# Treasuries Look Ready to Break (and what happens when they do) Source: https://www.youtube.com/watch?v=AqE53pD4m3U Recap page: https://rapidrecap.app/video/AqE53pD4m3U Generated: 2026-01-26T14:33:16.588+00:00 --- ## Quick Overview Treasury yields are signaling a potential break to the upside, which implies that if yields rise significantly (e.g., Fed Funds rate hits 10%), the US government will face much higher borrowing costs, potentially leading to severe inflation if the Fed cannot stop buying assets, as banks are currently restricted by the Supplementary Leverage Ratio from absorbing all necessary debt issuance. **Key Points:** - Gold is on the brink of breaking $5,000 per ounce, acting as a monetary asset against inflation driven by central banks and large funds. - The U.S. Dollar Index has been weakening over the last couple of years, contrasting with rising stock indices like the NASDAQ 100 Index hitting all-time highs. - If the Fed Funds rate drops to 1% (implying lower government borrowing costs), the cost of living (housing, transport, food) has increased by 5%, meaning lenders demand at least 5% return to compensate for lost purchasing power. - The profile of public debt as of December 2025 shows Notes comprise 50.68%, Bills 21.22%, Bonds 16.98%, and Other 11.12%, with 72% of debt maturing in under 10 years. - The Fed paused quantitative easing (QE) in 2020 but has recently resumed increasing its balance sheet, which drives up asset prices but also risks severe inflation if they buy too much debt. - Banks are currently restricted by the Supplementary Leverage Ratio from buying all necessary US Treasuries, creating a funding gap that the Fed may eventually have to fill, likely through the printing press. ![Screenshot at 0:04: The chart displays the rising trend of CFDs on Gold \(US$/OZ\) from September to February, approaching the $5,000 mark, illustrating its role as a monetary asset.](https://ss.rapidrecap.app/screens/AqE53pD4m3U/00-00-04.jpg) **Context:** The video analyzes current market conditions, focusing on the divergence between rising asset prices (like Gold and the NASDAQ 100) and the weakening U.S. Dollar, which is historically seen as a safe haven asset. The core argument centers on U.S. Treasury yields, which are threatening to break out higher, and the implications this has for government borrowing costs and the Federal Reserve's ability to manage its balance sheet amid ongoing inflation. ## Detailed Analysis The speaker asserts that the Treasury market is ready to break out, which signals potential trouble, particularly for the U.S. government's borrowing costs. Gold is approaching $5,000/ounce, serving as a monetary asset against inflation fueled by central bank money creation (M2 supply hitting new highs). Simultaneously, traditional equity markets like the NASDAQ 100 are reaching all-time highs while the U.S. Dollar Index weakens. A key issue discussed is the cost of living rising by 5% while borrowing rates might only be around 1% (like a $100 dinner costing $105), meaning lenders require higher returns (at least 5%) to compensate for inflation. The composition of U.S. public debt as of December 2025 shows that Notes dominate at 50.68%, with 72% maturing in under 10 years, creating significant refinancing pressure. The Federal Reserve historically used Quantitative Easing (QE) to buy debt during crises, but recently resumed increasing its balance sheet (Total Assets chart 6:25). If the 10-year yield breaks out higher, the government's borrowing becomes more expensive. Furthermore, banks are currently restricted by the Supplementary Leverage Ratio from absorbing all the new debt issuance, meaning the Fed might be forced to step in and buy again, which could unleash severe inflation if not managed carefully, likely by changing banking regulations. ### Gold and Stock Market Performance - Gold CFDs are nearing $5,000/oz - NASDAQ 100 Index is pushing all-time highs - U.S. Dollar Index is showing weakness ### Government Borrowing Costs - 10-Year Treasury Yield is poised for an upside breakout - If yields rise, borrowing becomes much more expensive for the government - Current yields are around 4.3%, but lenders demand higher returns to beat inflation (e.g., 5% needed if cost of living rose 5%) ### U.S. Debt Structure (Dec 2025) - Notes account for 50.68% of public debt - Bills account for 21.22% - 72% of debt matures in under 10 years, requiring frequent refinancing ### Federal Reserve Policy & Bank Restrictions - Fed resumed balance sheet expansion recently, reversing the 2020 pause - Banks are restricted by the Supplementary Leverage Ratio from buying necessary Treasuries - If the Fed needs to buy debt again, it could trigger severe inflation ![Screenshot at 0:04: The chart displays the rising trend of CFDs on Gold \(US$/OZ\) from September to February, approaching the $5,000 mark, illustrating its role as a monetary asset.](https://ss.rapidrecap.app/screens/AqE53pD4m3U/00-00-04.jpg) ![Screenshot at 0:41: The NASDAQ 100 Index chart shows a strong upward trend from 2023 through early 2026, reaching above 25,000.](https://ss.rapidrecap.app/screens/AqE53pD4m3U/00-00-41.jpg) ![Screenshot at 1:08: The U.S. Dollar Index chart shows a clear downtrend since early 2025, indicating dollar weakness.](https://ss.rapidrecap.app/screens/AqE53pD4m3U/00-01-08.jpg) ![Screenshot at 1:39: The US Government Bonds 10 Year Yield chart shows volatility but is currently trending upward, signaling a potential breakout.](https://ss.rapidrecap.app/screens/AqE53pD4m3U/00-01-39.jpg) ![Screenshot at 1:55: The M2 Money Supply chart illustrates a massive, near-vertical increase starting around 2020, hitting new all-time highs.](https://ss.rapidrecap.app/screens/AqE53pD4m3U/00-01-55.jpg)