By The Financial District
Jul 31, 20231 min
US bond market is on the verge of a "major breakdown" that will boost government debt costs and hurt banks, Euro Pacific Asset Management CEO Peter Schiff said, Joseph Wilkins reported for Business Insider.
Photo Insert: The US bond market meltdown could possibly send government debt costs spiraling and wreck the loan portfolios of vulnerable banks.
That would also send benchmark mortgage rates soaring to 8%, a level unseen since 2000, according to him.
"The #Fed's gonna need a much bigger rate hike!," he said in a tweet.
The US bond market meltdown will send government debt costs spiraling and wreck the loan portfolios of vulnerable banks, according to Schiff, who warned of a crash in Treasuries after benchmark 10-year yields jumped above the key 4% level on Thursday, fueling a selloff in US equities.
Bond yields move inversely to prices.
A debt-market rout would also see the home loan rate surge in line with Treasury yields and this raises the cost of financing the $32.7 trillion National Debt and will crush the loan portfolios of already insolvent banks.
Yields on 10-year Treasuries surged as much as 15 basis points on Thursday to touch a high of 4.02% after official data showed the US GDP rose more in the second quarter than economists had estimated.
The strength of the economy is fueling expectations that the Federal Reserve could continue to raise interest rates in a bid to cool inflation to its 2% target.