Yields at these levels are dang near dead on the money

 Both are within a whisker of their respective long term averages of 4.64 and 5.16.

 

 

Druckenmiller: WWII debt was paid for by suppressing yields, causing double-digit inflation which was paid for by the people, and it's still a bad idea

Druckenmiller understands our predicament very well, but even he won't call for raising taxes, which we must. 

How much government spends is NOT the only variable. 

That is the Big Lie of our time.

  

Commentary: Let the Bond Market Speak By Stanley F. Druckenmiller (Wall Street Journal) -- Aug. 24, 2026 05:27 PM

 

The Treasury Department announced on Aug. 19 that it would double the size of its long-dated bond buybacks, from $2 billion to at least $4 billion per operation, aimed at the 10- to 30-year sector and running from Sept. 9 through Nov. 4.

The announcement came after the 30-year yield touched a 19-year high.

Yields fell within minutes.

By the next afternoon they had round-tripped to levels above where they started.

The market's verdict was swift and correct: This wasn't liquidity management, it was price management-and a mistake far larger than $4 billion suggests.

Treasury's announcement gave the game away.

It justified the larger operations as liquidity support in sectors with "consistent strong sponsorship from market participants," but strong sponsorship is the definition of a healthy, working market. 

There were no failed auctions, no dealer balance-sheet seizure, no forced unwinds, nothing resembling Treasurys in March 2020 or U.K. gilts in September 2022, the sort of genuine dysfunctional episodes that justify official action.

Volatility was contained, and trading was orderly-not a malfunction but the machine doing its job.

Consider what the machine was pricing.

Inflation is 3% to 4% and has been above the Fed's target since 2021.

Unemployment is 4.1%, full employment by any definition.

The deficit is running near 6% of gross domestic product, a number America has never before produced in peacetime at full employment.

The national debt crossed $40 trillion the same week Treasury intervened.

Net interest will exceed $1.1 trillion this fiscal year, more than the defense budget.

The 10-year yield, even after the summer selloff, sits at or below the economy's nominal growth rate.

That means a borrower (federal government) running 6% deficits at full employment, with above-target inflation, still funds itself at roughly the rate its economy grows.

Historically, that configuration is accommodative, not restrictive, of financial conditions.

The bond market wasn't being a vigilante, as some would argue.

It was being a pushover that had finally begun to clear its throat, and Treasury moved to quiet even that.

I have spent five decades trading on a simple premise: Markets aggregate information no committee possesses, and prices are how that information reaches decision makers.

The long-term Treasury yield is the most important price in the world.

It is also the only fiscal disciplinarian the U.S. has left.

Neither party will run on entitlement reform.

Both have spent the past decade expanding commitments while ignoring arithmetic.

Democracies don't repair their finances because a budget office publishes a table.

They repair them only when the cost of inaction becomes visible and immediate, when mortgage rates bite, when auctions tail, when the political price of a rising long bond finally exceeds the political price of touching spending.

Every basis point of artificial yield suppression is a subsidy to procrastination.

Suppressed long rates sugarcoat the interest-cost projections, shrink the apparent urgency, and let incumbents assure voters the debt is someone else's problem.

If Congress and the administration are unlikely to touch entitlements even with the market's signal, they are certain not to touch them without one.

Whatever this operation saves in basis points, it will cost multiples in delay.

Yield management always begins as a technical operation and ends as a policy commitment.

From 1942 to 1951, the Federal Reserve capped long Treasury yields to finance World War II.

The cap outlived the war, financed deficits with printed money, and fueled double-digit inflation.

It took the 1951 Treasury-Fed Accord to dismantle the cap, followed by years of financial repression that quietly taxed a generation of savers.

U.S. policymakers built the wall between debt management and price management for a reason.

This intervention starts dissolving it.

Within a day of the announcement, Treasury Secretary Scott Bessent indicated the operations could grow beyond $4 billion, and analysts observed that Treasury can double them again and again.

When the bond market didn't respond to this threat, senior Treasury officials told reporters that the department could use the Treasury General Account to intervene.

Once markets believe Treasury is defending a price, every rise in yields becomes a test of official resolve, and the operations must grow to survive the tests.

There is a quieter cost, too.

Buying back long bonds while funding the purchases with bills shifts duration, or long-term interest-rate risk, out of public hands-economically, a small dose of quantitative easing run out of the Treasury rather than the Fed, easing financial conditions while inflation sits above target.

These enlarged operations happen to run through the final stretch of a midterm campaign.

Debt management that even appears to follow the political calendar spends the one asset that took two centuries to accumulate: the credibility of the Treasury market.

That asset doesn't regain its value so easily.

During the debt-ceiling fight in 2011, I said a brief technical delay in payments would be terrible, but less terrible than another decade of can-kicking without reform.

In 2013, Geoffrey Canada and I toured college campuses calling the entitlement trajectory what it is: generational theft.

Transfers that accounted for roughly a quarter of federal outlays in 1960 consume 70% today.

I told students, "I love entitlements, but I want them for you guys," when they turn 65, not merely for my generation at their expense.

In 2023 I said Washington was spending like drunken sailors, with federal outlays up from 20% of GDP before Covid to 25% after, and I called Secretary Janet Yellen's failure to term out the debt at generational-low rates the biggest blunder in Treasury history.

Every household and corporation in America locked in low rates, and the one borrower that needed to most, didn't.

At prevailing rates, interest expense reaches 4.5% of GDP by 2033 and 144% of all discretionary spending by 2043.

We are tracking those markers early.

Anyone who tells you entitlements won't be cut is lying-not about the outcome but about who decides it. 

Either we restructure the promises deliberately, on our terms, protecting those who most need them, or the bond market restructures them for us, all at once, on its terms.

The defense of the buybacks writes itself: It is a routine tool, introduced in 2024 for liquidity and cash management, trivial against a marketable debt stock approaching $30 trillion.

All true but beside the point.

Routine operations aren't announced off-cycle, at double size, on the heels of the long bond's hitting a two-decade high, with a signal that they can grow without limit.

Judge an intervention by what it responds to.

This one responded to a price, not to plumbing, which is exactly how the market read it, and why the effect evaporated within a day.

You can't buy your way out of a solvency conversation with liquidity tools.

You can only postpone the conversation and raise the eventual price.

What should happen instead is straightforward.

Return buybacks to their stated purpose: small, scheduled, off-the-run liquidity operations announced at quarterly refundings, never off-cycle responses to yield levels.

Term out the debt honestly and pay the price the market sets.

If the 30-year must trade at 5.5% to clear, that isn't a crisis.

It is an invoice.

Then do the only thing that durably lowers long-term yields: address the primary deficit.

Reform entitlements gradually and honestly, through means testing, indexing changes, eligibility adjustments phased in over decades-so that the burden is shared across generations instead of dumped on the youngest.

The reward is enormous: A credible fiscal package would do more for the long end of the curve than a buyback program 1,000 times this size.

Governments defending prices against fundamentals always lose.

The only variable is how much they spend before conceding.

The U.S. shouldn't put itself on the wrong side of that trade, not with the most important price in the world, and not when that price is trying to say the one thing Washington most needs to hear: Let the bond market speak.                                  

https://www.wsj.com/opinion/let-the-bond-market-speak-81529d74?mod=hp_opin_pos_1 

Adults make rare appearance to defend the message being sent to Trump and Congress by the bond market

Unfortunately taxes are already baked into the cake, and taxes need to rise.

But Republicans will insist otherwise, and rearrange the spending chairs on the Titanic.

So higher yields it will be until politics intervenes in November, or in 2028.

The fixes by the Treasury Department will be temporary and ineffective, pushing on a string. 

 

 Stanley Druckenmiller leads doubters who think Bessent’s bond ploys will fail

... “If the 30-year must trade at 5.5% to clear, that isn’t a crisis. It is an invoice,” he wrote in a Wall Street Journal op-ed piece. “Then do the only thing that durably lowers long-term yields: address the primary deficit.”

... Like some others, [Ryan] Swift doesn’t see anything terribly alarming about the recent rise in yields, saying the 30-year long bond is near “fundamental fair value” based on the Fed’s benchmark rate and expectations for the central bank, along with inflation, unemployment and market volatility.

The 30-year bond is only trading slightly above its 50-year average around 5.16%. The benchmark 10-year note as of Tuesday morning actually traded exactly in line with its 4.64% historical average going back to the early 1960s. ...

Bond vigilantes: Buybacks shmybacks

 Yesterday: Treasury doubles debt buybacks as Bessent moves to steady bond market

Today: 

Yeah, well, the reports were "benign" but the facts weren't

 This is the problem with fake economic news, which isn't meant to inform. It's meant to shape, just like fake polls.

It's disinformation, meant to blunt the bad news every time its ugly head pops up to keep stock markets from falling.

Everybody's talking the stock market book, because everything else sucks. They're afraid that speaking the truth would be all it takes to destroy confidence in the economy, when everyone who must experience the economy on the street knows it is not booming.  

What rising Treasury yields are telling us 

... The yield on the 30-year Treasury bond ended the week at 5.26%, the highest since June 2007, despite benign reports on consumer and wholesale price inflation. (This is unusual, as long-term yields tend to move lower when inflation becomes less of a worry.) ...

Core wholesale prices have been increasing at an average monthly rate of 4.24% in 2026. Peak before the pandemic was 2.99% in August 2011. 

Core consumer inflation averaged 2.62% in 1H2026. Before 2021 there wasn't a reading that high since 2H2006 at 2.72%. Twenty years ago.

The bond market isn't blind to the facts like these reporters are, who have their heads in the sand. 

Yields are rising because of persistent inflation. 

TLT and IEF in the bond drawdown news

SPR isn't the only thing in drawdown lol, down 49.5% since the beginning of 2022. Oil. Pffft. Who needs it, right?

Long term bond investors are getting killed, if any are left still standing. The article linked says most fixed income investors have gone ultra short.

Meanwhile the personal saving rate, which includes monies being socked away in retirement accounts, has plunged to 2.7% in June 2026. A prosperous people saves. Ours is doing something else. 

 

Imagine being down 6.7% per year for five years straight in the "safe" part of your portfolio, or even 1%, when inflation has been raging at 4.5% on average. Real return is far, far more negative.

Here:

... The iShares 20+ Year Treasury Bond ETF (TLT), for example, has posted an average annual return of negative 6.7% over the past five years, while its 7-10 Year Treasury Bond ETF (IEF) has posted an average annual decline of 1%. ...

 

Experts fancy bond yields are simply normalizing higher, but yields across the board have risen in response to the oil war since March

 

GILTS at 5% are OK when Labour does it

 UK’s Andy Burnham becomes PM as Trump slams Britain as ‘Poverty Stricken Disaster’

 

 

Like moths drawn to a flame, this moron has 1.2 million followers

 

I have a hard time getting excited about bond yields surging 7% in the wake of the Iran war when they already surged 368% since 2020 to the end of February

100 days of the Iran war: How global markets and the economy have been affected, in charts

 ... Yields on U.S. Treasurys are among those to have surged in the aftermath of the war ... U.S. 30-year Treasury yields have surged ...

 

 

Everything sold off today

Stocks were down across the board, with the NASD 100 notably down 4.77%. The equal weight S&P 500 is down 0.52% month to date.

The Tech sector was down the most on the day, 5.78%.

The Consumer Staples sector was up the most on the day, 1.64%, which looks defensive against a possible coming recession. The Utilities sector was up half that.

The U.S. 10Y yield rose to 4.55%, and the 20Y and 30Y yields rose above 5.00. YTD return for VUSUX is now down 0.85%.

Oil retreated 3%.

Metals were down across the board, silver down over 8%.

Crypto was down across the board, too, with Bitcoin falling below $60k.

But DXY climbed! +0.658 to 100.071.

The theory is investors are upset that today's "strong" jobs numbers (the 70k hospitality hires is probably World Cup related, a one off, so forget that) indicate easy money from the Fed is now absolutely out of the question, and maybe even a rate increase is coming because the economy is running too hot, which is silly with 1Q GDP at 1.6% annualized. CNBC called that "solid" lol.

Jokers say everyone's just raising cash to buy overpriced SpaceX in its IPO next week.

Investors are taking profits ahead of SpaceX IPO, says Capital Wealth’s Kevin Simpson

SpaceX is worth less than half of its $1.75 trillion IPO target, Morningstar says

Daleep Singh: I personally don’t think the bond-vigilante trade will be alive very long

 

 The bond market is flashing a warning over Iran. A veteran of energy geopolitics explains the risk

... A deal would have to be guaranteed by a trusted third party. There’s no trust at all between the U.S. and Tehran right now, because the bombs have been dropping every time they’ve sat down to negotiate. That’s where China comes in, and I’ll be interested to hear more details of what was said and agreed in Beijing [during Trump’s summit with Xi Jinping]. ...

You have got to be kidding me. 

China is the primary beneficiary of the world's sanctioned oil.

 

 

Kevin Warsh wasn't sworn in as Fed chair on Friday and Powell is still in charge because Warsh has so many assets to unload to meet ethics requirements he couldn't get 'em all done on time lol

 So the bond vigilantes threw a party and sold off, spiking yields across the board 1.44% on the day, throwing down the gauntlet at Warsh, daring him to cut in the face of all the chaos Trump is causing.

The 20-year soared to 5.14%.

Yields are up 2.8% in the aggregate since the beginning of the month.

6% inflation is knocking on the door.

Inflation rate projected to hit 6% in the second quarter, top economic forecasters say

 

 

 

Hey, when does Starmer resign anyway?

Starmer Has Failed Abjectly. He Should Go

The Economist

 ... Britain’s government bonds have the highest yields in the G7. ...

 

The US bond market is pissed off at everybody this morning

 Yippee ki yay you muthas.

US economic growth peaked during the Reagan administration because America is a debt-based economy and we turned our backs on the formula during it

 The trend for the growth of the total universe of US debt, TCMDO or total credit market debt outstanding, rolled over after 1985, one year after GDP did.

TCMDO is the real money, almost $108 trillion at the end of 2025. In 1985 it was $9 trillion.

M2 was merely $22 trillion at the end of 2025. 

TCMDO is the sum total of debt expansion throughout the sectors of the economy.

Historically, most people have experienced it this way.

You get a full time job, which itself was created by a business selling debt in the form of stocks and bonds in order to expand its operations and future profits, and you go buy a house, putting down $100k on a $500k property. The bank loans you the $400k through fractional reserve lending on a small portion of its reserves but secured by the house. That new money is created out of thin air but is actually represented by the "guaranteed" future income stream of your job for 30 years, because you're a smart, reliable guy who never misses a day of work. TCMDO expands, and expands some more each time this happens.

When the conditions disappear for full time job creation, the process slows down. You can see the decline in the growth of the economy in the decline of the growth of the debt. Yes, everything is still growing, but not as vigorously.

Full time as a percent of population peaked 26 years ago, in 2000, at 53.55%, but retested the 1975 low of 46.74% in 2010 and 2011 at 46.97%, back-to-back years in the Late Great Recession.

Housing strength persisted in the immediate post-Reagan period on the illusory basis of windfalls from massive ordinary income tax cuts combined with the demographic peaking of the 1957 Baby Boom turning 40 in 1997 driving demand, but the hollowing out of the economy had already begun with the move of 20,000 manufacturers abroad after the 1986 tax reform.

Early warning signs began flashing already during the Clinton era.

Clinton immediately raised taxes in 1993 after he promised not to raise them in 1992, began a long series of cuts to federal government employment, and gutted the US Navy.

Americans were already struggling at the time and ominously tapped housing equity to sustain their middle class standard of living. Owners' Equity in Real Estate averaged 70% 1982-1986 inclusive, but plunged ten points within a decade to 60% 1996-1999 inclusive.

Homes had become piggy banks, preparing the way for 1997, the year Clinton and the Republicans went further still and turned homes into mere commodities, which in turn prepared the way for the housing catastrophe of 2008. From 1997 a flood of 70,000 more manufacturers began moving out as globalization kicked into high gear and China gained admission to the WTO in 2001.

Almost no one today wants to say out loud how unpatriotic this whole business was. 

Reagan tried to convince us that we know best what to do with our own money, and we promptly turned around and staked our fortunes on foreign investment, not domestic.

Libertarianism is a lie.  

Today you will be hard-pressed to identify a major manufacturing concern with 100% of its operations in the US. Tesla is a standout (heavily subsidized by the federal government!), but other than that most of the businesses which remain patriotically committed to the American idea are pretty small beer compared with how it used to be. 

The formerly domestic debt expansion was exported abroad, creating middle classes where none existed before, especially in East Asia, and doing so cost businesses A LOT less, the key attraction for them.

As a result, enormous profits accrued to the owners of capital while wage earners here struggled to maintain the American dream. Wealth inequality soared, and now our children are 40 before they buy their first home.   

TCMDO grew at a compound annual rate of 8.355% 1945-1985, but at only 6.398% 1985-2025. The change from optimism to pessimism can be traced in the trend lines.

Continued growth of TCMDO at the former rate but after 1985 would have yielded TCMDO at the end of 2025 of $223 trillion, or 106% more "money" than we actually have.

$115 trillion is "missing", or at least something like that. We will never know for sure, but some of us can still imagine because we watched the great betrayal actually happen.

This is why I say socialism is the future, not because I want it or because I think it will work.

People are going to figure this out eventually, get angry, and do the wrong thing, just like we did during the Reagan administration. 

 

 

As an inflation fighter, Jerome Powell turned out to be twice as bad as Arthur Burns

Under Powell core pce inflation exceeded 10Y yield for 4 consecutive years (2020-2023).

Under Burns it was for only 2 (1974-1975).

The Bernank was Fed chair in 2012 when inflation only just barely outran 10Y yield.

 

Why the world has the petrodollar, not a petroyuan

Don’t call time on dollar dominance just yet, say analysts as ‘petroyuan’ call sparks debate 

... “Oil is not priced in US dollars simply because the United States has long acted as the world’s policeman,” wrote Sonal Desai, Franklin Templeton’s fixed income CIO.  

“Oil exporters have a strong self-interest in getting paid in USD, because of what dollars represent: access to the deepest, most liquid capital markets in the world, backed by an institutional and legal framework that protects property rights and enforces contracts, supported by a strong, dynamic, and innovative economy.” ...

Franklin Templeton’s Desai added in the note that building the right infrastructure for a credible replacement, consisting of “deep markets, rule of law, full convertibility, a track record of macro stability”, takes decades, not years. ...

Desai added that the dollar’s recent weakness is simply a function of its characteristics. 

“Some dollar softness is perfectly consistent with global reserve currency status,” Desai wrote. 

“Unlike the renminbi, the dollar is a freely floating currency. It floats – up and down.”

 

 

Bond yields through March 2026 have ignored Fed interest rate cuts which commenced in September 2024

 

Drudge is running propaganda for the Chicom bond market now

 

Chinese govt bonds emerge as lone haven...

 

https://en.people.cn/n3/2026/0327/c90000-20440521.html

... "By allocating to RMB bonds, foreign investors can reduce portfolio volatility and improve risk-adjusted returns." ... "In the face of frequent geopolitical risks, the safe-haven role of RMB bonds has emerged," Yu said, adding that as the RMB internationalization progresses, demand for RMB assets as reserves is growing, and this is expected to support the growth of RMB bonds holdings by central banks and sovereign wealth funds.                                                                                        

LOL, what a crock.

Foreign investors own less than $1 trillion of Chinese debt, compared with over $9 trillion of U.S. debt.

... [U.S.] Treasuries are relied upon by global central banks as the pre-eminent reserve asset, since the $30tn market for the securities is the biggest and deepest in the world. ...

More.