Rising US rates will break something big very soon

I’m back in the office after a short vacation. It’s always great to step back a little and have some time off. Being detached for a little while helps you see the trends and market developments clearer. Less noise is many times, more helpful.

Upon my return (I was watching during my break) I can’t help but ignore the huge rise in US 10 year government rates. I’m fairly certain at some point in the next few weeks or months, something big in the markets is about to crack. The world’s financial system is very heavily exposed to US government debt and rising yields are going to be very painful for many portfolios.

When things break, as they did in the UK this time last year, regulators and central banks are going to be there to step in and contain any damage.

It’s not about if, but when.

Globally, things are far from straightforward. There are numerous factors at play, from geopolitics to domestic economic policies. However, through this complex backdrop, the Australian real estate market has shown a commendable steadiness. It's managing to weather the storm and even offers pockets of opportunity.

But a US 10 year yield with a 5 in front of it is certain to break something big in the coming weeks. I discuss how and why in the video above.

Peter Esho is an economist and Founder of Esho Group. He has 20 years of experience in investments and markets.