Global bond yields are flashing a multidecade warning... What 30-year Treasurys are telling us... Irresponsible budgeting... Home Depot: 'Frozen housing market conditions'... We're heading toward a credit crisis... How you can profit from it...
The bond market is talking again...
And when it does, it pays to listen.
This week, the 30-year U.S. Treasury bond yield touched its highest level in roughly 19 years – around 5.3%. That's a level we haven't seen since 2007, the year before the last financial crisis got underway in earnest.
And this isn't just a U.S. story...
Government borrowing costs are rising almost everywhere around the world at once.
Japan's 10-year bond yield just hit a 30-year high. Germany's 30-year yield is the highest it has been since 2011. France's 30-year bond yield reached a level not seen since 2008. And U.K. government bonds have followed the same path upward.
The latest flashpoint is the White House's standoff with Iran, which is keeping oil prices elevated and raising inflation concerns.
As we wrote yesterday, there's seemingly no end in sight to the oil and gas supply disruption in the Middle East, yet there's plenty of global demand for energy.
However, if you've followed our work over the years, you know the deeper story isn't about the conflict with Iran. Rather, it's about decades of government-driven inflation, the steady (and sometimes fast) devaluation of the U.S. dollar, and irresponsible fiscal spending – not to mention monetary policy.
Last week, the story took a new turn...
At a regular auction, the U.S. Treasury sold $25 billion worth of 30-year bonds at a 5.216% yield, the most expensive 30-year bond sale since 2001.
Not only that, but demand was weaker than expected, according to the independent Committee for a Responsible Federal Budget.
The latest bond-market action is driven by two big things: the pace of inflation – 3.4% in July, based on the consumer price index – and the U.S. government's soaring spending and deficits.
Not coincidentally, Uncle Sam also reported last week that the U.S. fiscal deficit rose to more than $432 billion in July. That's its highest monthly total since March 2021, which made the year-to-date deficit nearly $1.8 trillion.
Interest alone on the roughly $40 trillion national debt this year has cost the government $1.2 trillion, which exceeds the amount allocated for defense spending.
Meanwhile, the cost of borrowing is rising for consumers and businesses too because nearly every interest rate that touches your life – mortgages, auto loans, credit cards, business financing – is directly or indirectly influenced by these benchmark government rates.
One example: When I (Corey McLaughlin) closed on my current home about a year ago, I had a mortgage rate of 6.75%.
I anticipated maybe refinancing within a year, and wouldn't you know it, in February, rates were dipping to 6%. I got in contact with my broker in case rates continued to move lower.
No such luck. A couple of days later, the war in Iran began... Treasury yields rose... and mortgage rates, which often follow them, did too. Today, the average 30-year mortgage rate sits almost exactly where it was a year ago.
A bigger point? The housing market – a big chunk of the economy – remains a tough nut to crack for a lot of Americans, and activity has slowed to a crawl. That's not likely to change anytime soon.
Just this morning, retailer Home Depot (HD) reported quarterly earnings. Chief Financial Officer Richard McPhail referred to "frozen housing market conditions," though the company beat Wall Street analyst expectations.
Meanwhile, the new Federal Reserve is watching...
Last month, Fed Chair Kevin Warsh chalked up already-trending-higher bond yields and their widening gap compared with the federal-funds rate to a strong economy, rather than them being a warning sign about inflation... or a signal that the central bank should raise its benchmark rate to slow inflation.
So the Fed held rates steady last month, while Warsh maintained that the Fed still takes inflation seriously.
He'll take the stage later this month at the annual central-banker confab in Jackson Hole, Wyoming. Perhaps we'll hear a different message then.
But for now, what Warsh and the Fed are saying and doing are two different things. And our Credit Opportunities editor Mike DiBiase thinks that gap matters a lot more than most investors realize.
There's some politics involved, as always...
As we all know, President Donald Trump is in favor of lower interest rates, generally speaking, and repeatedly criticized previous Fed Chair Jerome Powell for not cutting rates. So far, Trump hasn't said anything (at least publicly) about wanting Warsh to lower rates, though that could happen.
Mike shared the following note with us last night, updating a thesis he originally shared with Credit Opportunities subscribers in January...
With midterm elections only a few months away and another presidential election for his party a little more than two years away, I expect President Trump to repeat Richard Nixon's mistakes of the early 1970s.
Nixon's approval ratings were plunging, just like Trump's today. So he pressured then-Fed Chair Arthur Burns to turn on the money printer and unleash massive monetary stimulus. Nixon won the 1972 election in a landslide. But it caused inflation to soar from around 3% on election night to 11% by the time Nixon resigned less than two years later.
The only way to force today's long-term Treasury rates down is to resort to massive quantitative easing, or QE. That means the Fed printing money to buy 10-year and 30-year bonds. That might work for a brief period, but it's going to result in a massive resurgence of inflation.
I think the next financial crisis is much closer than folks think.
Mike isn't just speculating here. He has spent years studying the relationship between the money supply and inflation. And as regular readers know, he correctly called the inflation surge of 2021 to 2022 before almost anyone else was talking about it.
His outlook is rooted in a simple idea...
Big, fast increases in the money supply eventually show up as inflation, with a lag of a year or two.
As Mike pointed out in our Sunday Masters Series, America's money supply has now grown for 26 straight months, and the pace of gains has been picking up. As Mike said...
The money supply increased around 5.6% year over year in both May and June, its fastest monthly increases since 2022.
By the middle of 2027, I believe these money-supply increases will begin pushing inflation higher again. Inflation has already been rising because of soaring oil prices caused by the war in Iran. But even without the temporary supply shocks, I believe inflation was headed higher anyway.
If Washington leans on the Fed to cut rates, or even keep them steady, and resumes QE heading into the midterms, Mike believes that would set the stage for a larger inflation spike... followed by a much bigger bill coming due.
And it wouldn't just be inflation. Mike believes money-supply increases will trigger something the market hasn't experienced at length in nearly two decades: a genuine credit crisis, where liquidity dries up.
The next credit crisis... and the strategy built for it...
A credit crisis is a period when interest rates rise, bankruptcies climb, and lending standards tighten considerably.
Companies that leaned on cheap refinancing for years suddenly have to borrow at much higher rates, if they can borrow at all. As more of these companies get cut off from credit, investors realize that the bonds they're holding carry real default risk.
Fear takes over. And because the corporate bond market is far less liquid than the stock market, prices don't just dip – they crash. Think of 2008... or more recently, the March 2020 pandemic panic, which was relatively short. Companies will go bankrupt.
Ahead of these periods, you'll want to protect your portfolio, stocks included.
But while most investors think of a credit crisis purely as a threat, Mike sees it differently. As we said in Sunday's Masters Series, a credit crisis is "one of the best times to profit" – if you know where to look.
You see, when credit tightens and fear spreads through the bond market, selling isn't limited to the weakest companies. Because corporate bonds trade in a much thinner market than stocks, panic-selling can hit indiscriminately. The panic spreads to perfectly healthy companies' bonds.
A $1,000 bond, even on "good debt," can suddenly trade for a few hundred dollars, regardless of whether the company behind it can still pay its bills.
The gap between price and reality is where Mike finds opportunity...
If the underlying company is still sound, a bond bought at a steep discount pays you twice: in the form of a higher effective yield on the discounted price you paid and in the form of a gain as the bond's price recovers toward face value over time.
It's a way to target equity-sized returns while holding a security that comes with legal protections that stocks don't have.
Even better, Mike doesn't have to guess when conditions are ripe. He watches the high-yield spread – the extra yield investors demand to hold risky "junk" bonds over safe Treasurys. When it spikes to a certain level, it's a crisis signal.
Mike has applied this approach before. During the market panic in March 2020, his team quickly moved into eight distressed bonds while everyone else was selling. Every one of those positions closed above face value in less than a year, with an average holding period of roughly 112 days, for an average annualized return near 59%.
That's why Mike is watching the bond market today so closely.
Right now, the high-yield spread sits well below its historical norm, which means the market still isn't pricing in the risk sitting in corporate America's balance sheets – including the sizable share of companies that can't cover their own interest payments out of their profits.
If Washington leans on the Fed to cut or keep rates steady while increasing the money supply... and the resulting inflation eventually forces rates sharply higher... Mike believes the ensuing chaos could give his subscribers the shot to earn equity-like returns without taking on equity-like risk.
Meanwhile, Mike's not waiting around...
He and analyst Bill McGilton continue to comb the bond market for what they call "outliers" – individual bonds that yield far more than their actual level of risk justifies. A new recommendation will hit subscribers' inboxes tomorrow.
If you don't have access already, click here to learn more about Credit Opportunities. You'll hear from a subscriber who used Mike's strategy to retire at age 52 and learn how to get started today.
New 52-week highs (as of 8/17/26): Amgen (AMGN), ProShares Ultra Nasdaq Biotechnology (BIB), iMGP DBi Managed Futures Strategy Fund (DBMF), Cambria Foreign Shareholder Yield Fund (FYLD), Global X MSCI Greece Fund (GREK), Helmerich & Payne (HP), iShares Biotechnology Fund (IBB), Marathon Petroleum (MPC), ONEOK (OKE), USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund (SDCI), Valero Energy (VLO), and State Street Energy Select Sector SPDR Fund (XLE).
In today's mail, various feedback on yesterday's Digest – on topics from government naming conventions to the K-shaped economy. Do you have a comment or question? As always, send your notes to feedback@stansberryresearch.com.
"In your various writings you keep referring to the Dept. of Defense. There is no such department in the U.S. government. It is the department of War." – Subscriber W.K.
Corey McLaughlin comment: Well, that's just not true. Last year, President Donald Trump signed an executive order to authorize using "Department of War" and "Secretary of War" as public-facing titles for the department and its head.
But despite the rebranding, legally, the name of the department remains the Department of Defense, which was established by Congress in 1949. Only an act of Congress can change it. That hasn't happened, and we don't suspect it will anytime soon.
"RE: 'Lower- and middle-income families still spend a disproportionate chunk of their monthly income on essentials like groceries, shelter, and energy.'
"This will ALWAYS be true. As humans, we all need roughly the same essentials. It's true that the wealthy spend far more on 'essentials', but that excess is discretionary. Because the wealthy have more resources, the essentials represent a much smaller percentage of their income." – Subscriber Mike M.
"1. Totally agree w RM's comment that once prices go up, they don't come back down even when their cost does.
"2. K shaped economy? C shaped economy? It's all shaped like a big steaming pile of BS as far as I'm concerned. No pay increase in several years & none on the horizon..." – Stansberry Alliance member Greg F.
All the best,
Corey McLaughlin
Baltimore, Maryland
August 18, 2026
