserve surprised investors by flagging the potential for additional rate hikes. You can get a 4.8 percent return-on-investment by buying Treasuries—yet no one seems to want these bonds.

The market for Treasuries has shed almost a quarter of its value since the start of the covid-19 pandemic, meaning the world may be experiencing the biggest U.S. Treasury bonds sell-off of all time. The outbreak of the Civil War was the last time people were dumping Treasuries near this fast.

Losing confidence: Treasury bonds were once considered one of the safest investments in the world. But formerly reliable buyers of U.S. debt are pulling back because America is now spending one fifth of its tax revenue on interest payments for its national debt.

A decade ago, China and Japan together held more than 22 percent of U.S. government bonds. European and Middle Eastern buyers are also pulling back, as are domestic buyers. Bank of America sold half of its Treasuries this year.

Economic malaise: Loss of confidence in Treasury bonds is a major challenge for the U.S. government. Since it routinely spends $1 trillion more than it collects in taxes each year, it relies on bond sales to keep the government running. If investors stop buying bonds, the government will be forced to slash spending, raise taxes, or start printing money.

Slashing spending is the last thing that socialist-leaning politicians in Washington, D.C., want to do, so the latter two options seem the most likely. This means less take-home pay and more inflation are on the horizon for U.S. citizens. You cannot spend beyond your means for decades without consequences.

Bible prophecy: God taught the Israelites that blessings come from obedience to His laws and curses come from disobedience. In Deuteronomy 28, God warned that debt problems are one of the many curses for disobedience. Specifically, He warned that if the nations of Israel turned away from Him, strangers would lend them money, but they would not lend to others.

America’s economic woes are not the cause of its problems. Instead, they are one of the many symptoms that point to the greater problem: rebellion against God’s law.

Learn more: Read “The Party and the Crash.”