The funniest thing that's happening to Donald Trump right now is that while he tries to intimidate the Fed to reduce interest rates and they do nothing, yields are soaring all by themselves

 The bond market is issuing a vote of no confidence in our elected leadership.

One branch of Republican government thinks this is the 19th century with a robust manufacturing base it needs to protect with crazy wild tariffs, and another branch of Republican government thinks it's just fine to go on spending like drunken sailors and not raise taxes to pay for any of it.

Interest payments alone on the national debt in fiscal year 2024 soared to $1.1 trillion against revenues of $4.9 trillion.

Meanwhile the most powerful military in the world can't stop a bunch of rag-headed heathen bastards from launching missiles at Israel.

These people are crackerdog.

US Treasury yields are now up a net 2.37% across the curve since last Friday.

 

Long duration is very unhappy: 10Y at 4.53 at the close yesterday, 20Y at 5.00, 30Y at 4.97.

 

VUSTX ytd total return: -0.53%.

 

 

Week over week US Treasury yields in the aggregate popped 5.8% on net to an average 4.335% after declining for months from 4.5 to 4.0 and everybody's freaking out like this hasn't happened, what, six times now in the current era

Most of the pissing and moaning is from investors who pulled the bond trigger too soon, plowed into fixed income, and got burned badly because interest rates reasserted themselves.

The press this weekend is instead full of apocalyptic language about the Treasury market and the implications for America on a grand scale. It's complete rot and I'm ignoring it. It's all designed to pressure the Fed to lower their rate again.

The last time the Fed embarked on rate cuts is instructive. It was late September 2024. The average of the aggregate of the curve had fallen to just north of 4. Inflation rates seemed to be trending down. So the Fed cut, and voila! Treasury rates hilariously shot upward!

The burn was real.  

$TLT investors, who were down 4.76% in 2021, 31.41% in 2022, up 2.96% in 2023, went down again, 7.84% in 2024 as a result. Ouch.

They are back, itching again for a policy reversal like they have a flea infestation, so bad they are bleeding.

As things stand year to date, long term investment grade investors in VWESX, for example, are down 1.43%. It wasn't supposed to be this way, not again.

So everyone hates the bond vigilantes with the heat of 1,000 suns, and urges more imprudence.

Meanwhile in "cash" you go on making 4.3% or so, and in gold you have made a killing, while stocks reel under Trump's stupid tariff shotgun blasts which are wounding everyone in the field, including himself.

If the Fed had done a proper job against inflation by jacking up the Fed Funds Rate to meaningfully combat the core pce inflation rate of its average 5.35% in 2022 instead of going only where it did, which was 1.69% on an average basis, maybe we wouldn't still have this lingering inflation for the bond vigilantes to demand payment against. Core pce inflation hasn't moved materially off 2.8% in a year now, still much too high.

The bond market is "she who must be obeyed". She doesn't tell you everything you need to know, but she does tell you the most important thing.

But what the hell do I know. I'm just some punk keyboard warrior blogging in his underwear in the basement to the money men. So yippee-ki-yay, you earned it. Especially you Donald Trump, you complete ignoramus.

 

The bond market vigilantes scared off Donald Trump and his tariffs: Average yield at today's 10-year note auction was 4.435% vs. 4.31% at the previous auction

 

Ambrose Evans-Pritchard: Trump will stop at nothing in his quest for imperial power and will destroy the credibility of US Treasury debt

 

telegraph.co.uk

If you think it’s alarming now, just wait for Trump to wreck the bond market

The White House’s push for for expanded presidential power threatens US economic stability

 

Ambrose Evans-Pritchard

8 April 2025

---

Donald Trump is systematically purging every US government institution, a pattern familiar to anybody who has studied the caudillo regimes of Latin America, or the playbook of today’s Putin-Orbán-Erdoğan prototypes.

It is a racing certainty that he will soon do the same to the Federal Reserve, forcing the central bank to cut interest rates into the teeth of rising inflation, with epic consequences for the world’s dollarised financial system and for €39 trillion (£33 trillion) of offshore dollar debt contracts and swaps.

Late last week he fired the head of the National Security Agency and its top officials at the behest of Laura Loomer, a fringe conspiracy theorist, who whispered into Trump’s ear that they were disloyal to the Maga movement.

He has already fired the heads of the FBI’s intelligence division, its counterterrorism division and criminal investigations division, as well as the heads of the Washington and New York offices.

He has fired the top brass of the US military, starting with a preemptive strike on the chairman of the joint chiefs of staff. An earlier chairman – General Mark Milley – refused to ratify Trump’s attempted coup d’etat on Jan 6 2021.

“We don’t take an oath to a king, or to a tyrant or dictator, and we don’t take an oath to a wannabe dictator. We take an oath to the constitution,” said Milley in his parting shot.

But Trump also fired the three judge advocates general, who are legally independent by Congressional statute and have the authority to decide which military orders should be disobeyed – such as Trump’s order to “just shoot” American protesters, on American soil, during the Black Lives Matter saga.

That obstacle will not recur. Pete Hegseth, the defence secretary, said the three judges had been sacked to stop them posing any “roadblocks to orders given by the commander-in-chief”.

You can go through the list, agency by agency, extending to the universities and private law firms, and even to the muzzled editorials of some of America’s once great newspapers: the purge is Bolshevik in ambition.

Does anybody in their right mind think that Trump will spare the Fed’s Jerome Powell as the two men gear up for an almighty clash over US monetary policy? “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!” bellowed Trump in capital letters on Truth Social on Friday.

The Fed will indeed cut rates this year but not until it is able to see through the confusing blizzard of tariffs and the ricochet retaliation of an angry world.

Powell told Congress that the tariff shock is much bigger than expected and may set off “persistent” inflation rather than just a one-off jump in the price level. He came close to damning Trumponomics as a recipe for low-growth stagflation. That is a red flag to a bull.

The current debate over whether or not Trump has the legal power to fire Powell entirely misunderstands the character of the Maga revolution. America’s rule of law is for guidance only these days.

You could say it was ever thus. Franklin Roosevelt tried to pack the Supreme Court after it blocked the New Deal. He failed, and unleashed tax investigations to settle scores, as did Richard Nixon. But Trump is an order of magnitude more outrageous.

Powell will not go without a fight. “I will never, ever, ever leave this job voluntarily until my term ends under any circumstances,” he said during Trump 1.0.

Scott Bessent, the Treasury secretary, said the administration could sideline Powell by appointing a “shadow” Fed chairman, who could steer the markets by issuing forward guidance. But this does not overcome resistance from the Fed board and the hawkish regional presidents.

A secretive team of Trump loyalists drew up a 10-page report before the election proposing more radical measures. These include forcing the Fed to “align policy with administration goals” or even to make the president an “acting” member of the Fed board.

Trump could purge members of the seven-strong Fed board one by one until they get the message. The law states that the president can terminate the 14-year term of a Fed governor “for cause”, usually meaning malfeasance or neglect.

But Trump has just abused his tariff powers on an heroic scale by invoking fictitious “emergencies”. He could no doubt stretch the meaning of “for cause” to anything he wants. The Supreme Court has the last say, but Trump-appointed justices have already shown a strong leaning towards an imperial presidency.

In any case, there are other methods to bring the Fed to heel.

Maga vigilantes are intimidating American judges by having pizzas delivered to their homes – a mob tactic to say “we know where you live”. So we can assume that recalcitrant members of the Federal Open Market Committee will face this sort of treatment.

The major US banks are raising their inflation forecasts to 4pc or higher this year. This inflation will hit before the last three price shocks – Covid, the Putin commodity spike and Biden’s overspending – have faded from immediate memory. It is exactly how inflation psychology becomes embedded.

A variant happened in the 1970s. Nixon bullied the Fed into expansionary policies, with some choice language on “the myth of the autonomous Fed” that later surfaced in the Oval Office tapes.

Loose money stoked inflation, so Nixon ordered a freeze on prices and wages in 1971, declaring war on “gougers”. It was very popular. Illiterate policies often are.

If Trump succeeds in extracting rate cuts from the Fed and tax cuts from Congress, the same problem is going to arise. So my assumption is that he will blame the symptoms and will resort to price controls.

The elephantine difference is that US federal debt was 34pc of GDP in 1971. Today it is 122pc on the Fed measure, and galloping upwards. The fiscal deficit is over 6pc as far as the eye can see.

The US does not have the domestic savings to fund this debt appetite. The savings rate has collapsed to 0.6pc of national income. It was 12pc in the 1960s.

Foreign investors have been plugging the gap. This soaks up a large part of the world’s savings – the underlying cause of America’s trade deficit.

If you think the stock market gyrations of the last few days are terrifying, just wait until Trump destroys the credibility of the Fed and of US treasury debt, the anchor of the global system.

He could order a captive Fed to relaunch quantitative easing and buy the bonds, but to do that when inflation is running hot would be seen by the whole world as naked fiscal dominance. It would set off a price spiral and a collapse of the currency – the sort of outcome seen over the decades in Latin America, or Erdoğan’s Turkey.

The end destination is a return to US capital controls to stop foreign funds and US investors from taking their money out of America. A man willing to impose 116pc tariffs – including pre-existing ones –  on Chinese goods and shut down the biggest bilateral trade relationship in the world as if it were a TV reality show will stop at nothing.

 

https://www.telegraph.co.uk/business/2025/04/08/trump-sell-off-is-bad-wait-until-wreck-us-bond-market/

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.

 

US Treasury yields making new highs for this cycle as of Oct 19, 2023

Massive Treasury issuance to pay for massive pandemic spending has driven yields higher.

 

It's the law of supply and demand: Increase the supply of US Treasury debt and the price goes down.

 

Previously issued securities paying lower interest rates drop in price because they are much more plentiful in comparison with the new issues paying higher rates which investors demand.

 

Who wants 'em?

 

Banks are estimated to be stuck with these dogs in quantities approaching what the Fed has let roll off, which is what they also must do. The collateral backing banks, insurance companies, pension funds, et cetera et cetera et cetera, suffers.  

The Federal Reserve Bank's role as a big buyer in the bond market has been curtailed since 2Q2022, removing its big price support role. As of 3Q2023 the balance sheet is down $768 billion as securities mature. That's about $51 billion rolling off per month, and no net buying to replace it.

 

The Fed has also raised the Federal Funds Rate to an average of 5.33 to combat inflation.

 

So yields have risen for such reasons to these records for this cycle to date, but it's all predicated on the US Treasury having to dilute the supply:

 

1MO 6.02 5/26/23 (debt ceiling disagreement)

3MO 5.63 10/6/23

6MO 5.61 8/25/23

1Y    5.49  9/27/23

 

2Y 5.19 10/17/23

3Y 5.03 10/18/23

5Y 4.95 10/19/23

7Y 5.00 10/19/23

10Y 4.98 10/19/23

 

20Y 5.30 10/19/23

30Y 5.11 10/19/23.

In the aggregate as of Oct 20 yields are up a net 22% year over year to an average of 5.25692 from 4.30846 when all the wizards of smart said they couldn't possibly go any higher without breaking something.

They're still saying that.

 

US pandemic debt orgy described as fiscal slippage lol

It's so indicative of our degeneracy how economic profligacy must not be described that way in this day and age where anything and everything is great, awesome, and epic but that.

Oh well, at least they still pay a modicum of respect with huge, swelled, and deluge.

If only all that cash were a tsunami, inundating the shore with ruinous inflation.

 

 

 

CNBC, here:

. . . investors are also pricing in surprising economic resilience alongside fiscal slippage.

 The U.S. federal government ended its fiscal year in September with a fiscal deficit of almost $1.7 trillion, the Treasury Department announced on Friday, adding to a huge national debt totaling $33.6 trillion. The country’s debt has swelled by more than $10 trillion since the onset of the Covid-19 pandemic in the first quarter of 2020, prompting a deluge of fiscal stimulus to help prop up the economy.

I watched Die Hard on Christmas Eve

 It was much dumber than I remember, but then so was I back in the day.

It turns out that Roger Ebert's review here captured what's wrong with the film.

The review in THE GRAUNIAD here is just laughable.

Yippee-ki-yay. 

 

The entire US Treasury yield curve bows and worships at the feet of the 1-year Treasury for an eighth day now, and you know what that means

 When the upstart 1-year tries to compete with the long end, you in for a heap a trouble boy.

Yippee-ki-yay.

Rock-bottom yielding 30-year US Treasury from two years ago sold at pandemic sky-high price sells at a 50% discount

Yippee-ki-yay.

 

Bond vigilantes on the move everywhere

 Yippee-ki-yay.

 

 

I would like to come back as the bond market . . . You can intimidate everybody

 Yippee-ki-yay.

 

 

Long US Treasury and Investment Grade bonds both made new 52-week lows again last night

Yippee-ki-yay.

 

Bond vigilantes be like . . .

 Yippee-ki-yay, motherfucker.

 

Self-hating, America-hating liberal Peter Fonda finally gets his death wish: of lung cancer at 79

Peter Fonda has wanted to die at least since 1969, when a loose-triggered good ole boy decided he had to kill the witness too, and blow Fonda's character Wyatt away with a shotgun off his motorcycle in the final scene of Easy Rider. Wyatt's partner Billy had the wrong hair cut, you see, and the bad Yankee manners of the wrong hand gesture to go with it, while Wyatt had the wrong flag painted on the gas tank of his chopper and helmet. The Yankee fu was answered with the rebel yells of a twelve gauge. 

Fonda repeated the performance in 1974's little-remarked Open Season as the character Ken, when the father played by William Holden hunts Ken down and kills him. Ken is a sick-in-the-head Vietnam vet who otherwise appears to lead a normal life but abducts and abuses, then releases and hunts and kills humans two weeks every year for sport with his buddies. As young men before the war they had raped Holden's daughter. She had had a child as a result, raised by the Holden character, and ended up in a mental institution. The Yankee fu was answered with the rebel yell of a vigilante's hunting rifle. 

What Fonda couldn't bring himself to do with a gun in real life, he did to himself with drugs. For one reviewer of his 1998 Don't Tell Dad: A Memoir, too much of it "is a catalog of dope smoked". All along the real fu was to himself.