Last week US Treasury yields for Bills averaged below the Daily Federal Funds Rate of 4.33 after 12 weeks averaging 4.3+change

 

"I'm going to reduce interest rates by crashing the stock market with tariffs"

Bessent says Trump is focused on the 10-year Treasury yield and won't push the Fed to cut rates

 

US Treasury auctions last week indicated that yields held up from the previous auction only for the 1-month, and fell apart strongly in the Notes

 US Treasury auctions last week:

3-month 4.195 average yield/4.225 previously

6-month 4.18/4.22

2-year 4.169/4.211

5-year 4.123/4.33

7-year 4.194/4.457

4-week 4.25/4.245.

 

The weekly average of US Treasury yields by duration finished the week showing Bills holding up and Notes collapsing the most, with Bonds not far behind.

Yields for the 1MO, 1.5MO, 2MO, 3MO, and 4MO were strong in the range of 4.3. Investors piled into 2Y and 3Y Notes with yields plunging to 3.99 on Friday.

 

In the aggregate US Treasury yields haven't moved much since the end of November, after which duration began to normalize, but looky here

 On Nov 29, 2024 the yield curve averaged 4.356 in the aggregate, after which we began to see duration normalize.

On Feb 21, 2025 it averages 4.357.

Now, however, there are seven securities in the Bills category, not just six, with Treasury rolling out the new 1.5-month (6-week) security as part of debt-ceiling-forced "extraordinary measures". There are five in the Notes, and two in the Bonds.

Duration normalization has now partly reversed because of the extraordinary measures, at least on a weekly basis, with yields for Notes once again falling below those for Bills on average on Friday.

If you count just the traditional 1MO, 3MO, 6MO, and 1Y among the Bills, the Bills yield average is nearly identical to Notes at 4.2825.

These falling yields may be both signaling and spurring increased purchasing of UST, including among the Notes to lock in an anticipated disappearance of opportunity as Bills issuance surges to fund the Treasury General Account. The increased issuance of Bills means yields fall across the curve, at least temporarily, as investors lock in.

The special 6-week security rolled out at 4.41 on 2/18 and was paying 4.39 on Friday vs. only 4.15 for the 1Y and 4.42 for the 10Y, the latter's lowest yield all month. Falling yields for the 10Y is a specific goal of the Treasury under Trump. Evidently the temporary 6-week Bill is helping them achieve that . . . for now.

Reported Feb 5 and Feb 6:

Bessent's focus on 10-year US Treasury yield may let Fed off the hook

..."The president wants lower interest rates and ... in my talks with him, he and I are focused on the 10-year Treasury," Bessent said. "He is not calling on the Fed to lower rates. He believes that if we ... deregulate the economy, if we get this tax bill done, if we get energy down, then rates will take care of themselves and the dollar will take care of itself." ...

 10-year Treasury yield drops as traders digest news on issuance, fresh data

... The [Treasury] department also said it will be issuing more short-term bills than usual as it uses “extraordinary measures” to keep the government operating while Congress battles over the debt limit. That announcement came despite new Treasury Secretary Scott Bessent previously criticizing his predecessor, Janet Yellen, for issuing unusually large amounts of shorter-term debt. ...

 

 

 

In the aggregate US Treasury yields averaged 4.408 on Friday, Feb 7, still ahead of the Daily Federal Funds Rate of 4.33 set by the Fed in December

Relative to each other by duration, bond yields on average normalized at the beginning of December, and notes on average in mid-December. 

Last week the spreads narrowed as bills on average rose a little bit in the aggregate and bond yields fell.

The 20-year bond was the yield leader at 4.75 while the 1-year bill was the yield laggard of all the issues at 4.25. 

The fixed rate 30-year mortgage averaged 6.89 last Thursday.

 

 

The revenge of the bond vigilantes

 The Fed started cutting the Federal Funds Rate last September (DFF 5.33 then, 4.33 now), and average yields for notes and bonds started climbing and haven't stopped lol.

 

 

Amateur hour 2.0: Trump thinks he can tell the bond market what to do when not even the Fed can do that lol

Welcome to the party, pal.

 

yippee-ki-yay mofo

President Donald Trump says he’ll ‘demand that interest rates drop immediately’

Does this dope pay attention? Oh, that's right, he doesn't pay anyone.

Anyway, the Fed cut rates by a full point since the September meeting, and rates on bonds and notes soared anyway.

The Fed can't demand anything, but President Goofy Nuts pretends it can, and he can.

 

 

 

US Treasury yields are steepening and by duration are normalizing

 This is actually a good thing.

Longer dated securities should pay more than shorter, unlike most of 2024 when Bills paid far more.

Bills yields on average on Friday match the Daily Federal Funds rate exactly, falling in tandem with it in 2024 from the 5.33 range to 4.33 now. They've been pretty stable at this level for five weeks now.

The fall in Bills yields actually ran in front of the Fed decision to make the first rate cut in September by many months.

The fall commenced after May when the Fed announced it would institute a slight decrease to its tighter money policy through balance sheet operations involving UST beginning in June.

Bills yields fell hard for four months into September even as core inflation year over year remained flat at 2.7% over the period. Investors locked in higher but rapidly disappearing return.

Yields on Notes and Bonds also plunged, but against most predictions they rebounded in the face of the Fed rate cuts, which is quite amusing. Longs got their lunch eaten.

The simplest explanation is that longer dated securities anticipate more inflation, and the Fed simply pushes on a string. Bond vigilantes demanded more return for the rising risk.

People who didn't appreciate fixed income turning into a casino like the stock market hid out in cash and did just fine. VMRXX returned 5.24% last year.

There are over $6 trillion in T-bills outstanding at the end of 2024 vs. $2 trillion to start 2018, out of a total of approximately $28 trillion total UST outstanding.

Unfortunately for buyers of houses and cars, long money is going to cost you more, as yields on Notes and Bonds climb again in anticipation of recalcitrant inflation and increased deficit spending under Trump.

The average four year new auto loan was 9.36% and the 30-year mortgage 6.93% last week.

 

S&P 500 Equal Weight Index down 7.25% in December to date, US Treasury yields up a net 2.13% in the aggregate since the end of November

Both stocks and fixed income down at the same time is a real bummer, you know, like in 2022.

UST yields in the aggregate tonight are at 4.45 vs 4.356 at the end of November.

UST yields have risen 375 basis points net in the aggregate in the three months since the Fed started cutting the Fed Funds Rate on September 18. That's +6.93%, which is hilarious.

 

US Treasury yields tonight 12/19/24

 UST yield averages tonight:

Bills 4.351

Notes 4.436

Bonds 4.780

Go ahead you fools, get rid of the debt ceiling . . . Make my day

 

US Treasury yields are looking more normal!

 UST averages tonight: Bills 4.365 Notes 4.410 Bonds 4.695.

Low duration issues yield the least, long duration issues the most, and the middle looks like the middle should look, middling.

That's how it should be.

Low duration issues have been dominating the curve, yielding the most. Why, just at the beginning of the month the 1MO still yielded 4.75, more than any other security. Tonight the 1MO yields 4.44 and the 20Y yields 4.74, the leader. The yield laggards are the 6MO and 1Y at 4.30.  That's what you want to see happen.

The Fed today dropped the Federal Funds Rate 0.25 points to 4.25. I expect the short end to keep moving lower as a result, and the middle to rise more in tandem with the long bonds as inflation continues to bite.

But we shall see.

Average US Treasury yields aggregated monthly started to normalize in November as yields fell for bills but rose for bonds

Interpreted politically one could say yields for notes and bonds reversed their slide starting in October as Harris' lead evaporated at the end of September and bond markets started to bet on a Trump win, bringing with it higher deficits because of his proposed tariffs and tax cuts.

 

We're finally getting some yield curve interest rate normalization with the 1MO yield leader being replaced by the 20Y, as it should be

 The UST Bills end averages 4.353 as of Friday Dec 13th, while the Bonds end averages 4.650.

Still soft in the middle, though, with Notes averaging 4.288. Would like to see Bills and Notes the reverse of that for a nicely steepened slope from short duration to long.

More inflation: Core producer prices, aka core wholesale prices, have been up four months in a row measured year over year, the last three increases all above 3% yoy

 3.2%, 3.4% . . . and 3.5% year over year now in November 2024.

Overall prices are up 3% yoy in November.

 

Wholesale prices rose 0.4% in November, more than expected:

Final-demand goods prices leaped 0.7% on the month, the biggest move since February of this year. Some 80% of the move came from a 3.1% surge in food prices, according to the BLS.

Within the food category, chicken eggs soared 54.6%, joining an across-the-board acceleration in items such as dry vegetables, fresh fruits and poultry. Egg prices at the retail level swelled 8.2% on the month and were up 37.5% from a year ago, the BLS said in a separate report Wednesday on consumer prices.

 

The Fed is expected still to cut again at the next meeting despite all the evidence pointing to persistently high and increasing inflation, hiding behind the skirts of fear of job losses, a smokescreen for gifting easier money to speculators, and to federal authorities who now need to finance $36.1 trillion in the national debt at lower rates.

20Y and 30Y bonds are revolting, demanding 4.624 and 4.551 as we speak, now the highest yields across the curve, as the short end yields in US Treasury bills come back down to earth.

 

Disgusting: No matter how you cut it, core cpi inflation is up in October

 Seasonally adjusted core cpi inflation is trending higher since July, and ticked up from 3.25% year over year in September to 3.30% in October.

Not seasonally adjusted inflation is up to 3.33% in October from 3.31% in September, also trending higher since July.

And yet Jerome Powell keeps cutting the Fed Funds Rate, 50 basis points in September and another 25 basis points last week. 10Y yield minus 2Y has been showing its displeasure ever since, reversing its healthy trend. So has the 30Y mortgage.

Congress continues to spend like drunken sailors, and Powell has joined them with loose monetary policy now after not tight enough policy EVER.

The whole thing is DISGUSTING. And the election changes NOTHING.

 

Gold and silver and yields, oh my

 

Prime Rib and Pork Chops and Scampi, Oh My

Gold prices fell over 1% after hitting a record high on Wednesday, as a stronger dollar and a rise in U.S. Treasury yields countered support from safe-haven demand linked to the Nov. 5 U.S. election and Middle East war.

Spot gold was down 1% to $2,721.12 per ounce as of 12:25 p.m. EDT (1410 GMT) after hitting a record high of $2,758.37 earlier in the session.

U.S. gold futures fell 0.9% to $2,734.60. ...

Spot silver fell 3.1% to $33.74 per ounce after hitting its highest price since late 2012 at $34.87 on Tuesday.

More.

Fixed income investors in US Treasury securities took a beating last week as yields surged 4.67%

Year to date total return tanked for 30-year bonds from 2.01% on 9/27/24 to -0.78% on 10/4/24.

For 20-year bonds year to date return fell from 3.33% to 0.98% over the week.

There was similar carnage down the curve. Only 3mo and 6mo Treasury bills were up year to date week over week.

 

US Treasury yields collapsed 6.5% week over week Friday Aug 2, 2024 and year-to-date percentage total return went green across the entire curve

 

UST yields collapsed 6.5% week over week Fri 8/2/24 (down 402 basis points) to an average for the aggregate of the curve of 4.430.

 

YTD % Total Return is now green across the entire curve.

The 10-year, 20-year, and 30-year still had been down year-to-date through Friday Jul 26, just one week ago: -0.26%, -2.31%, and -4.31% respectively.

Now look at 'em:

 

 $TBIL 3.32 $XBIL 3.15 $OBIL 3.06;

 $UTWO 2.98 $UTRE 3.05 $UFIV 3.15 $USVN 3.45 $UTEN 2.94;

 $UTWY 2.33 $UTHY 1.31.

 

 

 

 

 

Despite US Treasury department manipulation of the yield curve last week and another Fed pause, yields still average above five in the aggregate

 We saw a much bigger surge into bonds in March, but yields persisted.

With inflation, employment, and nominal GDP all still strong, Treasury tricks are unlikely to unravel this.

Cash such as VMFXX at 4.21% ytd and total stock market such as VTSAX at 13.92% ytd continue to trounce bonds ytd. VBTLX is still down 0.39% ytd. AGG is down 3.46% ytd.