What will happen in the economy if 10 year treasury yields hit 5.3% like in 2003?

Our debt is significantly greater than in 2003, and the M1,M2 supply as well. If buyers get spooked and expect a better return to loan out money to the govt for 10 years it will quite interesting.

I would imagine the S&P 500 would take a 40% haircut.
PM's like gold will tumble to 800 or less an ounce due to the cost to borrow and hold.

It does seem like the market is able to absorb 1.5% on the 10. The Auction today was ok, there were less buyers though than the last few years but enough to keep things calm.

I could imagine how the economy on the street level will get.

 

5.3 will be Armageddon. Doubt we will see it.

 

So I would venture the FED would have to buy as many 10yr notes as possible. I just wonder if at some point the they end up being the only buyers. I wonder how long that could last before it is no longer possible? If that happens it would signal to the world we pretty much entered into some backdoor monetization of debts.

The USD would then start taking a hit and we get stagflation regardless if other countries notice this and lose confidence in the dollar.

 

"What will happen in the economy if 10 year treasury yields hit 5.3% like in 2003?"

 

Yep, this. DISASTER. But how can it be stopped indefinitely? If they keep printing money at a 23% annual clip everyone is going to finally realize that inflation is coming HARD and won't want to touch bonds. If nobody is buying, how to they prevent the yield from going up? I know the Fed can keep buy, but eventually THAT has to stop or else we will be in hyper-inflation territory.

 

I see now that KingofShorts and I were thinking along the same lines. I think the future for this country is BLEAK.

 

We have an aging and ossified leadership pretty much lots of parallels to the last 2 decades of the Soviet Union during the era of stagnation. I am curious to see what happens when a tipping point is crossed.

if 10 year treasury yield of 5.3% is fatal to our economy then we have a real untenable situation because at some point we will cross into the line of monetization of debt the moment the FED becomes the 100% buyer of T-notes just to keep yields from reaching dangerous levels.

The next 15 years will be very critical and will be a make or break period if some corrective action not taken. But is any corrective action possible anymore?

 

Well said. As to your question at the end: I would bet big bucks it is impossible at this point.

 

5.3 won't be necessary to take this house of cards down. We'll head south well before then.

P.S. We're already on the way.

You can't fix debt with exponentially more debt. Period.

 

and yet you can. Granted not forever, but in the long run we are all dead.