What’s your timeframe? And what will Trump do? 
Long-Dated Bond Yield Moves
- Since March 3, the 30-year long bond yield is up 41 basis points
- Since May 21, the 30-year long bond yield is down 22 basis points
- Since March 3, the 10-year treasury yield is up 19 basis points
- Since May 21, the 10-year treasury yield is down 23 basis points
Two-Year Treasury Yield Moves
- Since March 3, the 2-year treasury yield is down 8 basis points
- Since May 21, the 2-year treasury yield is down 12 basis points
- Between March 3 and April 30, the 2-year treasury yield declined 36 basis points. The 30-year and 10-year yields rose in that timeframe.
If you pick your timeframe and duration, you can make a case for up, down or nowhere.
3-Month T-Bill and Fed Funds Rate
The 3-month T-Bill yield is up 7 basis points from March 3 and 6 basis points from May 30.
The Effective Fed Funds Rate has been 4.33 percent since December 21, 2024.
If anything, the 3-month T-Bill seems unconvinced the next Fed move is a cut.
Looking ahead, CME Fedwatch has a 66.2 percent chance of a rate cut at the September 17 meeting.
As we approach that date, 3-month T-Bill yields should be inching lower, perhaps by as much as 25 basis points.
10-Year-Treasury Yield Monthly Chart
The above chart shows an symmetrical triangle formation. It’s formed by two converging trendlines drawn through a series of lower highs and higher lows.
While considered a neutral pattern, symmetrical triangles often act as continuation patterns, meaning the breakout direction tends to follow the preceding trend.
30-Year-Treasury Yield Monthly Chart
The above chart shows an ascending triangle formation. It’s formed by a horizontal resistance line (flat top) and an upward-sloping support line (rising lows).
The pattern is a bullish continuation pattern in technical analysis, typically indicating a likely upward price breakout.
Technically Speaking Synopsis
Technically, the charts are ominous. The expected direction is up.
However, I am ambivalent.
The misunderstood aspect of TA is that is does not predict anything. Its primary purpose is to provide entry and exit points for trades with stop losses close by.
The current 30-year yield is slightly above the long-term resistance zone that dates to 2007. But it’s below the top of that resistance zone.
If the trend breaks higher, we can easily see the long bond yield at 6.0 percent for no other reason than technical players and algos playing the breakout.
Fundamentally Speaking
Fundamentally speaking, I am also ambivalent.
We still do not know what Trump will do with tariffs or how that impacts the markets and jobs.
The Unknowns
- Will tariffs cause a jump in inflation? Lasting?
- Will tariffs destroy so many small business jobs that demand collapses?
- Neither?
- Both?
Point 4, both, is the stagflation scenario. It’s crazy to rule it out.
In addition, we have inflationary aspects of the one big beautiful boondoggle act that Trump just signed.
Fed Chair Jerome Powell is in wait-and-see mode because he does not have the answers to the above questions. And nobody else does either.
This is why all the clamoring for rate cuts is idiotic.
Powell is on hold until something breaks. Is everyone ruling out a hike?
Trump Begging for Inflation
Trump’s persistent hounding of Powell to cut rates is seriously misguided. Trump does not understand trade, tariffs, or the economy in general.
Trump is a real estate guy, and like all of them, wants lower rates.
Had Powell cut rates, I am certain the long bond and 10-year treasury yield would be scorching higher.
That is another thing Trump does not understand.
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Gold Soars to Another New High, What’s the Message?
On May 6, I asked Gold Soars to Another New High, What’s the Message?
- Gold does not believe the Fed is under control
- Gold does not believe Congress is under control
- Gold does not believe Trump is under control
And neither do I.
I don’t believe what’s going on at treasury auctions is on the up and up. It’s subterfuge. The powers that be are quietly sending money offshore to other countries and having them show up at treasury auctions with our funds to buy, buy, buy. The music must continue.
Amidst all the ballyhoo about tariffs, it’s important to remember that only about 11% of U.S. consumer spending can be traced to imported goods, which reflects the cost of imports included in the Consumer Price Index (CPI) calculations. This percentage has remained relatively stable over the past 15 years.
That said, corporate America, despite the tax cuts, is likely to continue to hype the tariffs as an excuse to increase prices and profits.
Another important factor is the dollar which has been declining recently and should impact import prices at least as much as tariffs. This goes largely unmentioned in all the brouhaha about tariffs.
If Trump gets his way with lower interest rates the dollar could be expected to decline even further, exacerbating inflation.
Can he really pull off a combination of lower rates, a weaker dollar, and higher inflation, which is where he seems to be headed?
True, nominal US yields could head up or down. But there is now a really good chance for the US going through a „Turkish scenario.“ When Erdogan around 2018 decided that „high interest rates are the mother and father of all evil,“ he first forced interest rates (both nominal and real) down to ridiculously low levels. After inflation in Turkey duly soared to 70-80 percent, even an authoritarian like Erdogan came to his senses, and he allowed the central bank to hike interest rates to levels needed to lower inflation. Clearly, Trump seems tempted to play „Erdogan on the Potomac;“ and it remains to be seen whether US monetary policy making institutions are strong enough to avoid a „Turkish scenario.“ To be kept in mind: Turkey during this time had a much more responsible fiscal policy than the US has now.
The pundits say, “primary dealers have to have adequate balance sheet capacity to intermediate the Treasury market.”
But never are the banks intermediaries in the savings/investment process. Lending/investing by the Reserve and commercial banks is inflationary. An increase in the TGA drains reserves. So, if the FED holds reserves constant then rates will remain stable.
“The Senior Financial Officer Survey (SFOS, 2023), asks both about a firm’s lowest comfortable level of reserves (LCLoR), its tolerance for fluctuations around that level, and its preference for holding reserves above that level”
When filling the TGA, we will watch the EFFR ratio to the remuneration rate.
https://www.clevelandfed.org/publications/economic-commentary/2025/ec-202505-qt-ample-reserves-changing-fed-balance-sheet
“reserve balances have become steadily more evenly distributed”
“Larger banks hold fewer reserves per unit of asset compared to smaller banks.”
https://www.richmondfed.org/publications/research/economic_brief/2025/eb_25-18
Bank reserve’s role should become increasingly more important.
Bond yields are headed UP if the Fed doesn’t do QE, and are headed DOWN if the Fed gets back to doing QE once again.
They’re already doing stealth QE. If $50B roll off their balance sheet, they’re only destroying $5B and the other $45B is buying treasuries.
There is no ‘stealth QE’ currently
Way before the phrase QE even existed, the Fed bought and sold Treasuries as a function of its open market operations in an attempt to maintain a specific federal funds rate it was targeting. In those times, the Fed rolled over expiring Treasuries as you are describing on a regular basis.
But when the Fed tells us it will roll over less than is expiring each month for the express purpose of decreasing its balance sheet, and then does so, it is specifically engaged in QT, not QE.
That’s one reason Trump is upset with the Fed; it’s being restrictive (due to inflation concerns) and keeping short-term rates high (through OMO) and longer-term rates elevated (through QT).
You’ve got this backwards
In the simplest sense, QE creates liquidity & QT destroys it as assets / treasuries mature. Given the massive growth of the Fed’s balance since 2008, when the Fed starts re-investing far more maturing treasuries than it destroys, then the Fed is engaged is stealth QE.
Most importantly, the Fed didn’t pay interest on reserves prior to the 2008 financial crisis, so bank reserves were enormously smaller. From the 1960s – Sept 2008, reserves averaged about $30B. Right before the crash, reserves were about $40B.
The graph below clearly shows the gradual rise to the Fed’s balance sheet from 1914 up until late 2008, when it exploded.
Resources and Assets: Total Resources and Assets (TOTRA) | FRED | St. Louis Fed
From Feb 2014 – Feb 2018 the Fed engaged in stealth QE as well. For four years, the Fed’s balance sheet remained flat at ~$4.5T as treasuries matured. During this time, the Fed stopped purchasing MBS, which allowed them target the shorter end of the curve, thereby keeping the FFR near ZIRP. Then when inflation jumped from near zero in 2015 to over 2% in 2018, the Fed finally had to start raising the FFR.
The Fed will re-invest about $400B in treasuries over the course of the 12 months. This is not your good old OMO type stuff. $400B is easily 10X the pre-2008 bank reserves amount that didn’t pay interest.
That’s stealth QE in my book or about 1 in 5 deficit spending dollars. That’s a lot of influence on the yield curve.
Most importantly, this reversal allows the Fed to keep its balance from falling below a no-go floor of ~ $6.2T vs the currently $6.6T.
– We still do not know what Trump will do with tariffs or how that impacts the markets and jobs. > No we don’t, but we do know that the Goal is to drive purchases Homeward, and/or bring the off shore cost low enough to be around what it is costing in America.
The Unknowns:
– Will tariffs cause a jump in inflation? Lasting? > Results above will not cause inflation.
– Will tariffs destroy so many small business jobs that demand collapses? > Results above could add Jobs to small businesses especially, if they changed or are changing their business model to keep up with the upcoming changes. Most will, or try to anyway if possible. Not enough to collapse demand, unless they stayed business as usual imo.
– Neither? > All Depends, and on a lot of things, and what choices were made already…
– In addition, we have inflationary aspects of the one big beautiful boondoggle act that Trump just signed. > Now this I am much more worried about. Intentions are well intended I am sure, but when Big Piles of $$$ get tossed around, odd things can take place, and strange things seem to happen involving That $$$, Plans, Players Etc. What was once “To Be” may not even be insight any longer…
>> Greed got us where we just were, and are still climbing out from under. This needs to be a “Perfectly Executed Strategy” and I don’t doubt Trump can do it, as He has before. Does He have enough Spine in Total by his Backers? If we start seeing Major Shifts, real shifts in the way things are going, then we could be in trouble… Getting Closer!
10Y minus 3M ==> inverted. US30Y minus German 30Y = 2%. 1D US 30Y: in the cloud fog. 1W: turned down. 1M: turned up in May 2025. In Oct 2023 SPX plunged. May closed below Oct 2023 high and Oct 2023 closed, hitting resistance. May high was a lower high, below Oct 2023 high. If Germany enters recession the German 30Y will drag US 30Y down. US 30Y was rising during SPX Jan 2022/ Oct 2023 plunge. Inflation peaked in June 2022 at 9.1%.
Inflation peaked in June 2022. Since Sept 2023 it built a Lazer aiming down. May 2025 is moving up, trying to get back in, from below and well below the 1M cloud equilibrium. The front end of the 1M cloud is red and widening.
There are just too many valid Elliot wave counts to make a near term forecast. Hurst cycles indicates a nominal 54 month low arrived in September 2024. This cycle, though running short at 48 months, has been very consistent, so the next low is expected on August 2028. That is not to say the yield will be lower than today. So sideways to UP in the near term. Definitely UP the next 15 years into the nominal 54 year cycle (Kondratieff cycle running 60 years)
XXXIt is not just that Trump wants lower rates. The Great Recession of 2008 started this zero rate thing trying to “save the economy” so that anyone who has a good credit rating (and rich friends) and wants to borrow at zero percent (free money) to buy up anything not nailed down (which the media never talks about). Stocks and bonds are at all time highs. Half the stocks on the NYSE have been taken over and disappeared. You cant find reasonably priced real estate anywhere. I heard this some years ago (Max Keiser?) that America was being taken private. A few thousand people will buy up everything with free money and own it all. The new Lords and Ladies. 99% of America will be renters/serfs with nothing.
Well stated and the question to ask is why so few understand the wealthy getting wealthier and the poor getting poorer when it’s the rich that have access to the cheap resources.
The fed fixing rates lower is government sponsored stimulus. during the great depression we had government stimulus out the wazoo and yes there were some wonderful construction projects, but the cost was prolonged depression. We have had serious government stimulus over the last 25 years that has blown bubbles, but we have not had congruent economic gains. That is probably due to government picking winners and losers, bailing out rather than letting failing enterprises fail during the great depression, QE money printing, failed pandemic response and the list goes on. So, two periods about 20 years each of government stimulus netted less than stellar results and Trump wants more of it. Guess he expects different results.
My suggestion is for the government to quit meddling in the market with fiscal shenanigans and the fed to quit meddling with interest rates and money supply and let the free-market sort it out.
The divergence since 1970 of productivity (which continues to increase) vs. payroll (which has flatlined for 50 years — the average non-supervisory worker earning no more pay above inflation) lines was the starting point of the uber-billionaires. The WW2 “we’re all one big happy family” left the stage.
The Fed is about end the supplemental leverage ratio requirement which is going to slowly flood the treasury market with $3.3T in bank reserves. In addition, the Treasury will continue to focus selling more of the short end of the curve, so we’re going to see a big divergence between short & long rates.
The Fed is already doing stealth QE by reducing the amount of liquidity they’re destroying to just $5B a month, with anywhere from $20-50B in other maturing treasuries being re-invested right back into treasuries. Remember, kiddos, the Fed can pay any amount they want for treasuries as the lender of last resort.
The BBB is going to supercharge the economy by early next year with all the extra spending & massive tax cuts, meaning inflation only has one direction to go whether or not Trump TACOs on tariffs.
The middle east appears to be calming down which is good news for oil prices; however, I see the oil market figuring ahead of most how buoyant the BBB is going to be for the economy. Oil SLOWLY starts moving higher by the end of August. And remember, inflation ALWAYS follows the price of oil.
I say we arrive at 3% core inflation no later than October, when the September numbers are reported. The CME Group adds a rate hike probability to their site by the end of October.
Most of the tax cutting is an extension of what we already have. Spending will increase rather modestly in the short term. Work requirements for medicaid are a tailwind. Offsetting that are layed off government workers, a restart of student loans, illegal immigrant deportations, and tariffs.
I’m not clear how anyone can look at that soup and predict the future with such confidence, and that doesn’t get into black swans like Russia , mideast wars, or drunken 2am tweets from Trump.
You need to go read up on all the business-related tax cuts. They are substantial. The no tax on tips & overtime are nothing to sneeze at.
The Ukraine war is now squarely Europe’s problem as it should be. Israel & Iran are at a truce. Hamas & Israel are about to be at a truce. Yemen will fall in line. The slowly building stability in the middle east is going to be inflationary for oil prices, because it’s going to take away the uncertainty & stimulate growth which will eventually cause oil prices to rise. My late August call may be 30-60 days too early.
The BIG UNKNOWN is tariffs & what additional countries are going to come to the table in the next few months. My expectation is that Trump slowly & smartly ratchets up the tariffs which means its effect on inflation will start to show up in CPI by the September. More on this next week as we see if Trump TACOs or not. And it’s possible that CA & MX move towards a deal by September as well. That would be huge.
Core inflation is already at 2.8%, so it’s not going to take much to push it to 3%. A decent rally in oil would be enough.
I’m on board with everything you wrote in the above 2 paragraphs with the only exception being in Oil. My company (multinational) is in the oil field services business. Most of our customers have told us already they are going to be cutting back in the 2nd half of the year and into 2026. In other words they all expect not to be drilling much due to oil prices being low making drilling unprofitable.
If our customers change their minds, then I’ll let everyone know. But at the moment I do not expect oil prices to rise.
In general, less drilling means less oil coming to market, which means higher prices. Just like the Saudis control their output from time to time to try to shift prices.
Drilling (Rig Counts) in the U.S. have fallen every month since trump took office. Over 10,000 oil workers have been laid off. Producers see a glut of oil and gas on the market and can not make a decent return on equity with the price of steel pipe, labor and other vital components rocketing upwards. They have learned the hard way ~ that drilling is unwarranted.
Prime considerations are the fact that Russian hydrocarbon exports are on the rise to China and India and the U.S. has now effectively taken over the sovereign nation of Iran and there is no justification left for any sanctions. Iranian oil exports will increase and IMO we are looking at $55 oil unless Trump can stir up another military action.
Oil prices are deflationary in what appears to be an inflationary tariff and borrowing environment.
Contrary forces and indeed they support Powells position that interest rates should stay on hold.
>
We haven’t taken over Iran. We’re just midway through TRYING to keep them from developing the bomb. Trump will use sanctions soon, because Iran isn’t going to agree to inspections, so this military conflict isn’t over. How quickly it re-intensifies is hard to guess.
Again, my expectations are the Trump starts to sign enough tariff deals by the end of the year that the drag of tariff uncertainty starts to go away.
If past history is any guide, reduced production due to an oil glut eventually works its way out and ends up causing tightening at some point, especially if good economic news continues for a couple more quarters.
So Q2 GDP is going to come in probably near 2.6%. With just the right amount of removal of tariff uncertainty, the economy will start to accelerate, not weaken.
Core inflation has crept up to 2.8%. It’s not going to take too many more good jobs reports for it to reach 3%.
Again, with what appears to be $2T deficits during Trumps last term, the chances of a recession diminish considerably IMHO.
Good analysis.
The no tax on tips and overtime is structured as a tax credit, not an immediate deduction. Sure, some folks will realize that their cash tips are now free and clear, but they won’t actually get that credit until 2026 tax season.
Correct, and I did say early next year. And anyone making big money off tips of overtime is going to do just enough research between now & the 2025 tax filing season to realize their refund is going to grow. This will start to affect consumer spending positively by January 2026.
Only the bond vigilantes can knock some sense into the heads of this Congress and Administration.
Too late. They’re done casting the die for tax and spending policies for probably two years. They cut taxes and raise spending. The myopic media touts the CBO estimate of “$3.4 T added to the deficit over ten years”. They make it sound like that’s all that will be added to the national debt. Wir sind gefickt.
Some day a Treasury auction will fail, and the Fed will step in. Soon after paper money will lose its value.
Legit! A really long tail that spooks the shit out of Bessent & he has to go explain to Trump what it all means.
Not gonna happen after the SLR change.
I suspect SLR boost was designed to give banks headroom to absorb the extra issuance inbound as Treasury refills the General Account now that the debt ceiling has been lifted in the usual tragic farce.
Let’s assume that Trump’s BBB forestalls a recession during his last term. It’s reasonable to think that this $3.3T in reserves will be used up.
Where did this money come from? It came from years & years of QE. The Fed isn’t doing QE anymore, so they’re not injecting trillions of $$$ into the economy.
What happens if the economy stays robust, the bank reserves are used up & the Fed’s balance sheet continues to drop?
Again, the WHOLE POINT OF QE is to create huge amounts of liquidity to fund deficits, when the Fed isn’t buying huge sums of treasuries via QE.
How does the treasury market react if the Fed all of a sudden has to start buying treasuries in a solid economy? My guess that’s the type of bond auction that creates a very long tail that we’ve never seen before.
Agree with the concept; I just don’t think the problem is imminent for next 2 years. By then something else will probably go wrong! But another workaround might also be found.
Although unlikely, If the economy does remain healthy, tax revenues might bring down the deficit enough to defer the day of reckoning.
Where did you get “Again, the WHOLE POINT OF QE is to create huge amounts of liquidity to fund deficits”?
QE in the US started in 2008 to fight off the most significant recession since the Great Depression. It was a super-charged form of the standard modus operandi of the Fed of open-market operations to get lower-interest-rate funds to businesses and consumers to try to get them to spend to get out of the recession.
We can have a legitimate discussion about whether the Fed should have bought the QE securities it did. But the Fed did not do QE to “fund deficits”; it acted independently to try to goose the economy. Congress and the US Treasury have run deficits for many decades and the Fed has oftentimes sold bonds and raised the federal funds rate throughout this period (thus NOT always funding the deficit)
Trump’s bill is “utterly insane and destructive. It gives handouts to industries of the past while severely damaging industries of the future.” https://archive.ph/R8qqf
I read the op-ed you shared. I don’t have a commanding knowledge of Renewable Energy policy, even after reading the article below, but it does summarize treatment of various credits under the final bill…
Senate and House Pass BBB With Favorable Renewable Energy Credit Provisions, Bill Awaits Trump’s Signature – McGuireWoods
We shouldn’t have presidents, and congress putting their thumb on the scale to help any industry at all. If solar can’t make it without handouts they should become one of the industries of the past.
Well, that means ending subsidies for agriculture, and that ain’t happening, Ryan. But in principle, I agree.
Automobiles might not have made it without governmental roads – which were a govt handout.