The 30-year long bond yield is just 17 BPs from a new 18-year high.
Since April 21, the long bond yield is up from 4.866 percent to 5.010 percent, a rise of 14.4 basis points.
After ignoring gyrations in the oil markets, the yield started rising with oil prices.
On April 24, I asked All Quiet on the Long-Bond Front. How Long Can This Last?
The 30-year bond has been remarkable stable given wild stock and oil market gyrations.
We are not at the breakout point yet. However, it now seems more likely than not.
30-Year Long Bond Monthly Detail
The breakout point is 5.18 percent. That’s just 17 basis points away.
Technically Speaking
Ascending triangles are a bullish formation, bullish meaning the expected move is up, not that anyone would describe rising inflation and yields as bullish.
The implied target is 5.18 minus 2.86 plus 5.18. That would be 7.5 percent.
Heaven help us if we were to get there. I don’t think we do, either.
But if yields do break out, a minimum target would be a test of the 18-year high at 5.44 percent, nearly a half-point higher.
Target Rate probabilities for April 2027 on 2026-04-29
We had roughly an 8-basis point move from yesterday to today looking all the way out to April of 2027.
That’s about a third of a quarter-point tightening bias.
Q: What happened?
A: Oil
For discussion, please see Trump Says He’s “No More Mr. Nice Guy”, Oil Jumps 5 Percent to $105
An economically illiterate trump warns the markets.
It remains to be seen how much more pain Trump, Iran, or the world will take.
Fundamentally Speaking
Earlier today I commented There’s Upward Pressure on Interest Rates With a Slight Bias for Fed Hikes
The longer the blockade lasts, the more upward pressure there is on the price of oil, gasoline, diesel, aluminum, fertilizer, and interest rates.
The price of oil is far more important than anything Powell says today.
Trump has stated he is willing to hold the blockade until Iran caves into his demands.
The bond market does not like that idea to say the least.
Oil Price Movements
The price of oil blasted seven percent higher today. It’s 107.22 per barrel as I type.
That is not yet reflected in the price of gasoline which rose to a new post-war high. For discussion, please see National Gasoline Prices Hit the Highest Level Since Start of War in Iran
Hello warmongers. Are you watching gasoline prices?
In edit, that was two days ago. Prices rose again today and they will rise again tomorrow,
For about a month the long bond yield seemed unconvinced on direction. It’s pretty clear now that the next move is higher unless there is a very sudden negotiation development.
The die is cast. Brace for more inflation and higher yields.
Trump’s ego is so fragile that he can never admit losing. He cannot bear to face up to the reality that he, more or less single-handedly, led America to the greatest strategic defeat in its history. So he desperately wants to extract concessions from Iran that would lend him a fig leaf and allow him to claim victory.
I am curious as to given the massive current US government debt load as to whether we could be headed for a new era of financial repression? It has happened before following the end of WWII. A sudden surge to 7.5% inflation for a couple of years would deflate the real value of the US debt significantly, if interest rate rises could be constrained. It’s a topic I don’t know much about. Gemini indicates that the economic costs of financial repression would be “a tax on savers” (don’t think either party would object to this), “capital flight” (maybe some, but honestly where is it going to fly to?) and “loss of Federal Reserve credibility” (how high is Federal Reserve credibiliity anymore anyway?). Mish or others?
repression or recession?
yes.
The three largest expenditures in the federal budget are entitlements, interest on the national debt, and military spending. These three items account for all but sixteen percent of the budget. There is no serious discussion in government about entitlement reform, they have to pay interest on the national debt and Trump wants a fifty percent increase in military spending. Financial repression is the easy (for the politicians, at least) way out. I think it’s coming.
The author at the link supports the higher inflation scenario with some interesting arguments: The Money Printers Have Crossed the Point of No Return – GAINS, PAINS & CAPITAL
I believe there is a factor that has not been discussed too much, that being a debt characteristic of bringing economic activity forward. Normally credit is obtained to make a purchase in the present rather than save and make the purchase in the future. With government, many of the expenditures for current programs paid with credit are social programs that are inflation protected and almost impossible to wind down, or as President Reagan once said there is nothing closer to eternal life on earth than a government program.
Private and public debt has brought significant activity forward recently, but without continuously expanding debt that activity will not be sustained in the private sector but for government much will remain. Result is contracting private economy and its public sector funding when the public sector will need even more funding. This is a reason why we cannot inflate the debt problem away. I know it is not likely, but the only way out of our fiscal mess is to cut government spending below revenue or the debt continues to grow, and our mess gets worse, albeit possibly slower.
A downgrade of US credit is inevitable as are higher interest rates. People are running from bonds and treasuries into the DOW.
Until they start to fun from it!
Cash is king!
Out of the frying pan, into the fire, and then whence?
I hope it’s not the mushroom cloud
“Feel free to sit with your 4.883% bond and wait for the Fed to make a move. In the end, it almost doesn’t matter whether rates go up or down; you’re simply watching society erode, one basis point at a time. The interest rate is the symptom; the debt mechanism is the disease.”
https://www.zerohedge.com/markets/those-big-beautiful-bonds
“Feel free to sit with your 4.883% bond and wait”
You could do that or you could buy TLT using cash secured puts, then sell calls on TLT and earn 10 to 12% (or more) per year via dividends+options. And at some point when Trump crashes the economy, the Fed will have to lower rates, maybe to zero again, and when that happens, TLT will shoot to the moon.
The safest play right now that I can think of but if someone’s got something else, do tell. Oh and FXY, nicely up 2.2% today – the collateral damage to all of this will be the Yen carry trade.
Default risk premium?
Is money avoiding bonds supporting the stonk market along with the inflating money supply?
“Heaven help us…” <<<Not Likely>>>
Homes, Americans had best pray that there is no God and that He is not just, for if ever were there a people deserving of collective punishment, then surely we are in for a big one.
Including those of us that sit on our hands while this all happens.
In his blog, Michael Bordenaro argues that most Americans aren’t afraid of future inflation, but are devastated by the inflation they’ve been experiencing for the past few years. Once again, it seems that “official” inflation is significantly lower than what most people are actually experiencing.
https://www.youtube.com/watch?v=cJJ0ZcVokcQ
Trump getting desperate and “leaks” a “short and strong” attack (this weekend when markets closed ??)
Iran responds
* IRAN’S REVOLUTIONARY GUARDS AEROSPACE FORCE COMMANDER MOUSAVI SAYS TEHRAN WILL RESPOND WITH ‘LONG AND PAINFUL STRIKES’ EVEN IF U.S. ATTACK IS LIMITED — SNN
* IRAN’S MOUSAVI SAYS U.S. SHIPS WILL ‘FOLLOW THE SAME FATE OF U.S. REGIONAL BASES’ – SNN
Short and strong attacks are what we are left with now (if any attacks). We have used up close to 50% of our longer range, expensive missiles in 2 months. Time frame to replace these is 2-4 years. If we keep burning through them, we will leave ourselves with limited defense capabilities in a conventional confrontation.
And since Iran has good relations with China, they can be supplied with all the war materials they need dirt cheap including rare earths.
And since Trump has soured relationships with China and just about everyone else, it will be hard to source cheap materials.
Cheap drones (likely from Ukraine) are in the US war future.
Its more that a bit strange the US hasn’t learned that lesson after watching what’s unfolded between Russia and Ukraine the past 4 years.
The US was offered assistance by Ukraine on the use of cheap drones at the beginning of the Iran War, but turned it down. The reason given was pure arrogance, “the US has the greatest military in the world by far”. The idea that Ukraine could have anything militarily to offer the US was considered preposterous.
Stupid people have difficulty adapting to changing circumstances, and we have the stupidest administration in American history.
Simplicius the Thinker says the USS Abraham Lincoln is 330 km off the coast if Iran. The American consensus is that the maximum range of Iranian missiles is 300 km. Maybe true, maybe not. We still don’t know whether it was an Iranian empty missile that went almost as far as Diego Garcia.
All indications are the missile that almost reached Diego Garcia was not carrying a payload
I see oil at $200 soon and a major recession. Trump may declare official war on everyone soon and cancel elections.
The one variable that may prevent crude from hitting $200/bbl at least on paper is demand destruction. It’s so hard to know when it will flex its muscle.
Suspiciously timed oil trades — including $950M short — have to be insiders, enraged traders claim: ‘F—k this s—t!’
https://nypost.com/2026/04/29/us-news/oil-trades-including-950-million-short-have-to-be-insiders-traders-claim/
Crime and corruption in government & leadership positions is a sure fire indication that a civilization has come to its end and will soon be exterminated.
An external intervention may be next. In the (distant) past it used to be great floods or something similar.
Good time to prepare your spiritual journey into the next world. Which will be better than this.
The smart thing to do for those without inside information is to stop trading so insiders can’t make the money.
Now for the real world implementation plan. Oh shoot.
what do we expect when the POTUS is a lifelong fraudster who milked casinos while they were going bankrupt, fooled regular people into spending thousands on a fake “university” and is now getting planes and ballrooms and crypto billions from people who want favors? SCOTUS gave him the freedom to do what he wants, so did everyone thing he and those around him would be less corrupt?
Trump’s voters are very happy to stand back and stand by while he loots our financial system for his own personal gain. Isn’t that why they voted for this fool?
Insider trading has long been rampant. Just now they don’t even bother to try to pretend to cover their tracks.
Growth or inflation? Long term interest rates are not only inflation but also growth expectations. Higher interest rates also mean looser lending standards. Remember, banks make money by borrowing shorts and collecting on the higher long-term rates. This is the issue with the inverted yield curve. Banks have a difficult time making money when short rates are above long rates. Banks finally can lend into the real economy instead of hedge funds and shadow banks. The real story is the explosion in the fixed asset private nonresidential fixed investments (capital goods). Although, if it is AI spend there are revenue recognition issues, unrealistic depreciation schedules, lack of physical equipment, electric capacity and lack of revenue to support the spend which will only by exposed when the liquidity dries up, but I digress.
Everyone likes to point to oil prices as inflation, but the other side of the coin is demand destruction. From $147.27 on July 11th to $40 in December 2008. Do you remember 2008? Does any remember oil at $61.29 in December 2019 and $4 in April of 2020?
The bigger story is that people are selling their treasuries and raiding their piggy banks to pay for oil and other things they need. What about gold? Should it not be going up in times of inflation and war? The truth is gold and bonds are getting sold off to buy things they need. The effect is pushing gold down and bond prices down and interest rates up. This is temporary. We will have to wait to figure out if this is growth or demand destruction coinciding in a liquidity event like 2008 to see who is skinny dipping.
Good post.
“Everyone likes to point to oil prices as inflation, but the other side of the coin is demand destruction. From $147.27 on July 11th to $40 in December 2008. Do you remember 2008? Does any remember oil at $61.29 in December 2019 and $4 in April of 2020?”
Any dip in demand is temporary because the global economy cannot grow without more oil. As long as the economy grows, so will demand.
Here are the global oil demand numbers in millions of barrels beginning in 2005. Demand dropped slightly in 2008 and 2009 with a severe recession. Demand dropped severely with Covid in 2020 but quickly recovered. There is rarely much long term demand destruction.
2005: 83.65
2006: 84.58
2007: 86.50
2008: 85.90
2009: 84.60
2010: 84.80
2011: 87.20
2012: 89.10
2013: 91.10
2014: 92.00
2015: 94.20
2016: 95.70
2017: 97.67
2018: 99.07
2019: 100.27
2020: 91.19
2021: 97.08
2022: 99.57
2023: 101.89
I am a trader. I dont care about the median price. I care about extremes and mean reversion. Secondarily, I would aslo like to present a theme other than the narratives brought to you by the media with is paid by investment companies that prey on fear and greed; also the news.
Good ole taconomics continues to unfold before us. Should be good conversation near mid-terms.
This is NACHO stock market.
Perhaps asking for a military budget of $1.5 Trillion is dampening long bond investors’ enthusiasm…
Anticipation of an exploding deficit might be a factor. From the war spending and coming worldwide recession. Near term stagflation will probably be mild compared to what follows the inflating with which the Fed will react to recession.
Oil is the lifeblood of the global economy. The price of that oil has implications for inflation, interest rates and economic growth.
Trump’s war on Iran has reduced global oil production by 10+ million barrels per day for 2 months. We are currently using up most of our available storage to make up for this loss.
And as we use up our storage, the price of oil is rising because of the supply/demand imbalance.
As I type this, WTI (june) is $109 and Brent (june) is $122. Prices will keep rising until the market rebalances supply and demand. The likely area where the market balances is somewhere between $150 and $200.
Prices will drop when the strait of Hormuz opens again. Where they drop to is a matter of debate and depends on many factors. My opinion is a range of $70-$100 depending on economic conditions.
Higher oil prices will mean higher inflation and interest rates.
Trump has done more to promote renewable energy than any other President.
All while trying to murder alternative energy, ex-nuclear
D’oh! 🤣
Have you not been paying attention?
That’s the bet I have with StronGnu. He says they will drop to $40-$70 by years end. I said $70-$100.
Do you think otherwise? If so, please explain.
PD, she is a complete troll. Best not to feed her.
If the war will start again and more energy infrastructure are damaged I think we can stay above 100$ by the end of the year. The trafic through the strait will not be back at the previous pace for several months. Oil tanker owner will not risk their boats. Insurance premium will remain very high.
Agree. Assuming you are correct about the kinetic war restarting and destroying more infrastructure.
Seems dated BC is over $140
Hurst cycles are looking to the upside as well in the short term. The 54 month cycle ended in at the September 2024 low. The first 18 month cycle of the second 54 month cycle ended in February 2026 lows. The fastest changes occur when large and multiple cycles come out of end of cycle lows. Since the present 18 month cycle is relatively new, more upside is expected. If the yield trades below the support made by the end points of the previous 18 month cycle, then the present cycle has probably topped.
Excellent post and awarded 1 star Mishelin.
As the yields rise and debt burden becomes heavy, all that AI money sloshing around needs to have real value and guess what….
https://fortune.com/2026/04/28/nvidia-executive-cost-of-ai-is-greater-than-cost-of-employees/
The greatest computer every made is the human brain and all it takes to keep it going is water and a few thousand calories.
AI on the other hand needs half the planet to be strip minded, endless water for cooling, endless electricity for computing and temp control (humidity), etc.
Basically the same arguments made against EV on “green-ness” can be made against AI on “cheapness” to humans.
AI will eventually get better, cheaper and maybe run on a smart watch but we’re a long way from there so are the trillions OpenAI needs to come up with in a few years going to pay out a return? probably not, when investors realize this it’ll be dot com deja vu all over again.
The big correction is coming, gonna be a cruel summer.