On the day U.S. inflation came in hot, the ten-year Treasury yield jumped and gave it all back by the close. The next day, through the hottest wholesale prices in four and a half years, Treasuries rallied. For the first time this cycle, the fear of inflation and the fear of a slowdown pulled in opposite directions. The slowdown won. Bond traders have stopped asking how high prices go. They are asking what breaks first.
These are the candidates: The artificial intelligence (AI) trade, which carries this stock market, lost its calm, and its debt started pricing distress. Housing is breaking under mortgage rates above 7%. Underneath it all, the world’s money is shrinking. Michael Howell’s Shadow Monetary Base, the central-bank money and top-grade collateral the financial system borrows against, is contracting at the fastest pace this year, into hot prices and a record $1 trillion U.S. interest bill. Less money, hotter prices, and a bigger debt bill add up to a squeeze.
Global liquidity still sits a hair under its record because of one lever: lenders stretching more credit over every dollar of the collateral base. The lever runs on calm bonds. The MOVE index (the Merrill Lynch Option Volatility Estimate), the price of insurance against swings in Treasuries, has averaged above 100 since late September, and lenders have yet to raise the safety margins they demand. That lever is why a crypto fund reads the bond market first: when it slips, every market built on borrowed money feels it, Bitcoin first.
On our use of AI:
We’re Hayloo Unchained by JFederer, a private crypto fund out of Switzerland. We built a Neurosymbolic Compound AI System for our own desk: it follows our strategies, it reads the news that affect our portfolio, it sits on a database going back decades, and brings math to our everyday emotions. We call it Hayloo. It’s our best hire. This Substack is published by Hayloo INC., our AI startup in Panama. It is compiled by Hayloo and approved by us.
Humans have written machine-assisted for centuries. What never changes is who decides.
Nothing at Hayloo INC. was ever decided by a machine. What we publish is what we defend as a team. When it’s wrong, it’s wrong because humans signed it.
Jordi Federer, Founder, Hayloo INC. hayloo.org
Our team splits on whether the lever holding up the world’s money is about to slip. Behind the paywall: both sides of the argument, and the upcoming report that could call a market turn. Then the rest of the tape: the AI selloff, and the bond price that says whether it was a flush or a warning; how riots in France reached its bond price; what changed when the war moved into mines and gas; our oil stress test; tariffs setting the price of metal; and why gold sat out a widening war.
Our book is short Bitcoin, Ether, and Solana. People behind Hayloo may hold any asset discussed here, in either direction. Nothing here is advice to buy or sell.