Podcast
[1]Discussing bonds, Federal Reserve activity and the impact they have on the bitcoin market.
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On this episode, "Bitcoin Bottom Line" hosts Steven McClurg and C.J. Wilson met to discuss bonds and crypto.
Wilson opened by asking McClurg what changes he has seen in the bond market. McClurg stated that when it comes to bond yields, the Federal Reserve tightens and makes it more expensive to borrow. More prominent institutional investors must have a certain amount of their assets in fixed income for safety; therefore, large institutions will push the yield down for companies issuing debt that should go out of business. Sears and Toys "R" Us survived longer than they should have, while Nordstrom is struggling to keep its doors open and cannot get credit to buy inventory. As the Fed begins to tighten, it increases the size of its balance sheet by continuing to expand the upper growth of purchasing. McClurg believes that the market is finally starting to price in tapering but has failed to price in interest rate heights.
This year, the Fed has mentioned three types of interest rate heights, meaning it will increase short-term rates. McClurg predicted that with a 10-year going to 188, which was previously down around 1%, it will cause the refinance rates for borderline companies not to afford their debt service; meaning they cannot afford the interest payment on their new debt, causing them to refinance continually. McClurg explained that the U.S. government’s treasury department is selling and buying the bonds. It is issuing debt to pay for government spending, but nobody else is buying it, so the Fed is needing to step in and buy
