Since the Fed’s first rate cut on September 17, yields on the long end have soared. So have mortgage rates.
Treasury Yields Since First 2024 Rate Cut
- 3-Month: -60 Basis Points (0.60 percentage points)
- 10-Year: +102 Basis points (1.02 percentage points)
- 30-year: +96 Basis Points (0.95 percentage points)
30-Year Mortgage Rates
30-year mortgage rates closely track 10-year treasury trends so it’s no surprise mortgage rates are up just over a full percentage point.
Except for the second half of November, long-term treasuries have been hammered.
What Doesn’t the Bond Market Like?
- Fed Policy?
- Trump Proposed Economic Policy?
- Both?
I vote for number three, but with primary emphasis on point number two, economic policy.
We have massive peacetime deficits and everything Trump has proposed will raise them.
Team Trump Accelerates Social Security Insolvency
On December 29, I asked Team Trump Accelerates Social Security Insolvency, Where’s DOGE?
Republicans expand Social Security at a cost of $196 billion. Guess who benefits.
Trump Threatens to Take Down Chip Roy
On December 19, I noted Trump Threatens to Take Down Chip Roy, One of the Only True Fiscal Conservatives
Massive Republican infighting between Trump and fiscal conservatives is underway.
Can DOGE Cut $2 Trillion?
I asked these questions on December 27: Can DOGE Cut $2 Trillion Out of $1 Trillion? What About Revenue?
If you think Trump or DOGE is going to do a damn thing about the deficit, please read the link immediately above.
What Would You Do to Balance the Budget?
For discussion, please see An Interactive Exercise: What Would You Do to Balance the Budget?
Unlike DOGE and Trump, I did balance the budget in my proposals.
How Much Revenue Can Trump Realistically Bring in From Tariffs?
On January 6, I asked How Much Revenue Can Trump Realistically Bring in From Tariffs?
There are many moving parts to this question including Congress, retaliations, and consumer impacts.
Trump claims tariffs will bring in a huge amount of money to pay for his programs.
Tariffs will not come close to covering extension of the 2017 Tax Cuts and Jobs Act (TCJA).
Moreover, Trump wants to add additional items to the TCJA renewal and expand military spending too.
The bond market thinks as much of Trump’s plan as I do, and that’s why yields are rising.
In a following post, I will outline my specific proposals and compare to Trump’s.
= panama greenland mexican gulf renaming . canada etc
DON’T YOU LOVE it ? DOGE lived what? couple weeks
it was nice sound bite,and it died!
=====
everybody and my uncle knows TRUMP WILL NEVER EVER CUT OFF EVEN 500 bil from USA federal spending. it will be WORSE than 2007*208 great recession.
own party+ dems will impeach trump faster than you would say cheese!!
IT IS OVER. !!!!!
His EXPOSED HAND is saying: “I will help you and America to become great again.” THE HIDDEN HAND is high-fiving vested interests. WHICH WINS or will it be a blend of pain and exhilaration?
My main point though is NOT that one. Trump’s Policies are inane. We cannot, and the vested interests will not ALLOW spending to drop enough to offset Trump’s Willingness to continue to Wage War on the world. What is it? 900 bases. CONFLICTS with no end in spending?
He will get NOTHING material done, but it will be entertaining. Congress is the entertainment division of the Military-Industrial Complex.
It’s a trifecta of Uncle Sam, the fed sham, and the mostly peaceful fascists in charge.Have a nice mostly peaceful mayhem day..
Who would have thought voting for chaos would cause…chaos?
As far as not taxing ss benefits , I agree with that only. Those payroll contributions from the employees are done with after tax money. When you collect I think it’s extortion to tax them again.
Feel the same way about interest, dividends, capital gains, etc.?
Because that would be one heck of an initial income tax we would have to have to make up all those tax revenues
The ten year is giving us about 2% yield over inflation. In fact the whole yield curve is showing positive real returns above inflation. As an investor I don’t think this is bad at all. I see it as a return to the period before the quasi-zero interest rate policy which did much harm.
I think you’re drinking the Kool-Aid a little bit on the official inflation numbers. Services, which are the majority of the US economy, are still at red hot inflation and the trend for most of last year was acceleration. But I agree with you that this is at least a step in the right direction, and I expect even higher yields with the way things are going.
How do you service $300 trillion worldwide at ANY interest rate?
We cannot even pay the principal down….even ONE DOLLAR OF IT. It CANNOT BE PAID DOWN without an extended Ponzi scheme, which is THE PLAN, by the way!
Doug, where did you get your inflation rate, please so we can understand your simpleton math?
Our twin deficits: “foreign trade deficit” and “domestic federal deficit”, have an insidious, if not an incestuous, relationship. Positive interest rate differentials are significantly responsible for the dollar’s exchange rate support. And an “overvalued” dollar in turn is the principal contributor to our burgeoning and protracted trade deficits (> $-63 trillion in our balance of payments since we became a debtor country in 1985).
The U.S. can be more creative than selling its birthright for a mess of pottage (becoming a financial hostage to our creditors).
The uniparty seems to have entirely subscribed to Modern Monetary Policy without actually know what that is. Both Biden and Trump have zero knowledge of macro economics and are entirely comfortable with running enormous fiscal deficits. However, neither of them could get away with this without the knowledge that Powell is gutless and a de facto subscriber to MMP himself.
Finally, the yield curve is starting to look like it should for normal economic and market operations
Set interest rates at 4% and a lot of wealthy people will have to sell everything … my lips are smacking!
Trump’s tariffs started the LA fires.
If the government continues being reckless with inflation and the Fed enables them, a new era of bond vigilantes is going to take off. The market is sending a clear signal: the free lunch era is over.
Trump is an expert at bankrupting his own companies. Now he has a good chance to bankrupt a whole country. The bond market is (very slowly) waking up to this realization.
On that subject Trump can do nothing but yak. Congress controls federal spending. No, this is not a cause for optimism.
However, Trump controls the Congress, the Supreme Court, the Fed and the Justice and Treasury Depts. Our very first look at what a king could do for this country.
Trump loves bankruptcy because it zeroes out debts and while allowing you to keep the assets (or buy them for pennies on the dollar).
For example if the US defaulted on it’s debt, we’d instantly zero out a large part of the the trillions owed to China but we’d keep all the stuff they’ve send us for that money.
China doesn’t hold “trillions;” latest figure was $760 billion, and the Chinese seem to actively reduce their exposure.I wonder why.
China masks its Treasury holdings in State Owned Enterprises.
Official numbers are garbage.
Doesn’t the Treasury know who it’s writing the interest checks to?
Lots of Treasury ownership hidden via tax havens. Not just Chinese, either.
Has to be this way so I can have more tax cuts and subsidies. Too bad, proles!
It is even worse in the UK.
10-year Gilt yields have hit a 17-year high of 4.80% and still the Pound falls vs. the $USD.
We are watching a G-7 sovereign debt/currency crisis gradually unfold in real time.
European banking crisis. But I thought Brexit would make Britain great again or was it supposed to be ‘grate’ again.
https://www.youtube.com/watch?v=7AVNzCtLDq0
The European Union won’t last. The idea you can have a monetary union without a fiscal union is folly. It’s a matter of time.
Ironically that the United States may be undergoing the same path. Some states are deep in debt and technically insolvent, will the other states bail them out?
I’ve been wondering why Trump is desperate to annex Canada and Greenland, the only thing i come up with are the resources of oil and Greenland has a ton of fresh water in form of ice. Perhaps the climate hoax is finally getting real. There are well know forecasts of everything west of the Rockies turning into desert over the next few decades.
They won’t let the states go under….Look what Hamilton did as his first act as Treasury Sec, he took all of the War debts of the states and paid them and issued debt for the federal government.
If you look at a map, the US, Alaska and Greenland form a perfect circle of defense .. to defend Canada. 🙂
Brexit was sabotaged. The execution was piss-poor as retaliation against those who voted for it.
Not denying this – but interested on how this was done…
It is great… you just left off the most important part of the MAGA slogan.. “for the rich.”
nobody else matters
The EU is much worse off
Check the 10-year Bund. It’s not all of G7.
The Fed has cut 100 BP for 2 primary reasons, if you don’t count the 50 BP bazooka cut to try to help Comrade Kamala:
#1 To slow the growth of annual interest expense as treasury auctions move to shorter maturities.
#2 To slow consumer spending by reducing the amount of money people make on CDs & MMFs. It’s about a trillion dollars a quarter.
They sure as heck aren’t looking at the data. Jobs are steady & core inflation has been rising four months now and has finally bled over into headline CPi. Even the short end of treasuries seems to have mostly bottomed out and may soon start rising once Trump is in office.
They’re not concerned about jobs or inflation. And the Fed is pleased with long end yields pushing higher. This increases pressure on housing prices to drop.
The #1 thing the Fed doesn’t want is a repeat of the housing foreclosure crisis from 2008-2011. That scares them to death, and they’ll do anything to keep it from repeating.
There won’t be another foreclosure crisis. Anyone who got a rate under 5% will rob a liquor store or start turning tricks for cash before they’d let their home go into foreclosure.
Forgot to add that it wouldn’t have mattered if Trump or Harris had one, inflationary spiral was baked into the cake no matter who won or what their policies would be. You need look no further than the 70+ million and growing recipients of social security and medicare. Wait till 2030 rolls around and there are 80+ million on social systems.
Whether it’s Trump’s tariffs and immigration plan or Harris’ expanded social programs it was always going to be…..”turtles all the way down and inflation all the way up!”
Grab some popcorn and get a seat from somewhere safe overseas to watch the horror show unfold.
It’s a great time to pick up TLT. Currently has a yield of 4.37%, guaranteed by the gov, and you can sell calls for extra juice. When the Fed crashes the market and needs to lower rates, it shall rise like a phoenix from the ashes. Only suggested for long term holders.
So in the above post you say nothing but inflation and then right after you say to buy long term bonds. Do you also pee sitting down?
Pray for wisdom so you can figure it out all by yourself. Don’t know how many times I need to repeat the word hedging on this block but here it goes: hedging, hedging, hedging, hedging, hedging, hedging.
But if all you got on you is lunch money, don’t bother, take that to the pew and do some good with it.
I do think they will try to pull the plug on all of this during Trumps term. Everything is against him…so we agree on that. Lunch money barely begets a bagel in Biden’s economy I’m afraid.
I’m going to agree with you. Trump has gotten a really bad rap far beyond what he deserved. After watching Mark Zuck groveling to Trump it made me realize there may be a tinge of truth to all the conspiracy crap I’ve had to read through here and other places online. Keep in mind, I say a ‘tinge’ of truth.
In any event, it doesn’t matter, the Titanic has hit the iceberg and she’s gonna sink, it’s only a question about who is smart enough to take a lifeboat and who are the people that will go down with the ship.
Many people I know are moving to South America, Asia and some even Africa!
I need new conspiracy theories. My old ones all came true.
All I can see is yields normalizing from crazy inverted by monetary manipulation, but normalcy can only be temporary in a broken system.
Only happened one other time in history. Nothing normal about this. See below
You cant service $36 trillion in Federal debt alone at ANY interest rate. Plus the rich and powerful dont like to pay for money used (interest) to buy up America, Rates are going to zero .. all of them.
Bull steepening. Nothing to do with Trump, little to do with the Fed. Everything to do with the cyclical crisis workings of capitalism.
The June 2022 peak in inflation was textbook. Money flows, the volume and velocity of our means-of-payment money supply, bottomed in August. It will accelerate going into 2025.
A lot of that inflation was Ukraine/energy-driven.
Honestly, there seems to be no end to the things you will blame on Trump. FYI, the rate of the 10 yr Treasury was at 3.9% last September when the idiot Yellen announced the Treasury’s version of “operation Twist” to drive rates lower. She began in January buying long Treasuries & selling Bills to pay for them. From the time of that announcement, the 10 Yr. rate went from 3.9% to 4.92 as I write this. If you’re such a great analyst, you might have done your homework before writing the crap you just put out here. It is fairly easy to see what’s driving rates up, not just here but globally – and it ain’t Trump. Lenders are getting skittish about financing the follies that have driven our economy to the brink of the disaster that is unfolding before our eyes. Except for folks like you who prefer to hide behind the ubiquitous TDS you seem to prefer wallowing in.
“Dont fight the Fed” babe. Banks dont control debt, the Govt/Fed does … as much as they want.
I have little idea what is causing it, but I sure didnt expect to be getting 4.69% from a money market account (no losses — guaranteed) in my Federal retirement “portfolio.”
So happy for you Scott. I was worried about your passive income.
In retirement it is all passive income. 🙂 Sadly this cannot last as you cant service $300 trillion in worldwide debt at ANY interest rate. Headed back to zero as soon as Trump arrives ….
The FED’s old guard has retired. They knew money mattered. Bernanke didn’t help, he censored the FED’s Ph.Ds.
I think inflation has set into its historic norm (3%ish), Fed rates are setting into historic norms and long bonds are finally catching up. Not a big deal.
Yes, it is a big deal. See savings of households and institutions vs. fiscal deficit:
Our ability to fund the deficits is waning.
Trump jawboning to create negotiating leverage. China gonna be looking for some relief post Jan 20th, what do we get in return?
The only other time, for the record, that the Fed has cut by 1 or more and long rates went up by 1 or more at the sametime is 1981….Not a good omen. The massive inflation that Carter wrought had to be cleaned up by Volcker. Now we have the horrors of Biden inflation but no Volcker available.
The “time bomb”. exploded in 1981. N-gNp soared. Volker solved the problem by introducing reserve requirements on NOW accounts
It was predicted by Dr. Leland James Pritchard, Ph.D. economics Chicago 1933, M.S. statistics Syracuse, Phi Beta Kappa.
The time bomb increased the transactions velocity of money from 17% in Jan 1980 to 34 percent in Feb 1981.
Please explain why its happening now then.
I would differ on all time frames you identify.
1.) Massive inflation started arguably during LBJ (JFK’s tax cuts + Vietnam funded by debt + Great Society), certainly appearing obviously during Nixon (Arthur Burns ease as arm-twisted by Nixon, + oil shocks), through Ford (“Whip Inflation Now”) and then Carter too.
2.) This time, it was the culmination of prolonged low interest rates for years, before sprouting in 2022 range. Powell started to try to normalize interest rates during Trump 1, Trump browbeat him and he folded, leaving unnecessarily low rates, to give Trump the desired appearance of hot markets. The latter would, I think, back up the bond market’s current expectations, as discussed above. Yes, Biden overdid fiscal handouts in the waning pandemic period (as Trump had done too, both with complicity of Congress).
History has a way of not fitting neatly into our political prejudices, or our attention spans.
History shows the most recent president with the lowest cumulative inflation was Trump. Fits neatly with what actually happened…I doubt he can do it again due to the recklessness that preceeded him
I would agree with the exception of his final year in office. COVID-era deficit spending was off the charts. And Biden’s year 1 budget was all Trump too. Everything after that, sure, blame it on Joe. But 2020 was an awfully reckless year for Trump.
Trump also inherited frakking from 2014 forward. Does wonders to bring down prices,
On spot analysis in my opinion!
I believe the guns vs butter problem was Nixon, not Carter. Carter just had a lot of bad luck with an oil crisis.
Yellen has been a disaster at Treasury. I agree.
And the Fed has blown it.
Where did Mish mention Yellen and the Treasury (for your agreement)?
Didn’t need to. This gem just from today by Yellen.
YELLEN: FISCAL POLICY NEEDS TO BE PUT ON A SUSTAINABLE COURSE.
wait… wait… who was Fed vice chair and chair from 2010 to 2018 , who has been treasury secretary since 2021 and who directly oversaw and presided over a $15 TRILLION increase in US debt
And for a quick civics lesson for everyone else:
The Fed conducts monetary policy, not fiscal policy. So the Fed chair and vice-chair and the entire FOMC has no say on fiscal policy.
And the Treasury Secretary collects tax payments authorized by Congress and writes checks for expenditures authorized by Congress.
So if there is a problem with fiscal policy and its impacts and/or budget deficits, that’s on Congress, not the Treasury Secretary.
And who decides how to term out the debt?
And why is that important? I’ll hold your hand through this.
Your hubris is awesome, seriously! It does interject humor into my day.
Yes, please hold my hand and the rest of the commenters here (and especially Mish) and give us the links to the data and the mechanisms how Yellen has altered the make-up of the $36 trillion in US debt in the past four months since September such that she increased all long-term rates of all that massive debt by 1% singlehandedly.
You’ll be as famous as Woodward & Bernstein for solving this deep-state mystery LOL
No. Over the course of her tenure. Perhaps you should listen to the greatest investor of our generation on this fact.
“When rates were practically zero, every Tom, Dick and Harry in the U.S. refinanced their mortgage… corporations extended [their debt],” he said. “Unfortunately, we had one entity that did not: the U.S. Treasury.”
Druckenmiller—who was chief investment officer at George Soros’s wealth management firm for more than a decade before setting up Duquesne Capital Management in the 1980s—argued last week that Yellen should have issued more long-dated Treasury bonds when debt was cheap.
“Janet Yellen, I guess because political myopia or whatever, was issuing 2-years at 15 basis points when she could have issued 10-years at 70 basis points or 30-years at 180 basis points,” he said. “I literally think if you go back to Alexander Hamilton, it is the biggest blunder in the history of the Treasury. I have no idea why she has not been called out on this. She has no right to still be in that job.”
Nobody is gonna bother to read any of this if you cant keep your point to three sentences or less.
I may be alone but I prefer the (moderately) lengthy replies!
Hedging your bets, EAS? 🙂
If you can’t read more than 3 sentences, on a finance blog, you might be in the wrong place.
Further, Mish has many posts detailing her failures.
Flashback December 13, 2017: Yellen’s only regret as Fed chair: Low inflation
At her final news conference as Fed chair Wednesday, Yellen said the Fed’s failure to bring inflation up to the central bank’s 2 percent mandate is her single disappointment.
“We have a 2 percent symmetric inflation objective. For a number of years now, inflation has been running under 2 percent, and I consider it an important priority to make sure that inflation doesn’t chronically undershoot our 2 percent objective,” she said.
Fair enough. I did not realize your short post today (without any attribution) was referring to news from five years ago LOL
I reread Mish in my downtime. Hes my muse.
Imagine that being her disappointment and then living through the last 4 years. 🤪
I’m waiting for her reaction when we get the imminent financial crisis that she said we’d never see again in her lifetime…
Tell that to mom who has more money than she has ever had because of Biden. Wrong again, Mid! 🙂
Of course. As long as number 1 is doing well, the hell with the rest of the country. Ivory towers and shit.
If you read as well as you type, you’d see that it wasnt just mom that benefited from Biden. It was MILLIONS of older couples who were in stocks.
As if older couples are the ones that matter the most in an economy. Meanwhile two income partners in their 30’s are lucky to afford rent in this bloated inflationary abyss.
I cant fix the olders having all the money. And now they have even more.
So the top 20 percent of the ‘olders’ are doing well. @hat about the rest? What about the majority those under 30 years old? Screwed!
The ones that have given up and believe only a college degree will get you ahead … very true
The Weimar idiots all had more money than they’d ever had, too, but it iddn’t buy what it used to buy.
The real crime against seniors was the suppression of interest rates that began under Obama / Yellen… not their return to normal levels.
As long as my family members still go off to work, the dollar still has some value. Or, they wouldnt go.
https://x.com/RelaxingNews/status/1877043143532487105