Sublime

When the bond market entered its golden era and became known as smart money, the U.S. federal debt-to-GDP ratio was only about 30%. That was a small and nimble market, and one that was effectively priced by professional traders.

A short-lived capital stock will manifest in accelerated depreciation and a fragile capital structure will incur an undue interest charge.

However, here in the 2020s the bond market is riding on a lot of reputational momentum. The things that made it the smart money previously are now largely gone. That’s not to say that the people trading it are any less intelligent than before, but rather it is to say that the structure and size of the market is such that intelligent bond traders

Second, those who hold return-seeking capital assets but who do not lever up are comparatively disadvantaged if their competitors do.