Veteran investor Peter Schiff said Monday that the bond market has entered a structural bear market that will push Treasury yields far beyond their highest levels since 2007, arguing the surge is just beginning given how much larger the national debt has grown since prior yield peaks.
Not the Same Bond Market as 2007
The 10-year Treasury yield touched 4.78% Monday, its highest since 2007.
“However, in 2007, Treasuries were still in a bull market, with yields headed lower. Now they’re in a bear market, with yields headed much higher,” Schiff said in a post on X.
Sees Room to Run Higher
Schiff added that once the 2006 high of 5.15% is broken, the next targets are the 1999 peak of 6.44% and the 1994 high of 8.03%.
He added that the national debt was “well under $5 trillion” in 1994, compared with more than $40 trillion today.
Charlie Bilello, chief market strategist at Creative Planning, said the national debt has grown by $715 billion since July 1, even as the Treasury doubled its buyback of long-dated bonds to $4 billion per operation.
He called it an approach that “doesn’t solve the underlying problem” of continued heavy borrowing.
The Fed’s Only Real Lever Is More Inflation
According to Schiff, the only way to slow the rise in long-term yields would be for the Federal Reserve to ramp up quantitative easing, but argued that this path would trade one problem for another.
“That just means more inflation and even higher bond yields later, but that’s the choice politicians always make,” he said. “That’s why we choose gold.”
Warsh’s Hawkish Turn Is Already Hitting Wallets
The 30-year Treasury yield climbed to a 19-year high this month as investors continued to weigh inflation concerns, pushing longer-term borrowing costs higher across the board.
Fed Chair Kevin Warsh‘s hawkish Jackson Hole speech on Friday pushed the odds of a September rate hike as high as 66.4%, according to the CME FedWatch tool.
Responding to a user who asked what an 8% 10-year yield would mean for mortgages, Schiff said it would send mortgage rates above 10%.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image via Shutterstock/ William Potter
