“I love it when a plan comes together.” Hannibal’s line is the title of today’s newsletter. The US Treasury, Bank of England and Bank of Japan each reveal the same debt dilemma: fight inflation on ensure debt sustainability. Read and subscribe: bloklandfunde.substack.com/p…

Today, the 30-year UK bond yield dropped 12 basis points. The reason? The Bank of England announced it will stop selling its longest-maturity UK gilts. £120 billion of bonds maturing in 2049 or later will remain on the central bank’s balance sheet, while £222 billion of shorter-dated gilts will simply mature. That leaves only around £146 billion to be sold gradually over the coming years. In other words, the Bank of England is taking a lot of long-duration supply pressure off the market. If the objective sounds familiar, it is likely because US Treasury Secretary Bessent has been trying to achieve something similar, but through a different route. The US Treasury sharply increased its buybacks of longer-term US Treasuries, while relying heavily on shorter-term issuance. Different mechanics, same objective: reduce the pressure on longer-term bond yields. Same dance, different dancer! Central banks and governments don’t want longer-term yields to rise much further. The message is not that we are in, or heading for, a sovereign debt crisis, at least not yet, but that central banks and governments will go a long way to prevent exactly such a crisis. So while bonds will generate a positive nominal return after a multi-year bear market, whether that also translates into an attractive real return is far less certain given where inflation is. More importantly, positive real returns alone won’t be enough to reverse the massive relative underperformance against scarce monetary assets like gold and bitcoin. August in the US and today in the UK showed what can happen when measures like “Treasury Twist” and “Threadneedle Twist” (the Bank of England sits on Threadneedle Street in London) are digested by markets. Going forward, assuming that bond yields will come down in the not-too-distant future, and I do, the reason why will determine whether bonds can close some of the massive gap in relative performance against basically every other major asset class. So while I agree that bonds look more attractive than they did some four years ago, when rates were still close to zero, I do not necessarily believe we are going back to the old normal in which bonds structurally offer an attractive return after inflation or reliable diversification within an investment portfolio, let alone outperform scarce assets like gold and bitcoin.

EXCITING NEWS 🚀! I’m proud to announce the launch of our second investment fund: the Blokland Sound Money Fund. Every robust investment portfolio needs scarce assets. The fund provides a comprehensive investment solution for physical gold and bitcoin, combining dynamic allocation, sophisticated portfolio construction, efficient execution, and secure custody. Interested? Contact jeroen@bloklandfund.com or visit bloklandsoundmoneyfund.com for more information.

Germany’s economic crisis has become a political crisis! Germany used to be the anchor of political and economic stability in Europe. Unfortunately, this is no longer the case. Just like in several other European countries, political instability has now become a fact of life in Germany as well. After crushing election defeats, Chancellor Friedrich Merz says he wants to stay on. But why? Does he understand what is happening in his own country? Just one day after those election results, tens of thousands of workers at Volkswagen, Mercedes, BMW, Audi, Porsche and major suppliers are taking to the streets, worried about their jobs, factories and the future of German industry. These are two very visible symptoms of the same underlying problem. Germany has barely grown for years, while high energy costs, taxes, climate craziness, regulation, and increasingly fierce global competition have structurally eroded its industrial competitiveness. People are fed up with being squeezed from all sides while being told that even more taxes, more regulation, and more government intervention will somehow make things better. And this is part of a much bigger and increasingly uncomfortable problem in Europe. We have almost completely killed the space, motivation, and willingness to grow TOGETHER. When an economy stops moving forward, the focus inevitably shifts from creating more prosperity to protecting what is left and redistributing the existing pie. Politics becomes a fight over who gets what instead of a discussion about how to make the pie bigger. People won’t accept that, especially when they feel constantly squeezed from above while their economic prospects continue to deteriorate. You can now see that frustration both at the ballot box and on the German streets. So instead of simply asking how Merz can survive two disastrous election results, the German political establishment should ask itself why voters are turning away in the first place. Merz should start by looking in the mirror and asking himself what needs to change before his country becomes even more polarized.

Yikes! The spread on 10-year French bonds versus German Bunds just hit 100 basis points. While many “experts” predict a collapse in the US dollar, I suspect the euro will be the first to crack. Based on the historical relationship between the French-German bond spread and the euro, the latter should already be well below parity against the US dollar. We’re talking about a roughly 18% decline. 👀 Keep an eye on France!

Yikes! The spread on 10-year French bonds versus German Bunds just hit 100 basis points. While many “experts” predict a collapse in the US dollar, I suspect the euro will be the first to crack. Based on the historical relationship between the French-German bond spread and the euro, the latter should already be well below parity against the US dollar. We’re talking about a roughly 18% decline. 👀 Keep an eye on France!

PRINSJESDAG! Maakt duidelijk dat werken niet méér loont, ondanks wat het kabinet belooft. Van de €6 miljard aan lastenverzwaringen in 2027 komt €5,8 miljard voor rekening van werkenden. Vrij schandalig. Wie werkt, zal dus nog harder zijn best moeten doen om zijn koopkracht op peil te houden. En dan maar braaf sparen? Nee, helaas. Ook daar verdwijnt je koopkracht door inflatie. Dat is precies waarom we het Blokland Sound Money Fund, niet toevallig op Prinsjesdag, hebben gelanceerd: om beleggers een mogelijkheid te bieden te ontsnappen aan de eeuwige dynamiek van loze beloftes, geldontwaarding en koopkrachtverlies. bloklandsoundmoneyfund.com/

Today, the 30-year UK bond yield dropped 12 basis points. The reason? The Bank of England announced it will stop selling its longest-maturity UK gilts. £120 billion of bonds maturing in 2049 or later will remain on the central bank’s balance sheet, while £222 billion of shorter-dated gilts will simply mature. That leaves only around £146 billion to be sold gradually over the coming years. In other words, the Bank of England is taking a lot of long-duration supply pressure off the market. If the objective sounds familiar, it is likely because US Treasury Secretary Bessent has been trying to achieve something similar, but through a different route. The US Treasury sharply increased its buybacks of longer-term US Treasuries, while relying heavily on shorter-term issuance. Different mechanics, same objective: reduce the pressure on longer-term bond yields. Same dance, different dancer! Central banks and governments don’t want longer-term yields to rise much further. The message is not that we are in, or heading for, a sovereign debt crisis, at least not yet, but that central banks and governments will go a long way to prevent exactly such a crisis. So while bonds will generate a positive nominal return after a multi-year bear market, whether that also translates into an attractive real return is far less certain given where inflation is. More importantly, positive real returns alone won’t be enough to reverse the massive relative underperformance against scarce monetary assets like gold and bitcoin. August in the US and today in the UK showed what can happen when measures like “Treasury Twist” and “Threadneedle Twist” (the Bank of England sits on Threadneedle Street in London) are digested by markets. Going forward, assuming that bond yields will come down in the not-too-distant future, and I do, the reason why will determine whether bonds can close some of the massive gap in relative performance against basically every other major asset class. So while I agree that bonds look more attractive than they did some four years ago, when rates were still close to zero, I do not necessarily believe we are going back to the old normal in which bonds structurally offer an attractive return after inflation or reliable diversification within an investment portfolio, let alone outperform scarce assets like gold and bitcoin.

Threadneedle Twist After the Treasury Twist, we now have the "Threadneedle Twist"! The Bank of England has stopped selling ultra-long gilts and will keep around £120 billion of bonds maturing in 2049 or later on its balance sheet. At the same time, it will unwind shorter maturities and pause QT auctions until April. The message is clear: the BoE wants to reduce pressure on long-term yields without abandoning QT altogether. Good enough to deserve the name Threadneedle Twist.