It’s not a good day in the markets, Here’s a recap.
Add rising interest rates to Trump’s “tiny price to pay” list along with gasoline, diesel, fertilizer, and numerous other items.
30-Year Back Over 5.3 Percent
The 30-year long bond hit the highest yield in decades.
Highest yield since August 2007.
Bessent’s Pea Shooter
Jim Bianco on Bond Selloff
The Fed has No Navy
Mortgage Rates
Mortgage Rates are another item for the tiny price to pay list.
Don’t Worry, It’s Global
Oil
- Brent Crude is back above $100 to $100.26 per barrel, up $2.34
- West Texas oil jumped $2.20 to $95.21.
Diesel will top $6.00 within days.
Bessent’s Buyback Operation Disappoints
CNN reports Bond yields rise after Treasury Department announces size of buyback operation
Bond yields rose Wednesday after the Treasury Department said it would buy back up to $6 billion of government bonds, putting a dollar figure on the operation first announced last month.
The 10-year US Treasury yield rose to 4.85%, its highest level since 2023. If the 10-year yield ends the day above 4.82%, it would be the highest closing level since October 2023.The Treasury Department on August 19 announced it would at least double the size of bond buybacks from September to November. The announcement on Wednesday pins the buybacks at up to $6 billion, triple the size of the standard $2 billion operation.
CNBC reports 10-year Treasury yield jumps to highest since 2023 despite Bessent’s $6 billion bond buyback plan
Treasury Secretary Scott Bessent said the department will buy back $6 billion of longer-date government debt. The news comes after Bessent announced the operation last month, saying the Treasury would at least double debt repurchases.
Yields moved higher despite the increased buyback as some on Wall Street believed the repurchases by Bessent would be even bigger. Peter Boockvar of The Boock Report said some on Wall Street believed the buyback would be as much as $7 or $8 billion.
Notes to Bessent
- Buybacks do not change fundamentals.
- $6 billion, even $20 billion is nothing in a trillion dollar market.
The Fundamentals
Yesterday, I discussed Seven Forces Support High and Rising Bond Yields
There are national and international forces pressuring yields.
Bessent has adopted a strategy of mind over markets.
Bessent’s strategy is not exactly working.
That long term chart is fantastic because it very clearly shows the 20 year period of financial repression which followed WWII. And this is for nominal returns, it was even worse for real returns. But the WWII debt did gradually get inflated away. I will repeat my previous comments and again suggest that we are entering another long period of attempted financial repression. That’s why although I agree with Mish and others that the Fed should raise rates now, I am unconvinced that they will raise rates now. I will be happy to be wrong if they do raise rates.
Total clownshow, totally predictable. This administration has no idea what its doing and its going to cost the USA bigly. Get ready for a reduced standard of living
Our beef prices are loudly arguing that you’re correct.
“The Treasury Department said it would buy back up to $6 billion of government bonds” is a highly misleading statement as it implies the debt is being retired to the low information reader. Treasury is actually exchanging long term debt for short term debt and total debt is not diminished. I would consider this misinformation at best.
Ten and longer-term bonds offer stability in terms of future service costs as the interest rate is fixed for the term of the bond. Contrast that to bills that are rolled over every month to a year and therefore subject to increased service costs much sooner as rates rise as they are now. The country has a debt problem and gimmicks like this do not address the root problem and will probably make the current situation worse. I recommend Bessent go before congress and lay the cards on the table face up by basically testifying that this is a problem only congress can fix by cutting spending below revenue and commence paying down the debt. That will be painful, therefore politically unpopular, but it will also reduce the borrowing needs which over time will result in lower interest rates. He may want to show a few slides from the link to bolster his case:
How Much Credit Growth Does It Take to Expand Real GDP? – MishTalk
If congress does not make the hard choices, market participants will and the ruthless participants will not be considering consequences of their choices, only the means to cut their losses to a minimum.
Bessent doesn’t want to make the case for fiscal discipline and Congress wouldn’t listen even if he did.
Been waiting for these bond vigilantes for a while.
Glad to see them turning up this time…they should have showed up 5 years ago as far as I am concerned
To quote the late great Alan Abelson “It matters when they say it matters”. The “They” being the Vox Populi. The Vox Populi is the driver of mkt’s. And all Bessent is doing is showing the Vox Populi how desperate we’re becoming. IMHO his blowing Treasury credibility with completely hollow talk is completely burning moral capital. He’s burning down the house in broad daylight and the Vox Populi is noticing.
I expect he’ll go down as one of the Worst Treasury Secretaries ever. An utter POS along with much of the Trump crew. They’re all in a race to the bottom.
Bessent can join is master DJT in that respect
In response to the U.S. sinking three civilian Iranian oil tankers, Iran has again attacked American bases in Jordan. Casualties will be hidden from the public. Reagan had the sense to pull the marines out of Lebanon. Trump and his crew are too stupid to change course. Or too controlled. He needs a serious bitch-slapping in the midterms.
“[Trump] needs a serious bitch-slapping in the midterms“
NO, don’t you want the war to end?! President Trump just said today that he believes the Iran war will end “immediately” after the US midterm elections in November. Do you want to give up our only chance of ending the war, he might lose his support and decide not to follow through with ending it if we don’t all support his candidates! /s
Well that depends entirely how your investment portfolio is positioned….I read the headline and nearly had an instant profitgasm.
I sold covered calls on XLE today because when oil gets too hot, TACO steps in to spill the beans out of the TACO. Not matter what TACO does, the profits are locked in.
The 30 year and 20 year at 5.3 ish is great opp to buy-write more TLT. I’m collecting nice dividends each month from TLT then sell calls when it pops after a TACO.
There is always a way to make money in markets and when TACO is in charge it is even easier because he telegraphs every move like a predictable toddler.
But eventually the wheels will fall off the bus on this 70 mph ride and it won’t be pretty.
Just watch and…
Do worry, Trump, Walrus, GOP, and democrats will find a way to make things even worse.™
FED policy is crude, rude and largely ineffective…because its designed to be the handmaiden of the banks in “normal” economic times and their bail bondsman when they serially destabilize the economy with their monopoly paradigm of Debt Only for the creation and distribution of all new money.
However, the central bank basically has god-like power to create and distribute money, and if we’d integrate the new monetary and economic paradigm of Monetary Gifting strategically into the present monopoly paradigm of Debt Only that the banks wield…with a policy of a 50% Discount/Rebate policy at regular consumer and also financial retail sale…it would double everyone’s purchasing power and also simultaneously double the potential demand for every commercial agents’ goods and services…which is the very definition of good economic times.
Model it with the double entry bookkeeping operations of equal debits and credits that sum to zero…until you see it.
You’re welcome!.
Hahahahaha!
Thanks. That was my best laugh today!
Next time make it a 100% discount so everything is free!
Just keep modeling its beneficial economic and monetary effects…dunce.
The terminally orthodox mocked and warned about the disaster of changing the last monopoly paradigm humanity dealt with: the Roman Catholic Church’s paradigm of Salvation Via Roman Catholic Sacraments ONLY. Consult history.
“The Fed has no Navy and desperately wants a deal.”
The Fed should ally with Iran for protection.