“People are worried about German/French/Italian/Japanese/Swiss/Canadian solvency” [1]
“Germany’s benchmark 10-year bund yield was last seen trading at a 15-year high, while its French counterpart reached its highest yield since 2008. Japan’s 10-year bond yield rose to 2.954%, topping the 40-year high seen in the spring. Yields also spiked across the curve on British, Italian, Swiss and Canadian government bonds.”
Financialized AI (debt: ~$2T), private equity (zombie debt: ~$4T), government spending ($7.2T, debt: $39.9T), and the very rich (and up) are the economy right now. Everyone else is/has pulled back and is hurting because of rising prices and job uncertainty.
It's not all inflation expectations, either. The dollar has been strong lately due to elevated oil prices---countries that are short need extra dollars to buy oil, so they often liquidate treasuries to get them.
Well yes. A stock goes up because people are buying, but that avoids the intent of the question, if they're asking about why the stock is rising.
The answer the GP. The longer term bonds tend to be less impacted by interest rate expectations. Risk feeds into the yield, as does inflation expectations.
You have that backwards. The market sets the long end of the curve via supply and demand,the Fed controls the short end of the curve (federal funds rate)
If the Fed hiked the (short-term) FFR, long term inflation expectations would go down, along with the yield of long duration Treasury bonds.
Long-term bonds can be replaced with short-term bonds which are constantly rolled over. It wouldn't make sense if the market was pricing in anything else than future interest rates.
You are largely correct for the pre QE years. But with QE, bonds further out the curve have been purchased by the Fed, and the yields for such maturities have been artificially suppressed. Warsh, at on time, really cared about this mispricing of risk. We'll see how he feels now that he's got his hand on the rudder and the orange colored man breathing down his neck.
They still own 7X the amount bonds they did pre-GFC, and 75% of what they did at the peak. In short, I posit it still has a massive effect on the yield curve and all assets (US and globally).
"People are worried about America's solvency" - https://news.ycombinator.com/item?id=49329347
“People are worried about German/French/Italian/Japanese/Swiss/Canadian solvency” [1]
[1] https://www.cnbc.com/2026/08/18/bond-yields-government-us10y...The whole world is insolvent
Time for a global debt jubilee.
Please let me know when it's time to max out my credit cards to buy gold.
Financialized AI (debt: ~$2T), private equity (zombie debt: ~$4T), government spending ($7.2T, debt: $39.9T), and the very rich (and up) are the economy right now. Everyone else is/has pulled back and is hurting because of rising prices and job uncertainty.
Don’t worry, it’s all over the world. [1] [2]
[1] https://www.wsj.com/world/india/500-000-applicants-583-jobs-...
[2] https://www.nytimes.com/2021/07/03/world/asia/china-slackers...
It's rising because the market expects interest rate hikes. Long-term bonds are basically a prediction market for future interest rates.
The 30 year isn’t as affected by interest rate hikes unless the market is signaling it sees long term inflation despite interest rate hikes.
The 30 year should reflect more fundamental issues.
30y is keyed to inflation expectations.
If fed hiked to 5% tomorrow, 30y would invert and yield would go down.
It's not as simple as hikes lead to higher 30y yields.
It's not all inflation expectations, either. The dollar has been strong lately due to elevated oil prices---countries that are short need extra dollars to buy oil, so they often liquidate treasuries to get them.
Investing in long term bond == expected interest rate hikes?
yield rising means selling
Well yes. A stock goes up because people are buying, but that avoids the intent of the question, if they're asking about why the stock is rising.
The answer the GP. The longer term bonds tend to be less impacted by interest rate expectations. Risk feeds into the yield, as does inflation expectations.
You have that backwards. The market sets the long end of the curve via supply and demand,the Fed controls the short end of the curve (federal funds rate)
If the Fed hiked the (short-term) FFR, long term inflation expectations would go down, along with the yield of long duration Treasury bonds.
Long-term bonds can be replaced with short-term bonds which are constantly rolled over. It wouldn't make sense if the market was pricing in anything else than future interest rates.
You are largely correct for the pre QE years. But with QE, bonds further out the curve have been purchased by the Fed, and the yields for such maturities have been artificially suppressed. Warsh, at on time, really cared about this mispricing of risk. We'll see how he feels now that he's got his hand on the rudder and the orange colored man breathing down his neck.
There has been a distinct lack of QE the past few years, here is the Fed’s balance sheet charted: https://www.macrotrends.net/3003/fed-balance-sheet
They still own 7X the amount bonds they did pre-GFC, and 75% of what they did at the peak. In short, I posit it still has a massive effect on the yield curve and all assets (US and globally).