A very weak auction of American bonds caused long-term interest rates to rise once again and the stock markets to rally.

But this is not an isolated event. It is the continuation of a movement that has been putting pressure on the market for weeks.

And this pressure is putting Donald Trump in a corner!

The US Treasury attempted to sell $16 billion in 20-year bonds.

Demand was very weak, forcing the government to accept paying higher interest rates than the market projected.

The yield came out at 5.047%, above the expectation of 5.035%.

This seemingly small deviation represents a relevant level of stress in the fixed income market.

In technical terms, this is called a “tail”.

This means that the Treasury had difficulty attracting demand and had to offer a higher premium than the market expected.

The message was clear : o the market wants higher interest rates to carry American risk.

The impacts:

Long-term interest rates rose rapidly after the auction, and the stock market turned negative.

The S&P 500 fell 80 points in less than 30 minutes.

It was not a catastrophic fall, but rather a clear reaction to the tension with debt and interest rates.

The indexes closed as follows:

•Dow: -817 pts (-1 , 91 %) •S&P: -95 pts (-1 , 61 %) •Nasdaq: -270 pts (-1 , 41 %)

It is important to emphasize that all of this did not start today!

US debt has now surpassed 100% of GDP.

Moody's projection is that it could reach 134% by 2035.

The market is paying more attention to this every day.

💣 The real problem:

Interest on the debt alone could consume nearly 1 in every 3 dollars collected by the government in the coming years.

This is the type of situation that creates less space for public investment, less room to cut taxes and more pressure on interest rates.

The yields are as follows:

•10 years: 4.597% •30 years: 5.085%

Virtually the highest levels since 2007.

And there is a major aggravating factor:

Japan, the largest foreign creditor to the US, is also facing its own fiscal crisis, which is now beginning to spill over into global markets.

The repercussions are in the interest rates:

•Japan's 30-year bond is now paying 3.15%, the highest level in 25 years. •The 40-year-old reached 3.6%, a historic record.

Japanese Prime Minister Shigeru Ishiba himself threw sh… in the fan:

“Japan’s fiscal situation is worse than Greece’s.”

The Bank of Japan has begun a movement to raise interest rates and reduce the purchase of government bonds.

What held back the dynamics of Japanese debt… no longer holds back.

This has direct implications for the US:

If Japan needs to finance itself, part of that liquidity comes from the sale of US Treasuries.

When this happens, the consequence is simple: less demand, bond prices fall, interest rates rise.

🇨🇳 Worst of all : o risk doesn't stop in Japan:

Foreigners hold 33% of US debt — more than $8.5 trillion.

Japan and China alone account for almost US$2 trillion.

If these players start to reduce exposure, pressure on yields is inevitable.

The background is extremely delicate:

•US deficit at 7% of GDP. • Huge public spending. •Inflation that raises doubts. •And a Fed making it clear it won't cut rates any time soon.

🌎 There is potential for overflow around the world:

High interest rates abroad = dry liquidity worldwide.

•Stronger dollar. •Pressure on the stock market. •More expensive credit. •And high risk in emerging markets.