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● Treasury Yields – Fear Grips Markets

2024 Global Treasury Market Turmoil: Soaring US and Japanese Treasury Yields, Reasons for Dollar Value Decline, and a Summary of Key Market Forecasts

This article summarizes the issues of the rapidly rising US Treasury yields, the possibility of Trump's tax cut passage, the US credit rating downgrade, and the Japanese ultra-long-term Treasury market, all of which are currently shocking global stock and financial markets, and investors.
The latter part of the article comprehensively covers the relationship between rising Treasury yields and the dollar index, the interpretation of actual investment market reactions, and future prospects.
We provide detailed explanations by dividing each issue into groups for easy understanding.
In particular, we naturally incorporate top economic keywords such as the US, Japan, the global economy, financial markets, the dollar, macroeconomics, Treasury yields, and credit ratings multiple times.

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1. Facts and Background of the Rapid Rise in US Treasury Yields (Spring to Summer 2024)

Recently, the US 30-year Treasury yield exceeded 5.1%, the 20-year yield entered above 5.1%, and the 10-year yield also exceeded 4.5%, approaching 5%, with market interest rates soaring for both ultra-long-term and long-term bonds.
The rapid rise in Treasury yields means that the 'price' of Treasury bonds is plummeting, indicating that Treasury investors are reducing their purchases of government bonds.
In the case of US Treasuries, in particular, they were once called proven safe assets, but their credibility has recently been undermined.

• Main Causes:
  · Concerns about US fiscal deficits and debt
  · Highlighted possibility of passing a budget including Trump's tax cuts (expected to pass in May)
  · Expectations for prolonged interest rate hike-freeze stance
  · Inevitability of additional Treasury issuance => Expected increase in supply (issuance volume)
  · Decline in investor demand and price decline due to oversupply (=rapid rise in interest rates)

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2. US Budget Passage, Tax Cut Debate, and Credit Rating Issues

• Key Points of Trump's Tax Cuts:
  The logic is that tax cuts will activate businesses and boost consumption → the tax revenue structure can be improved in the long term.
  Immediately, it is inevitable that the fiscal deficit will worsen & Treasury issuance will increase.

• US Credit Rating Downgrade
  Recently, all three major credit rating agencies, including Moody's, have rated the US two notches below the highest rating (AAA) to (AA).
  The background is the accumulation of US debt and lack of fiscal management ability, persistent structural deficits, and the scenario of tax cuts being passed.

• US Congressional Budget Office (CBO) Forecast:
  Due to population aging and increased social spending, tax revenues are expected to increase to 18% of GDP, while expenditures will increase to 24% → The fiscal deficit will be fixed at 6%.
  Risk of further decline in international credit rating.

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3. The Interlocking Relationship Between Rising Treasury Yields and Dollar Value (Macroeconomic Perspective)

• When Treasury yields rise, the dollar value (Dollar Index, DXY) originally shows 'strength', but
  This time, 'weakness' is appearing simultaneously.

• Impact of Interest Rate Increase by Cause:
  · [Due to strong economic fundamentals] → Dollar value strengthens in tandem (money flows into the US)
  · [Due to Treasury supply-demand imbalance and declining credibility] → Dollar value weakens instead (popularity of dollar-denominated assets ↓)

  Currently, it's the second case. Market participants are concerned about the deterioration of the US's future debt, tax revenue, and fiscal balance, slow bond purchases, and the credit rating downgrade, resulting in a decline in the credibility of dollar-denominated assets themselves.

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4. The ‘Decline in Trust’ Phenomenon That Has Swept Even the Japanese Treasury Market

• Even Japanese 20-year ultra-long-term Treasury yields hit a 25-year high.
• Recently, the 'bid multiple' (bidding competition rate) for 20-year Treasury bonds plummeted from 3.5x to 2.96x.
• Investors are accelerating their rejection of Japanese Treasury bonds, which were considered the last bastion of safe assets, expanding distrust in global safe assets.
• As in the US, the causes are structural debt accumulation, population aging, and increased bond supply.

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5. Future Prospects and Interpretation of the Investment Market

• Since the market has already priced in the 'budget' passage itself, it is expected that even if the actual bill passes, it will shake initially but soon stabilize.
• Unless the US benchmark interest rate (4.5~5%) changes in the short term, market interest rates are likely to move within that range.
• In an environment where the premium of global safe assets is gradually deteriorating, both the volatility of Treasury yields and the unusual volatility of the dollar value are likely to continue for quite some time.

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6. Practical Investment Tip/Overall Review

• Even Treasury bonds from developed countries such as the US and Japan are no longer absolute safe havens.
• Be sure to check the linkage with macroeconomic variables such as market credibility, Treasury supply and demand, credit rating, dollar strength/weakness, and interest rate trends.
• Until expectations for a benchmark interest rate cut begin to emerge in earnest at the end of the year to early next year, the highly volatile market is expected to continue.

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< Summary >

The recent simultaneous rapid rise in US and Japanese Treasury yields is due to structural problems such as fiscal deficits and tax cuts, credit rating downgrades, and increased Treasury issuance.
The unusual phenomenon of rising Treasury yields coupled with a weakening dollar is increasing the burden on global market credibility.
In the future, it is necessary to interpret economic movements focusing on the keywords ‘budget passage’, changes in benchmark interest rates, and investor sentiment toward safe assets.

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[Related Articles…]

• [Latest] Economic Impact and Investment Strategies of the Rapid Rise in US Treasury Yields
• [Briefing] Reviewing the Impact of the Dollar’s Weakening on Global Financial Markets

*YouTube Source: [경제 읽어주는 남자(김광석TV)]

– 안전자산도 흔들린다. ‘감세안 통과 공포’…. 미국 국채금리 더 폭등할까? [즉시분석]

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● Money-Happiness Link Revealed

The Other Side of Money, Happiness, and Financial Freedom – Opportunity Costs, Family, and the True Value of Our Lives

This article reveals the true meaning of money in life and the changes in happiness.
It specifically addresses how the simple increase in numbers does not linearly increase happiness, and how the concepts of 'financial freedom' and 'opportunity cost' affect life choices.
It also includes practical economic stories such as family relationships, the correlation between divorce rates and income, and how to resolve conflicts in real life.
The article systematically explains the life cycle created by the flow of money and individual choices, up to the time value of life and future actions.

The Paradox of Money and Happiness: The Relationship Between Increased Income and Happiness

– Economics easily assumes that happiness increases infinitely as income increases.
– In this regard, the ‘Easterlin Paradox’ appears. It states that the increase in happiness noticeably slows down once income exceeds a certain level.
– In reality, the joy of going from 1 billion to 2 billion is less than the joy of going from 2 billion to 4 billion, and 4 billion to 8 billion.
– When it becomes very high (exceeding 10 billion, etc.), the aspects of problems also change, such as family conflicts, inheritance issues, and inheritance tax (50% is imposed in Korea when exceeding 3 billion).
– Happiness does not increase linearly as money increases. The important thing is that happiness can only come when you manage money without anxiety and enjoy economic freedom.

What is Financial Freedom – Freedom of Choice and Opportunity Cost

– Definition of economic freedom: a state where you don’t have to do what you don’t want to do or go where you don’t want to go, and you can entrust things you don’t want to do to others.
– Having this freedom can reduce unnecessary conflicts in relationships (family, work, etc.).
– The core principle of economics, ‘opportunity cost,’ can be applied: it is more profitable in terms of time and efficiency to pay someone to do what they are good at.
– Typical examples: Using external resources for things like housework, driving, and education that don’t necessarily require your time increases life efficiency and satisfaction.

Income, Marriage, and Happiness – Marital Conflict and Economic Conditions

– According to a survey by the Korea Labor Institute, the risk of divorce sharply decreases when the husband’s income is 3 million won or more than 10 million won per month, compared to when there is no husband’s income.
– ‘Money = Trust’ also plays a role in marriage. If economic ‘side jobs’ (reckless spending, indefinite investment, etc.) occur, trust is broken and the probability of divorce increases.
– Influence of familism and collectivism: Conflicts due to family reputation or money issues are particularly fierce.
– Never say anything that attacks the family, such as ‘Why is your family like that?’ as a trigger for divorce.
– Real-life examples: The causes of marital fights can be found in minor housework, education, driving guidance, etc., which can also be resolved by actively using ‘outsourcing’ of time and energy.

The Value of Time and Life Strategy – Efficiency, Immersion, and Happiness

– The healthy lifespan to enjoy ‘experiential consumption’ (travel, leisure, experiences, etc.) with family, children, and health in the future is about 20-25 years.
– Where to spend the remaining precious time is connected to the real ‘value of money’.
– Similarly, for children’s education, it is emphasized that an approach that ‘only advises and praises when asked questions’ is more efficient than directly interfering or guiding.
– Citing Warren Buffett’s retirement case, etc., mentioning the decline in concentration and the risk of self-replication in the second half of life, it suggests that health and time should be well managed.
– In the end, studying for money, the cycle of the market, and investment must also be a means for self-happiness and time.

Investment and Self-Development – Practical Strategies for Reading the Flow of Money

– The first step to financial freedom: You must study the flow of money and the cycle of the market.
– It is necessary to constantly check the latest economic information on ‘money flow’ such as inflation, investment, real estate, and stocks.
– Self-development and ‘optimal allocation’ of your time and energy must be supported to lead to true economic freedom.
– Since the flow of money is constantly repeated, a strategy of reading the major trends in the market and acting accordingly is necessary.

< Summary >
Just because you have a lot of money doesn't mean you're unconditionally happy.
Economic freedom and efficient allocation of time and energy are key.
In families and relationships, money is directly related to trust, resulting in real-world data such as divorce rates.
Emphasizes the time value of the remaining life and experience-centered consumption.
It is important to develop a habit of reading the flow of money and the market through self-development and investment.

[Related Articles…]

• 2024 Global Economic Outlook and Investment Points
• How to Achieve Financial Freedom for Beginner Investors

*YouTube Source: [와이스트릿 – 지식과 자산의 복리효과]

– 돈이 많으면 행복한 이유는 따로 있습니다 / 홍춘욱 대표 (1부)