The bond market is telling the Fed it wants another interest rate hike. 
Bond Market Revolt Continues
Despite a much weaker than expected jobs report on top of a better than expected PCE inflation report, long term bond yields keep rising.
30-Year and 10-Yield Bond Yields
- 30-year: 5.64 percent, highest since 5.65 percent on July 12, 2001
- 10-year: 5.29 percent, highest since 5.31 percent on July 11, 2001
Rising long-term yields is an unmistakable signal to the Fed that inflation is not under control.
Odds of Rate Hike Drop
The Fed Funds Futures betting markets does not think the Fed will hike at its next meeting on October 28. I don’t either.
However, the bond market acts as if the Fed should hike, and I agree as well.
If the Fed does not do what the bond market thinks is correct, the bond market revolt will continue.
What Happened to Rate Cut Odds?
On September 30, 2026 I noted Real Personal Income Fell 0.1 Percent August, Real Spending Jumped 0.6 Percent
Real incomes are down but spending surged.
Adjusted for inflation, real personal income declined 0.1 percent in August. Real spending rose 0.6 percent.
Excluding food and energy, the PCE price index increased 0.2 percent.
The core PCE up 0.2 percent was better than the consensus estimate of 0.3 percent. Rate hike expectations plunged but long-term yields didn’t.
October 2, 2026 I noted Jobs Weaker Than Expected in September, Up 29,000 With Negative Revisions
Nonfarm payrolls rose by 29,000 and unemployment ticked u to 4.2 percent.
These events should have been favorable to falling bond yields, but they weren’t.
A comment to the September ISM Manufacturing report on October 1 helps explain.
Input prices up 24 months, increasing faster.
“Every month, we are faced with new headwinds created by this administration. This month, it is the trade war with Canada, which every day is getting worse — causing prices to go up and uncertainty that creates massive disruption. Buying continues to get pushed out indefinitely as customers don’t want to spend on capital expenditures until there is more certainty of costs and demand. The only thing that is predictable is the chaos that is created by these trade policies.”
In short, the bond market does not believe in sustained disinflation, and neither do I.
David Enna over at Tipswatch thinks that US bond sales are suffering from a buyers strike.
https://tipswatch.com/2026/09/27/tremors-are-rippling-across-the-u-s-treasury-market/
“Rising long-term yields is an unmistakable signal to the Fed that inflation is not under control.”
The dollar is worth about 3 cents of its 1913 value. Inflation hasn’t been under control since then. A 2% annual inflation target, leaves inflation out of control on a permanent basis.
Now do a calculation for what your great-grandfather pulled in back in 1913. Today’s individual median income is $47,000. Comparing the ‘dollar’ value without discussing the changes in wages is useless.
Time for Trump to start tell more outrageous lies, or tell much bigger lies that he has in the past 2 1/2 years. I’m sure and increase in the Arte of Trump lying would sit very well with the electorate.
Follow the money, in particular follow the money supply. M4 is expanding at 7.5% a year so this gives a clue to future inflation about 12 months away.
Barnett doesn’t believe in lags
Shortly after Trump took office on May 16th, 2025 Moody’s lowered the U.S.’s credit rating. They cited the $36 trillion in debt and lack of fiscal discipline of our government.
Since then, debt has spiraled up by over $4 trillion (11%) in only a year and a half.
The rate of new debt accumulation is increasing rapidly and as low interest rate debt rolls over it is replaced with higher interest debt. The cycle is self re-enforcing and vicious.
Sooner rather than later, U.S. credit risk will need to be re-rated.
By the time this is over, Trumpstien will have added more to the debt than all other presidents combined.
If you count by nominal amount rather than by real value at the time, which is what the raw figures encourage you to do, this probably applies to a lot of presidents.
As far as historic spread, 10 Yr Treasury is usually 2% higher than annual inflation.
So the 10 Yr Treasury market is acting accordingly and not hyper-reacting .
And the 30 Yr mortgage rate is around 1.5% higher than the 10 Yr Treasury. Most mortgage bond owners want to earn at least a real return of 3% a year (even if most of the mortgages are FHA and VA).
I knew when I owned a GNMA fund back in the 1990s that I wanted to average at least 3% real return per year for holding it for at least 7 years.
Perhaps the Fed should be looking at the equity market if they can’t find the inflation, even a blind man can find it there.
All of that price inflation money ends up on corporate balance sheets. Equity markets should reflect that.
The Fed will run it hot until the dollar tanks. If the dollar stays stable it means the relative value of US assets to those of other foreign currency’s will remain stable.
When yields are exploding and the dollar plummeting, only then will the Fed pay attention.
The bond market isn’t always right. Jobs are weak because short-term money flows have previously fallen. Jobs are a lagging indicator. It’s the end of the flight to liquidity.
short-term money flows:
07/1/2026 ,,,,, 0.247 peaked
08/1/2026 ,,,,, 0.149
09/1/2026 ,,,,, 0.061
10/1/2026 ,,,,, 0.069
11/1/2026 ,,,,, 0.065
Anybody that thinks the bond market is always prescient will get their xxx handed to them.
The first half of 1981 is a prime example.
Trump wants inflation as high as possible, and the prime lending rate as low as possible. As a debt funded asset holder, he is doing everything in his power to maximize/minimize those two rates. It is all about personal profit for him; to hell with the country.
Of couse long bond yields are going to rise under these conditions. It is the rational response. There will be a credit crisis at some point (it may take a while), causing credit spreads to widen by at least a percentage point.
Prime rate is usually 3.25% higher than the Federal Funds Rate.
I think the Federal Reserve will maintain the Federal Funds Rate at least 0.5% above the annual inflation rate.
So the Prime rate is now around 7.25%, compared to an annual inflation rate of about 3.4%.
I believe HELOC loans rate is equal to the Prime rate.
Bond Market Revolt Continues
Despite a much weaker than expected jobs report on top of a better than expected PCE inflation report, long term bond yields keep rising.
This is the trend, STUPID.
Whatever you did, there was disinflation and yield was downward trend last 40 years.
Whatever FED did was right.
Investors were saying ” DON’T FIGHT THE FED ”
It ended in 2020 with NEGATIVE INTEREST RATE.
Now the trend has changed and yields are rising in the whole world.
Nothing can change.
This is the trend, STUPID.
After 2020, ” F**K THE FED ”
I mean ” F**K THE FED ”
Nothing can stop rising yield
Another Volcker moment awaiting.
(Sorry, I’m not rude, I just want to impress what i mean)
They need to try to reduce the federal deficit such as the budget increase just below the annual inflation rate. Reforms are needed such as with Medicaid.
Need more emphasis on production and supply such as with oil and gas, and energy.
Productivity and innovation help such as fuel efficiency and renewables reduces demand for gas and electricity from the grid.
Insulating a home may not be expensive but will save money on home energy costs, and overall reduce demand for electricity in the USA if promoted nationwide.
if 5% handle is a bond market revolt, than i’m cassius clay at his prime. good grief, the pearl clutching is hysterical. i remember buying CDs for dad at the local savings bank throughout the 70s and early 80s. i used to love my own little passbook savings account the teller would update with my side hustle after school jobs and nice interest.
Yes, the aberration was to gimmick things so capital would cost nothing, and the time value of money would be distorted. This is a return to somewhat sensible economics, finally when forced. The free money tap is tapped out.
agree
What a “convenient” jobs print prior to mid-terms AND taco wanting the fed to cut rates. Moreover, the guy who connected lutnick with epstein “conveniently” was said to have committed suicide?
amerikans love their presidents to be pederasts. democracy works. see michael jackson as the pop star of the century of self.
I did a third order best fit on the price of gold in USD from 1996-2026 and the gold price had compounded at 8.22% annually. I also looked at the US M2 money supply from 1996-2026 and found it had compounded at 6.2% annually with an R2 fit of 98.13%. So I think its fair to say inflation in the US is running at 6.2-8.22% annually or at an average of about 7.2% annually.
Both the 10 and 30 year bonds nominal yields are lower than these inflation estimates…and this gives one negative real yields, which of course is rocket fuel for gold prices. The governments real goal is to slowly pay off national debt with dollars that have lost their purchasing power over time. This is why the bond vigilantes have shown up to demand higher yields probably about 7% plus a risk premium to a get a real return on bonds.
Nobody seems to want to address how inflation is actually calculated.
now do gold after tax(which nobody in their right mind has ever paid a thin dime) compared to the us continentals and the confederate dollars averaged into the lincoln paper bucks etc……….forget going back to the days of colonial states currencies or back to the old country whether it was Uk or italia or france or russia……..
Yields are rising rapidly, jobs and real incomes are stagnant at best, yet the NASDAQ bubble continues to inflate based on dubious future cash-flows and voodoo capital financing.
Everything is fun and games until someone gets hurt.
I was reading about the 1870s US railroads, the super-tech of their day, that was going to transform the world (and ultimately did), but along the way, their debt-fueled crash in 1873. It took a long time for the whole economy to emerge from that, with tons of bankruptcies and reorganizations. The weight of that sector in its time, and the manias, seem very familiar. Winners emerged, with massive losses and suffering along the way.
it’s all so typical as you indicate. also it’s a good thing. when new inventions come along tons of money is thrown at it. pushes the inventions along with a few winners and many losers but the ideas get pushed ahead. sailing ships for explorations, canals, RR, boom and bust towns, energy exploration from timber and coal and oil and gas and nukes………televisions and radios and darpa net to internet………….on and on…………it’s good. venture capital still follows the old sailing ship models of what captains charged 20percent of the haul.
meanwhile: Trump Floats Using 1807 Insurrection Act to Deploy Military at Home
https://www.kxan.com/news/national-news/trump-not-ruling-out-invoking-insurrection-act-around-midterms/
Not that ANY level of confidence in the Trump Admin is warranted, but he pulled some new incompetence out of his a** yesterday when he said
“You know, inflation. Certain levels of inflation will also pay off that debt very rapidly. Very rapidly,” he told TIME in an interview published Thursday
NO ONE in ANY Senior Washington DC Policy position should f’ around about inflation being of any use, for anything. It’s just not competent. The asymetric risk/reward of lost credibility is too great. But to submit that ‘it will be beneficial’ in ANY way is irresponsible. Worst of all when it’s the President.
This insane man-child has no skill or conscience. So when assumed market measures do not work it’s b/e a fool rocked the boat. NO portfolio manager running money can have ANY confidence of inflation with Trump in office. Accordingly, to mitigate risk they shorten duration and the longer end of the curve ticks up from it.
You know, it makes it downright funny when 5 minutes later he’ll say out of the other side of his mouth “we should have much lower rates”. LMAO at him.
So goes our “Disaster in Chief”.
Donald Epstein is perfect reflection of amerikan values. so was genocide joe. democracy works. always has. always will. most amerikans cannot handle that simple truth. too nihlist. imho.
Democracy would eliminate the Bill of Rights.
“You know, stealing people’s purchasing power. Certain levels of stealing purchasing power will also pay off that debt very rapidly. Very rapidly,” he told TIME in an interview published Thursday.
Here is the thing. Stealing is murder-lite. When you steal my purchasing power, you are stealing the labor I provided for that money. That labor represents a percentage of my life. So you are stealing my life. And fuck you for stealing my life.
Well, it’s too late now. This was started when the Federal Reserve System was started, back in year 1913. President Trump is faced with trying to run a government in the collapse phase of an inflation. It is very hard to know what to do in such a position.
The Mises Institute says that the government should just default on its debts: that, it says, is the least immoral way out. It is probably right, but that is not politically acceptable yet.
Inflation was part of the way out after World War Two. Having a weaker currency would certainly stimulate domestic production as against imports. It will also divert resources towards people who are actually in the present day producing useful stuff, as against people who are doing imaginary stuff – such as all the “educators” and the staff of old people’s homes; and against people who have produced useful stuff in the past, but no longer can, such as all the old people themselves.
I like to tell people about the rescue of France after its collapse in 1870, when Napoleon III lost his war with Bismarck and abdicated, Paris declared itself a Communist republic, and a Marshal McMahon was faced with rebuilding the country. Boys from the bush streamed in to volunteer to fight Paris, which settled that problem. Apart from that, from what I can make out, Marshal McMahon simply refrained from doing anything stupid, and the country recovered surprisingly quickly.
So I think there is still hope for America, if not for Americans of my age. Your Latino population may largely take over from your Anglo population. The biggest cities may have a hard time.
“The Mises Institute says that the government should just default on its debts: that, it says, is the least immoral way out. It is probably right, but that is not politically acceptable yet.”
Well, most of that debt is held by the banking system, so it will collapse the world’s financial system. That will collapse international trade and the asset markets: stocks, bonds and real estate. It will also collapse businesses that rely on credit like automobiles, boats, etc… It will also collapse all businesses that use leverage to finance inventory, which is most of them, which will collapse the industry that manufactures that stuff. All in all, tens of millions will be thrown out of work. Which means that those who used to actually produce in the present, will no longer be able to do so. In those kinds of massive collapses in a complex industrial economy, coming back from it is very hard, and for a reason. Everyone needs food and 19th century France was a country of farmers. Most people couldn’t lose their livelihood. The world doesn’t work that way anymore.
Which is why the Mises Institute produces utter nonsense, and, yes, mass unemployment is politically unacceptable.
Good points and true. Early career I worked deeply w/ banks and asset-liability mg’t (ALM), et al. One should never underestimate the collateral damage from choices and actions. Lehman comes to mind. At it’s heart that was an ALM and a credit problem. It’s credit came down, while people wanted out of it’s <13-mo Commercial Paper (way overextended already) for which their capital structure was too reliant. A profit maximizer typically naturally wants to borrow short term b/e it’s cheaper, and invest higher long term -> but a profit maximizer also becomes a risk maximizer in doing so.
Careful what people f’-around with.
Which speaks to an issue Trump world is often oblivious to: Collateral damage. 1st and 2nd derivative effects of actions. Basically inept and idealistic shallow thinking.
I’m not denying that a debt default could be ghastly. The question is whether you should go on making it worse.
Another tidbit from von Mises: when you stop an inflation, it’s no use trying to put the value back in the currency. It will be in different hands from what it was in at whatever point you want to designate as the start of the inflationary collapse. What you have to do is simply to stop inflating. That means balancing the government’s budget.
Unlike some purists, I don’t suggest that a paper-money inflation is unacceptable when you are fighting a war. And Trump is fighting a war. What you should do is to stabilize the currency as soon as the war is over, which they didn’t do at the end of World War One. You may have to slash some zeroes off your figures, and call your currency a “new dollar,” or whatever.
The other caution I would have is that you should be damned careful about starting a war in the first place, given what can be the result. Bismarck said so, and he fought and won three wars. I might be inclined to criticize President Trump for starting a war when he didn’t have to, but I don’t know what stage the Persians were at in developing advanced weapons. President Trump may have the weakness of some men, that he is more of a doer than a thinker, and he may have done something that wasn’t strictly necessary. His Jewish friends may have been egging him on. They will pay a price, because they have lost their halo now.
I see I may have contradicted myself to some degree. In the first instance, I was quoting the Mises Institute: in the second, I was quoting from von Mises himself. My apologies, but I don’t really mind, because catching my own mistakes is how I learn.
I think the Mises Institute is made up of very bright academics, who have the distinguishing feature that they are not as dishonest as most academics. They may make mistakes too, but they aren’t in it for promotion, or they wouldn’t touch von Mises with a forty-foot pole.
Fifty years ago, I met an old American, here in Queensland, Australia, who had actually studied under von Mises in New York.
If you think that the Mises Institute produces “utter nonsense,” I think that says more about you than it does about the Mises Institute. I remember an angry letter to a financial newspaper by some young person who said that Warren Buffett must be a “total fraud,” because he said he didn’t understand some bogus theory about investment promoted by the universities. He was the best in the world at what he did, but he must be a “total fraud” because he didn’t suck up to the universities. You can keep your establishment academics as far as I am concerned.
Wouldnt *some* businesses go bust, and other businesses that had been responsible & not relied on cheap credit to the same extent pick up their bankrupted rivals assets in a firesale & thus lower their own production costs. Isnt that what is supposed to happen in capitalism…creative destruction.
Its that kind of ‘no one can be allowed to fail’ reasoning that allowed GM to be bailed out, several times. As if people who bought chevrolets would simply give up driving purely because they cant buy a chevrolet anymore. No, they would simply switch to Ford, Nissan, whoever. GM should have been allowed to go under back in 2008 or whenever.
With so many people up to their eyeballs in personal debt, they may actually feel comforted hearing that inflation will make their earned income go up and pay off debt with debased currency.
Bond Vigilantes? Last seen on Wall $treet Week With Louis Rukeyser on local PBS stations Friday evenings. He looked like Washington’s face on the dollar bill.
at least 100 people in my life told me i look like ole GW. as a kid, it was my nickname among the girls on the block. there is the old trick of folding the one dollar bill to make GW look like old barbara bush. first lady of the CIA cunt.
I would like to think the bond market is telling the Fed we NEED another rate hike. I am not a fan of taper tantrums and entities cajoling a stimulus package and such. However, I am always hopeful the bond vigilantes will express their concern re: fiscal policy, monetary policy, inflation and solvency via demanding a higher rate for the time value of money shrouded by all of that uncertainty. Why should they belly up to the monetary bar and shell out funds at low rates while the equity boys lather up the shares in green froth at their expense. (which they are doing today…..again)
It’s the inflation expectations, yield curve control and US fiscal flexibility that has them concerned, rightly so. Not sure how we are gonna afford the interest on the debt without doing everything but take our medicine…thus they know they need to demand higher rates to either cover the inflation (it won’t be enough yield, they’ll need a bigger boat/fewer MPO45v2 turtles) or force more difficult, uncomfortable cuts in fiscal policy.
Get your popcorn, if you can afford the oil, seeds, electricity/gas to make. I think salt is still fairly cheap.
The present 20 AND 40 week cycles for interest rates are highly right-translated. All the cycles with longer periods are aligned to the upside. The last 20 day cycle of the 20 week AND 40 week cycles started today. The longer 18 month cycle is about half complete, so any drop of interest rates into the 40wk/20wk/80day/40 day/20day/10 day lows (20, 50 and 200 day moving averages are good targets) and will be followed by a couple bounce to the upside.
The Fed continues to drag its feet on needed interest rate hikes. The fed funds rate is too low(almost 100 bps below the 2 year treasury rate). No sense of urgency, in the meantime the level of prices continues to increase. Affordability for the middle class continues to deteriorate. Lets hope the bond market is the electrified cattle prod to make the committee members get serious about lowering inflation. The problem is there is no accountability, no fear of being booted out for incompetence.
If the Fed doesn’t address the elephant in the room, the bond market will do it for them.
Trumpstien will bomb it if it does.
It isn’t just trade policy. It is also policies that disrupt any supply chains. Putin is turning America into Russia. At some point I expect the US economy to look more like Russia’s. In John McCain’s words, a gas station masking as a country.
mccain was an asshole since the naval academy. putin is the new czar. russia didn’t have one for a spell.
I think Trump saying “certain levels of inflation” can reduce the burden of the national debt “very rapidly” may have something to do with today’s bond market jitters.
Governments want low interest rates due to HUGE national debt!!
They want both low interest rates and the resulting inflation that will accompany them.
I’m confused. “Certain levels of inflation” can drive credit prices higher (not least on national debt) and lead to a lot of political whiplash and even chaos. Not jitters, actual public chaos. I don’t see reduction in the burden of the national debt anywhere in that picture, apart from dangerously rampant inflation doing it. What can reduce that burden “very rapidly”? The dude is blowing smoke as usual. Increase in productivity is the only bona fide way out, and that is not rapid. Fiscal cutbacks now do not reduce the national debt in any reasonable time frame. They might ease hikes of rates some. But this can has already been kicked clattering far down this road. The debts are on the books.
If here is any consolation, the USA is not. the lone ranger. Look at France, except they seem to all put on a level of hysterical melodrama Trump spews out every day, but from all directions at once.
10 year and 30 year bond auctions next week for those that like fresh juicy bonds instead of old stale ones.
https://home.treasury.gov/system/files/221/Tentative-Auction-Schedule.pdf
Trump has said more bombing Iran after elections which I assume would mean more Iran wiping out oil infrastructure in middle east. Time to position and hedge is now all the way around on bonds, oil, stocks, and foreign currencies.
Some people can smell rain coming, others can smell profits coming.
Do worry, Trump, Walrus, GOP, and democrats will find a way to make things even worse.™
Surprised that such long wars need no Congress approval.
The House passed a war powers resolution back in June with all Democrats in favor and enough Republicans to demand the President consult Congress prior to continuing the war. It failed in the Senate 50-49. Those 50 votes were 49 Republicans and 1 Democrat.
So we definitely know who the war party is.
I’m certain it doesn’t help that Bessent is buying back the bonds to “stabilize markets” not to mention the fact that other countries do not want to purchase them!!,