By Gregory Mannarino, TradersChoice.net

Last week Bloomberg reported this: “The Bond Market Has Not Flashed a Warning Sign for This Long in Over Six Decades.” 

The world debt market consists of essentially promissory notes, a constant and ever-expanding debt black hole with no end in sight. But today, nations around the world have become totally dependent on borrowing epic and ever-increasing amounts of cash directly from their respective central banks just to function day to day.

Moreover, this already enormous amount of borrowing is only going to skyrocket from here. Ever increasing perpetual debt, with interest alone costing more and more to service every day, sucking an unknowing public totally dry. A twisted debt-based system, an out-of-control debt super-spiral which was destined to fail from its inception! Taking the middle class with it.

Over the last six weeks, the world debt market has been selling off at a rapid pace, causing bond yields to spike. This spiking in bond yields is a direct result of the debt market selling off, which in turn has put increasing pressure on world stock markets. (Nations such as China and Saudi Arabia are dumping large amounts of U.S. debt onto the market, which is a trend that will continue and expand.)

Today, the pace at which the bond/debt market is selling off is alarming.

Rapidly rising bond yields is a clear signal that there is increasing instability in the debt market. Instability in the debt market puts pressure on world stock markets.

The stock market itself derives value from action in the debt market. A stable debt market with low yields allows cash to flow into stocks, and never in the history of the world have central banks kept rates/bond yields this low for this long.

Central banks have been extremely successful in inflating the biggest stock market bubble in history by this very mechanism. Central banks working together, keeping rates artificially suppressed since the stock market/economic meltdown of 2008, has created distortions across the spectrum of asset classes to a degree which has never been seen before. 

Today’s hyper-bubbles in both world stock markets and real estate, is a direct result of central banks collectively working together artificially suppressing rates.

Here in the U.S., the yield curve is THE most inverted in history. A downward-tending or “inverted” yield curve means that long term debt is yielding LESS than short term debt. This is a clear sign that something is dreadfully wrong in the economy. 

Inverted yield curves have preceded every economic downturn, recession, and DEPRESSION, in history.

The current rapid selloff in the debt market, which is causing bond yields to spike, is pathognomonic of serious underlying problems in the financial system. 

Today, the rapid rising of bond yields is a RED FLAG for the debt market, stock market, AND real estate markets.