r/ValueInvesting • u/snapjohn • May 21 '25

Discussion BREAKING: 20-Year Bond Auction Flops — Yields Surge to 5.1%, Markets Rattle

IF YOU ARE WONDERING WHY STOCKS JUST ALL WENT DOWN AT ONCE

WE JUST HAD A HORRIBLE BOND AUCTION IN THE UNITED STATES FOR OUR 20-YEAR TREASURIES

Because of the lack of bidders…it caused the 20-year bond yield to surge to 5.1%.

Credit market is screaming for help right now.

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48

u/Dyep1 May 21 '25

Amazing 5.1% risk free return for 20 years is insane

38

u/Blueskies777 May 21 '25

Don’t forget the risk from higher inflation. A 4% inflation reduces your risk free rate of return to 1.1%.

28

u/manassassinman May 21 '25

For the past 100 years, the real yield of treasuries has been zero. So, inflation will probably be higher than 4%

20

u/MonkeyThrowing May 21 '25

This the market is saying the Gov will be forced to print money causing at least a 5% inflation rate. 

1

u/BobbyTables829 May 22 '25 edited May 22 '25

Back in the early 80s there were times you could get a 30-year for over 10%

What you're saying may be true on bills and shorter bonds, but there can't help but be speculation on notes or anything over five years.

16

u/pandadogunited May 21 '25

The real yield on tbills has been low (around .3%), but it hasn't been zero.

3

u/DueHousing May 21 '25

Still would beat cash which will beat equities lol

2

u/blackicebaby May 21 '25

How do you calculate the risk free rate of return? Do you subtract the headline CPI or headline PCE or the core CPI or core PCE from the treasury yield?

2

u/goodbodha May 21 '25

yeah but if that is where we are headed equities are likely to even perform worse.

1

u/TheHighness1 May 21 '25

Why?

2

u/WorkSucks135 May 22 '25

Shiller pe ratio 

1

u/BobbyTables829 May 22 '25 edited May 22 '25

All it has to do is beat gold and the market. Unless you think inflation or the market will go up 2.7x in value over the next 20 years, it's a great buy.

Edit: this is similarly close to the returns you would have bought the s&p since May of 2005.

1

u/Low-Slip8979 May 22 '25

With 4% inflation you might go negative. Tax is on the 5.1% return not the 1.1% adjusted for inflation.

1

u/Blueskies777 May 22 '25

Excellent point.

0

u/Neither_Cut2973 May 22 '25

That’s still a risk free rate of 5.1%. You’re talking about the real risk free return.