That’s the highest in 19 years and 22 years respectively. 
Today, long-term yields hit the highest levels in decades.
Chart yields are from a bit earlier today, with yields now slightly lower.
The 10-year is 4.991 percent as I type with the 30-year long bond at 5.361 percent.
Mish on Zandi Yesterday
Bianco on Zandi Today
Bianco Part 2-3
Bianco Part 4-5
Bianco: “If it doesn’t cut tomorrow, it risks the market continuing to reject this easy policy; yields could soar.”
I believe he means “If it doesn’t hike tomorrow, it risks the market continuing to reject this easy policy; yields could soar,” and that is what I stated as well.
The Fed is woefully behind the inflation curve and the AI-bubble curve, once again blowing bubbles.
The Fed Will Get the Blame
When something bad happens, and it will eventually, everyone will blame Warsh.
But the policy error is as Bianco stated.
“The Fed made the mistake two years ago by cutting rates, and the market has been rejecting it through higher yields from 2-year to 30-year.”
Political Realities May Force the Fed to Hike in September
On August 31, 2026, ahead of the jobs report, I commented Political Realities May Force the Fed to Hike in September
It will be a stretch for the Fed to pause for many reasons, not just the CPI.
Even if the report is weak, a headline CPI of 0.4 percent will be hard for the Fed to ignore.
Politics is another huge hurdle that will force a hike sooner rather that later.
Jim Bianco’s tracking model places the FOMC in a rigid 5-5 gridlock, thrusting former Chair Jay Powell out of the background and directly into the role of the ultimate swing vote.
……
Conclusion: The Strategic Imperative for September
The upcoming September meeting represents the Fed’s cleanest and most viable window to execute. [It will not want to hike in October, days before the election]
Unless the jobs report is miserable and the CPI is tame, look for Warsh to hike rates in September.
To avoid any look of politics or uncertainty, I think Bianco will be wrong on the number of dissents, say three or less.
The Fed hikes tomorrow. We will find out the number of dissents. My guess now is no more than two.
Regardless, Bianco and I are on the same side of the fence, for the same reasons.
There are two primary levers government has to control inflation, monetary (rates) and fiscal (taxation and spending). How can anyone expect minor monetary adjustment to meaninfully alter inflation when the US federal government is spending money like a drunk oil sheikh?
Bianco has the winning chart of the day. Hopefully the Fed Reserve takes note and pulls a Volcker.
Volcker caused 2 back-to-back recessions. He’s not a good example.
In his book: Keeping At It
“Pg. 105: “We needed a new approach. To have more direct impact, we could strictly limit growth in the reserves that commercial bans held at the Federal Reserve against their deposits. That would effectively curb growth in deposits and the overall money supply. Put simply, we would control the quantity of money (the money supply) rather than the price of money (interest rates). “
Volcker’s operating procedure hasn’t changed since Paul Meek’s (FRB-NY assistant V.P. of OMOs and Treasury issues), described in his 3rd edition of “Open Market Operations” published in 1974.
Wasn’t Volcker supposed to control nonborrowed reserves? Volcker targeted non-borrowed reserves (@$18.174b 4/1/1980) when at times over 200 percent of total reserves (@$44.88b) were borrowed
One dollar of borrowed reserves provides the same legal-economic base for the expansion of money as one dollar of non-borrowed reserves. Legal or required reserves represents the monetary base.
The fact that advances had to be repaid in 15 days was immaterial. A new advance could be obtained, or the borrowing bank replaced by other borrowing banks. That’s before the discount rate was made a penalty rate (Bagehot’s dictum). And the fed funds “bracket racket” was simply widened, not eliminated. Monetarism has never been tried.
Zandi seems spot on to me. Tariff-, oil- and war-driven inflation can never be solved with tighter money. Raising rates now will sink the equity markets, possibly immediately or over the medium term.
Hint: “…the non-AI economy is already struggling”. But that may not be obvious to the “data”-dependent.
The Fed can wait.
To counter inflation you drain reserves. To increase R-gDp you drive the banks out of the savings business (which doesn’t reduce the size of the payment’s system).
I guess tomorrow we find out if Trump dug up enough dirt on Fed officials to force them to hold rates steady.
Bianco’s point about the uniqueness of the 10 yr yield rising in response to the Fed’s loose money regime isn’t a small thing. I tend to see it as an indicator that the deficit explosion–in a non-recession– is sort of hitting critical mass.
There is also the factor of higher oil prices as a pressure to unwind the Yen carry trade, which will tend to raise interest rates everywhere. Either way, Bianco’s point isn’t trivial; something large is going on.
I like Jim Bianco but his X posts here do not show causation.
Since 2020, the Fed kept overnight Fed funds interest rates at 0%, then hiked to 5+%, then flat for over a year, and then slightly decreasing over the past two years.
During that same time period, the 30-yr bond rate has been steadily increasing (with gyrations) for 6.5 years over time since 2020: https://www.cnbc.com/quotes/US30Y
So whether the very short-term Fed funds rate was 0, increasing alot, or decreasing slightly, the very long 30-year bond rate increased. BECAUSE it was at a historical low in 2020.
A quarter-point hike tomorrow (or a pause) in the overnight banking rate will have almost nothing to do with the long-term increase in the rate to loan money to the over-spending Congress for the next 30 years, after the bull market ended in 2020
3 month bills are 4%….the market has “hiked”…Given enough time the yield will invert, as markets should be doing.
The market controls long rates-the FED just follows. The Fed can monkey with short rates but long rates are a TREND. And the FED cannot change the trajectory of incompetence in US spending. Does anyone here think the US is good for 40 trillion in debt in 30 years. NO WAY.
The FED follows rates, it’s been like that since forever. If the FED lowers rates, that’s a sign the economy is stalling
Trump wants zero rates and Trump will get zero rates. All his rich buddies want zero rates also, to continue taking the country private (free money to buy up everything). 5,000 Lords and Ladies owning 98% of the USA. We’ve been a democracy too long to realize what an animal backed into a corner is capable of. Dictators dont care about inflation. Its all a game to them. Zero rates … no matter what.
Markets don’t care what any of them say…the curve will invert.
At what point does yield curve control by the fed get implemented? This is the ulitimate ending, ie inflate our way out of this. The only remedy ever used throughout history. It is coming. TIc tic tic. The real question is when what currency is there to go to? Pretty much most industrialized countries are in the same boat fiscally.
Can you name a country that has successfully done this, inflate their way out of a debt problem? Can you name a country that has developed or maintained a prosperous economy by trashing its currency?
The Trumpocalypse is right on schedule. The world will be in a great depression by the time he leaves office if not sooner.
“It’s Trump turtles all the way down and inflation all the way up!”
Got popcorn?
Could be soon, we appear to be in the second act of the shitshow now.
A hike is pointless performative art. It will do nothing, If it does do anything, it will be to fuel even more inflation through job losses, market losses and, ultimately, even higher deficits, The US is an emerging market country now, The only way out is through incredible pain.
Job losses would be deflationary though, through reduced spending power, at least i think so. Job losses are the way out of the inflationary environment, and the driver of the incredible pain you mention.
It wasn’t too long ago our host was channelling Casandra and singing about stagflation…I also believe it is nigh (especially so in BC)
Generally job losses and market losses are deflationary. You can’t spend money if you haven’t got it. Demand drops, prices go down, in theory. This is what the fed wants.
However, US citizens are a crazy lot, so who really knows. I think at this point people have pushed the panic button on US debt. $40T in total and in an ominous trajectory, with total idiots managing things. In order to induce people to stop buying gold and start buying US bonds the interest rate has to be attractive. This is the case whether the fed increases short term rates or not. Even the FED can’t defy gravity forever.
This just screams the end of the Ai bubble and this administration.
Big bubble and a corrupt idiot won’t end well.
DOGE was a lie.
Ending wars was a lie.
Tariff revenue was a lie.
Trump is a liar, war monger and pedophile.
Iran is shutting down worthless government services (US bases in the Middle East) faster than DOGE ever could.
189 million in base damage so far.
You ain’t seen nothing yet!
Just wait till the credit downgrades start cascading in
WTI just hit $106 again on its way to $150. Thank Trump and his senseless war!
This interest rate increasing issue is not going to stabilize unless Congress cuts spending to less than revenue. Congress now forces treasury to issue about $2 trillion in new debt every year; stated another way there is $2 trillion in new bills, notes and bonds that need to be sold to fund government. When supply increases price goes down. When you are in a forced need for money, you have to pay higher interest to meet the need.
All this is coming to fruition now because pawning inflation on the world has come to an end. The world sees the US currency for what it is, fiat being printed into worthlessness. The dollar backing, namely faith in the US government, has been squandered. Foreign central banks are increasing gold holdings to preserve wealth, which lowers demand for US debt that is also pushing interest rates up.
Basically, many purchasers of US debt are now refusing to buy unless compensated for loss of purchasing power. If the fed tries to keep rates low on any and every term, they will need enforce their decision with purchases using printed money and that will only exacerbate the inflation problem, causing private debt purchasers to require even higher interest rates or they will not participate. It is the reason the fed is impotent and congress must act
If a President is serious about ANY deficit reduction he would:
1.) Submit a far more balanced budget to Congress. Not one with bigger deficits. Congress has NEVER led. That is up to the President.
2.) Not include “Sunset provisions” in their tax bills to present what becomes fake numbers
Congress has NEVER led? Did you forget the “Contract with America” and Speaker Newt Gingrich?
It’s refreshing to see posts from Curvewatchers Anonymous and that the error was the cutting of the rates, surely the 50 bps and 25bps in late 2025 were unwarranted by the Trump-defier /sarc Jerome Powell.
Glad to see another commenter mention that it’s good to see a more “normal” rate return. There is nothing normal or right about a ZIRP or low interest rate. Optionality and opportunity cost require a positve real rate and the suprression of rates to engage in financial repression has put us at variance with sanity/normality for a very long time.
As The Bird put it…5.3% on the 30 year is still too low in a 40 Trillion federally indebted world.
Thank you our deranged dictator for destroying the USA in a brief period of time. Some neighbors have returned from overseas vacations. Their primary comment was “they hate us in these other countries.” Well done, taco.
Tony, we were over at our home in Portugal and our closest friends, whom we have known for quite some time, were universal in their comments to us, in so many words:
“We feel for ya, DH! How can you stand to listen to the guy?”
My reply was: “We don’t.”
Once I tell them I’ve voted Libertarian since 1988, they are chill with me.
Their primary comment was “they hate us in these other countries.”
They should.
It isn’t “us.” We don’t have a damned thing to do with it except funding it with our taxes, taken by threat of force. They should hate the Epstein class that rules the US Empire. As should we.
Every cloud has a silver lining…the whole world will be a better place to live now that the curtain has been pulled back to expose UncleSam’s true nature.
“It’s beginning to look a lot like..Trump has created a bearish bond secular trend!”
Add 1st part: ME Wars and energy problems
Add 2nd part: US Credit Negative Cycle from Unending Fiscal bust (coming in 3 yrs +/- 2 yrs per Dalio &/or inevitability)
And walla! We have serious mid-to-long end Treasury bond Bearish issues that make this a negative secular – not just another cycle – downturn.
We had roughly a 30-yr down cycle in long rates where we could dip in the well with a Fed Rate cut to stimulate the economy every downturn. The Bond Vigilantes aare starting to say that paradigm is fleeting.
Fiscal Policy has long been at risk of being driven by Monetary Policy from deficits. The Piper is coming for us to pay this bill.
As I’ve said, and the late great Paul Volker pointed out, if you let the Inflation Boogey Man out of the cage (uncontrolled) the consequences of trying to get him back in the cage are far more difficult. Thus HE tighted when damned straight inflation was largely again from an exogenouse event – The OPEC Oil embargo (in retailiation for our taking in The Shah for Med treatment. Gen X reminder.) Thus, although we are slowing the Fed has no choice. Paying the Piper later is FAR more costly in lost Fed Bond Market Credibility.
And B4NI.DE, proxy for Diesel, up 4.5% today, that would equate 6.50+ a gallon …
Will Trump sign an EO to limit the 1.5+ million barrels of diesel exported daily?
I’ve been arguing for this (as much as I don’t want my refiner stocks hurt!). But, considering he’s always happy to step in poop (i.e. tariffs) this should be a no brainer. Which qualifies Trump not to do it.
IF he does it it’s only b/e the midterms held his feet to the fire. IF.
I am actually happy to see rates where they are – it is long over due. People have forgetten what a “normal” interest rate environment looks like. I’d even argue a 5.35 30yr is still too low.
I agree, and it is far easier for me, who bought his first Stick House in 1984, where we paid 12% interest on a modest starter home under $120K in Cal. 1500 Sq Feet, 1/4 of an acre, OUT OF TOWN far from WORK because we could not afford a CITY home. We moved 45 mins away from my job. Commutes were terrible.
1987 purchased coop in working class brooklyn. high rates. commute was hour on subway when crime was rampant. savings and loan crisis, made the place worthless for a decade. banks unwilling to lend to any buyers on coops. a good lesson learned in my 20s. r/e can crash.