The bond market has voted Nay Nay on the Fed's interest rate cuts which started in September 2024, but I repeat myself

 Worries about softening employment have been entirely misplaced. Jobless claims have been FLAT for four consecutive years.

The Fed was wrong about jobs, just like it was wrong about inflation being transitory.

 

We're already close to the first: As of Feb 2026, the average interest rate on the U.S. National Debt is 3.4% while the compound annual rate of nominal GDP growth from 3Q2007 to 3Q2025 is only 4.3%

 One path to U.S. fiscal disaster is most alarming — and most likely

... An Everest of debt is an incentive for an inflation crisis to reduce the value of existing debt by paying lenders with debased dollars. But inflation would become baked into the expectations of investors, who would demand higher interest rates. Then R>G would bite: When interest rates paid on debt exceed the rate of economic growth, a crisis intensifies as rising interest rates depress economic growth. ... The most probable, and most ominous, outcome would be a gradual crisis. ... Nothing unsettles a middle-class nation more rapidly than inflation, a component of all of these crises. ...

Average yields on 20s and 30s are higher in January 2026 than when Trump was elected in November 2024, voting Nay Nay on what's going on

 

Yield on the 10Y is still lower but is saying Me Too

Gold bug Peter Schiff's problem is that gold represented at best only about 18% of the value of total global international reserves, and that was yesterday before gold started this price plunge

"The dollar is going to collapse", he said.

"The dollar is going to be replaced by gold", he said.

Central banks "are getting rid of dollars", he said.

"They're getting rid of treasuries", he said.

None of that is true.

The nominal broad dollar index remains relatively strong. 

Even foreign official ownership of treasuries is up slightly year over year, shifting slightly from long dated securities to short, while total foreign ownership is up solidly. 

Meanwhile fiat currencies represented about 78% of the value of total global international reserves yesterday. The U.S. Dollar alone represented about 55% of the value, followed by the Euro close to 20%.

Gold is not going to replace the dollar.

But Peter will be happy to sell you some, especially today lol. 

 

Fed Chairman Jerome Powell says economic activity has been solid lol

 10-year Treasury yield rises after Fed keeps rates steady, notes ‘solid’ economy

... “Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization,” the post-meeting statement said. “Inflation remains somewhat elevated.” ... 

“I think, and many of my colleagues think, it’s hard to look at the incoming data and say the policy is significantly restrictive at this time,” Fed Chair Jerome Powell said in a press conference. ...

The economy should be three times the size it is, $90.4 trillion in GDP instead of $31.1 trillion.

 

 

Bond yields don't appear to believe Trump's disavowal of the use of force in Greenland

 

Yields give the finger to The Don for tariff threats over Greenland

 

Look at those UST yields pop

 

Long yields have defied Fed interest rate cuts since September 2024, signaling persistent higher inflation

 

Stories like this about China destroying the U.S. Dollar just make me want to howl

But hey, what do you expect from MarketWatch?

China quietly destroying the dollar...

... As more commodities get priced in yuan instead of dollars, demand for dollars softens. As central banks diversify into gold, they buy fewer Treasurys. As fewer foreigners buy U.S. debt, interest rates drift higher. As the dollar’s purchasing power erodes, everything you import costs more. ...

This, like most of the story, is a load of BS.

Global demand for U.S. debt is at an ALL TIME HIGH, a record $9.2 trillion in the last three months through October.

You'll know the yuan has replaced the dollar when the world buys Chinese sovereign debt instead of ours. And right now the world owns less than $300 billion of Chinese sovereign debt, billion with a B, not trillion with a T.

Nobody trusts China like they trust us. 

The writer, who owns gold and silver, wants you to dump long term bonds and buy short term bills and . . . gold and silver. Gee, what a coincidence. 

Meanwhile foreign governments continue to prefer long term U.S. Treasuries and own relatively few bills.

And the dollar is relatively strong, not weak as the writer says, in November 2025. 

click to enlarge

 

The unemployment rate at 4.6% in November 2025 can't be right

 The unemployment rate at 4.6% in November 2025 can't be right with Initial Claims for Unemployment so low, averaging 223k.

The January to September averages were 4.2% unemployment with 222k initial claims.

Compare:

2024: 4.0% at 221k

2023: 3.6% at 221k

2022: 3.6% at 215k

2019: 3.7% at 217k

2018: 3.9% at 220k.

Household Survey response rates, from which we get the unemployment rate, have plunged since the pandemic, from above 80% before COVID to below 70% now.

As a consequence 2025 and 2024 look suspiciously higher than they probably are when compared with prior years. 

Initial claims for unemployment is more certain as a measurement because the data is aggregated from state unemployment agencies which pay actual people who make actual claims, not people who answer (or don't answer) a poll.

With claims still historically low, the Fed is making a big mistake in reducing interest rates because it thinks employment is softening based on the Household Survey.

They risk reigniting inflation. 

 

 

 

This was a plausible excuse for the latest Fed rate cut

 But what it really does is get the meddlesome Trump off their backs, whether jobs are flagging or not. Jobless claims have averaged a very, very low sub-227k in 2025.

The case for more Fed rate cuts could rest on a ‘systematic overcount’ of jobs numbers

 

Meanwhile Powell & Co. did an end-run around Trump by confirming all the regional bank presidents two months early, before Trump could meddle with that, too, which was a fear.

 

Which is very amusing. 

 

Fed votes to reappoint all of its regional bank presidents 

 

Long term yields have not believed in the rate cuts.

 

They have risen, risen indeed!, since the Fed started cutting in the face of persistent inflation in September 2024, and remain higher today.

 

You can run, but you can't hide from the Hound of Heaven. 

 

 

  

Flight to safety in September or just rebalancing?

 401(k) plans saw ‘flight’ to cash, bonds in September, analysis finds

... Bond funds captured 39% of fund inflows, while 25% of net investor money flowed to stable value and 18% to money market funds, Alight found. ... The shift to bonds may indicate investors are rebalancing to keep their asset allocations from getting too stock-heavy, Austin said.

VBTLX was up 1.05% in September vs. 1.93% in the 3-months ended September 30th. The fund was up 6.10% year to date on September 30th. 

What he said

 

Treasury Secretary Bessent tells a whopper

 

Bessent: Tariff Income And Fiscal Improvement Have Made The U.S. Bond Market The Best Performing In The Developed World

 

These jokers have added $1.2 trillion to the national debt in TWO months.

 

The 10-year US Treasury has returned 1.013% nominal in the last twelve months, -1.419% real. 

Friday's bad job report spooked Treasury buyers big time, pushing yields down 4.5% in the aggregate from the August average in a flight to safety

Average US Treasury yields by duration Fri Sep 5, 2025:

Bills 3.96

Notes 3.69

Bonds 4.75

Aggregate 3.98 (down 4.5% from Aug average).

The aggregate was already down 6.5% from January in August. The only yields still holding up had been in bonds, which gave up 11 basis points on Friday, yielding 4.75 vs. the August average of 4.86, down about 2.2%. 

The rosy scenario, which isn't rosy, is for stagflation. The worse scenario is for recession, possibly signaled by the revision to June payrolls, now down 13k.

You know, like in January 2001, but past performance is no guarantee of future results.

The point is, people are spooked. 

 

 

U.S. Treasury yields tank in flight to safety after August 2025 jobs only +22k: Fed rate cut incoming

 

Bonds tank and gold soars to start September in huge embarrassment to Banana Republican Donald Trump, who wouldn't pay his own bills let alone the country's

... Tariffs are set to bring in $172.1 billion in 2025, according to the Tax Foundation, which would be a nice financial boost to a country with a ballooning budget deficit.

“If this ruling is upheld, refunds of existing tariffs are on the table which could cause a surge in Treasury issuance and yields,” wrote Ed Mills of Raymond James in a note. ...

More. 

 

US Treasury yields retreated 3% from their July average in the aggregate on Friday in a flight to safety

 The July average yield of the aggregate of eleven US Treasury issues was 4.2927. Friday's 3% retreat left the aggregate at 4.1636.

Yields on Bills pulled back to 4.2175 from 4.2925 in July, or 1.7%.

Yields on Notes pulled back to 3.866 from 4.042 in July, or 4.3%.

Yields on Bonds pulled back to 4.80 from 4.92 in July, or 2.4%. 

 

VFSTX is now ahead 4.45% year to date.

VFICX is now ahead 6.37% year to date.

VWESX is now ahead 4.47% year to date. 

VBTLX is now ahead 4.67% year to date. 

VTSAX is now ahead 6.26% year to date. 

Look at that flight to US Treasury safety

 

Trump unleashes sweeping new tariffs in a blow to global trade

 

U.S. added just 73,000 jobs in July and numbers for prior months were revised much lower