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Will bond vigilantes finally force the hand of the US government to slow the deficit?
Posted on 5/21/25 at 12:56 pm
Posted on 5/21/25 at 12:56 pm
Weak 20y treasury auction just wrapped up and long term rates have spiked across the curve, but have steepened as well.
10y up to 4.59
20y up to 5.11
30y up to 5.08
Apparently the bond market isn’t in love with the spending/tax package.
10y up to 4.59
20y up to 5.11
30y up to 5.08
Apparently the bond market isn’t in love with the spending/tax package.
12
Posted on 5/21/25 at 12:58 pm to slackster
Shouldn’t this be on the money board? What’s the political angle here?
Posted on 5/21/25 at 12:58 pm to slackster
I’ve been looking at this… really hoping someone smarter than me can explain how this pans out, because on its face it doesn’t appear good.
Posted on 5/21/25 at 1:01 pm to slackster
quote:
Apparently the bond market isn’t in love with the spending/tax package.
You really think that bond purchasers are thinking I'm not going to buy because I don't like the terms of the Big Beautiful Bill?
Nah.
IMO it's a situation where the U.S. Treasury is flooding the market with bond sales because they need to refinance part of the 9.25 trillion that came due this year starting in January (and 70% is front loaded until August).
ETA: If the bond yields start getting too far adrift from the Fed's Fund rate the Federal Reserve will step in and buy like they did last Friday.
This post was edited on 5/21/25 at 1:11 pm
Posted on 5/21/25 at 1:18 pm to Riverside
quote:
What’s the political angle here?
Posted on 5/21/25 at 1:24 pm to slackster
quote:well... based on histrionics Congress and thus voters won't do it.
Will bond vigilantes finally force the hand of the US government to slow the deficit?
Hopefully someone can force Congress' hands.
Posted on 5/21/25 at 1:28 pm to Riverside
quote:
Shouldn’t this be on the money board? What’s the political angle here?
I posted it there too, but the weak auction and climbing rates today seem to coincide with the spending bill proceeding…
Posted on 5/21/25 at 1:48 pm to slackster
Here is what the last year of 10 yr Treasury yeilds look like.
Looks like business as usual.
I also heard an explanation that tried to describe how this actually means that there is oncoming greater demand for the bonds.
[shrug]
Looks like business as usual.
I also heard an explanation that tried to describe how this actually means that there is oncoming greater demand for the bonds.
[shrug]
Posted on 5/21/25 at 1:56 pm to GumboPot
quote:
You really think that bond purchasers are thinking I'm not going to buy because I don't like the terms of the Big Beautiful Bill?
I do because they see the bill as a promise for stepped up inflation down the road. Are you going to lend money at 5% over a term you see inflation running north of that?
Posted on 5/21/25 at 1:59 pm to slackster
Does this mean we will have the worst May in the history of earth?
Posted on 5/21/25 at 2:33 pm to GumboPot
quote:
ETA: If the bond yields start getting too far adrift from the Fed's Fund rate the Federal Reserve will step in and buy like they did last Friday.
The Fed doesn’t buy long term bonds based on the Fed funds rate, but regardless, where are they getting the money to do that in the first place?
ETA: and to clarify, they’re winding down more bonds than they’re buying still. They reinvest some of the interest and principal as things mature, but the Fed balance sheet continues to decline.
quote:
IMO it's a situation where the U.S. Treasury is flooding the market with bond sales because they need to refinance part of the 9.25 trillion that came due this year starting in January (and 70% is front loaded until August).
Well they’re definitely doing this, and it’s why I’ve said all along this notion that we’ll just refinance for longer terms at lower rates is a crock of shite because the demand just isn’t there.
quote:
You really think that bond purchasers are thinking I'm not going to buy because I don't like the terms of the Big Beautiful Bill? Nah.
Would you take on US debt for 20 years at 5% with the inclination to spend that they’ve shown?
This post was edited on 5/21/25 at 2:40 pm
Posted on 5/21/25 at 2:38 pm to Riverside
quote:
Shouldn’t this be on the money board? What’s the political angle here?
Wow.
Posted on 5/21/25 at 2:45 pm to GumboPot
quote:I think bondholders are selling because they are thinking "Congress is going to accept more deficit spending and that will drive up future interest rates so I'd better sell now before bond prices drop."
You really think that bond purchasers are thinking I'm not going to buy because I don't like the terms of the Big Beautiful Bill?
When more bond holders sell it drives up rates.
Posted on 5/21/25 at 3:12 pm to GumboPot
quote:
You really think that bond purchasers are thinking I'm not going to buy because I don't like the terms of the Big Beautiful Bill? Nah.
Interesting that you can’t see the correlation but then you post this…
quote:
IMO it's a situation where the U.S. Treasury is flooding the market with bond sales because they need to refinance part of the 9.25 trillion that came due this year starting in January (and 70% is front loaded until August).
But then can’t understand why this isn’t concerning
quote:
ETA: If the bond yields start getting too far adrift from the Fed's Fund rate the Federal Reserve will step in and buy like they did last Friday.
In a roundabout way, you confirmed the OPs point whether you realize it or not.
Posted on 5/21/25 at 3:37 pm to furrydogs
Ffs...
Posted on 5/21/25 at 3:40 pm to slackster
It's our liz truss uk moment. The bond market has called bullshite on this pathetic bill. Republican Congress better reconsider and get serious. Annual deficits at 7% of gdp is into danger territory. Bessent knows better. Shameful.
Posted on 5/21/25 at 3:42 pm to slackster
Vigilantes for treasuries don’t exist
Posted on 5/21/25 at 3:44 pm to slackster
quote:You say vigilantes. I say pragmatists.
Will bond vigilantes finally force the hand of the US government to slow the deficit?
Either way, hopefully the answer is "yes."
Posted on 5/21/25 at 3:45 pm to wutangfinancial
quote:
Vigilantes for treasuries don’t exist
Are you taking issue with the term, or are you suggesting the demand is relatively inelastic?
Posted on 5/21/25 at 3:47 pm to slackster
quote:
10y up to 4.59
Poor SVDTiger.
Nobody except everybody but him saw this coming.
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