A "shocking" $70 billion 5-year bond auction took place in the US overnight. Settling at 5.033% – the highest auction yield since 2006, and above 5% for the first time since 2007. Demand wasn't good.And it's worryingly global. Australian, UK, German, and European 10-year bond yields are all up close to 10bp.The largest US long-dated Treasury ETF (TLT) closed at a record low last night, down more than 53% from its peak in 2020.

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The biggest risk in the global equity market since US debt hit $40 trillion has always been a bond market meltdown. Overnight, we have seen what it looks like when it starts.You assume that at some point all the powers of the United States will step in to make sure nothing precipitous happens but we think with a 2 year quickly approaching 5% has a great risk/return profile.

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BUT Europe, notably France, once again has greater issues as to higher rates and debt.

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