US Bonds: Toast?! 😱

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Ah, the pronouncements from the gilded cages of Kohlberg Kravis Roberts (KKR). They, who dwell amongst the $360,000,000,000, have deigned to inform us, the huddled masses, that the Emperor – in this case, US Treasuries – wears no clothes! No longer, they say, does the humble government bond serve as a bulwark against the storms of the market. A shock absorber, they called it. A cushion for the fall. Now? Merely a prickly pear in the garden of investment. 🌵

KKR, that august body whose coffers overflowed with $360 billion by the close of last year, laments that these bonds have ceased their noble function. Bloomberg, that purveyor of financial tidings, carries their lament. One can almost hear the violins, no?🎻

Henry McVey, he who holds the weighty title of KKR’s head of global macro and asset allocation, speaks with the gravitas of a Politburo member addressing the Central Committee:

“During risk off days, government bonds are no longer fulfilling their role as the ‘shock absorbers’ in a traditional portfolio…”

Indeed! The shock absorbers have rusted through! The springs have sprung! The carriage rattles and shakes! And what is the solution, comrades? Flight! 🏃‍♂️

“Many CIOs are considering moving assets out of the United States toward other parts of the world.”

Run, you capitalists, run! Flee the sinking ship! Abandon the motherland! (But do remember to send back remittances, eh?) 🤔

McVey, ever the astute observer, also notes that the US dollar, that symbol of American might, is a mere 15% overvalued. A weaker greenback, he predicts, looms on the horizon, like a storm cloud gathering over the steppes. All thanks to President Trump’s… *unique* trade agenda. (One shudders to think.) 😬

“The traditional role of U.S. government bonds in many global portfolios will become more diminished… The reality is that the US government is burdened with a large fiscal deficit and high leverage, and its bonds are likely over-owned by many global investors who have benefited from both positive interest rate differentials and a strong US dollar.”

Ah, the truth seeps out, like water from a cracked dam! The government, burdened by debt, groaning under the weight of its own extravagance! And the bonds, over-owned, over-valued, ready to crumble like a poorly constructed Potemkin village! 🏚️

And as if to underscore the point, Moody’s, that grim reaper of credit ratings, has lowered America’s standing from AAA to AA1. A mere notch, perhaps, but a notch nonetheless. A sign of the times. A harbinger of… well, something unpleasant. 😟

Moody’s, in its infinite wisdom, attributes this downgrade to the nation’s soaring debt and the exorbitant interest payments. We are, it seems, paying more to borrow than our peers. A shameful state of affairs! 😠

“As deficits and debt have grown, and interest rates have risen, interest payments on government debt have increased markedly.

Without adjustments to taxation and spending, we expect budget flexibility to remain limited, with mandatory spending, including interest expense, projected to rise to around 78% of total spending by 2035 from about 73% in 2024. If the 2017 Tax Cuts and Jobs Act is extended, which is our base case, it will add around $4 trillion to the federal fiscal primary (excluding interest payments) deficit over the next decade.”

So there you have it, comrades. The bonds are failing, the dollar is weakening, the debt is mounting, and the credit rating is slipping. A perfect storm, brewing on the horizon. Perhaps it is time to invest in… turnips? 🥕

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2025-05-20 21:46