Treasury yields and tariff talk

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Thoughts?

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Everyone knew Mex and Can would cave by noon

BLS will drive the yields this week

Treasurys (yes that’s plural for Treasury when talking about bills, notes and bonds) are a flight to quality. When people get scared they buy Treasurys. Look at COVID, 2008-2009 crisis etc.

It’s a fine line now between higher inflation making yields go up and the skittish markets where people seek safety. I think that’s why yields have kind of been in a range for a bit.

Just my thoughts.

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Thats an understatement

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Your dipshit routine is cute. It is just a routine…

…isn’t it?

Does anyone think the 10 year treasury will drop back down to 4% or less any time this year?

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Does anyone think the 10 year treasury will drop back down to 4% or less any time this year?

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It's very tough to predict since there are many, many factors that drive yields.

Some things that alone could lower yields, and together could lower yields significantly:

- Spillover from the Deepseek situation rattling that sector/industry/market could result in flight to safety in bonds (markets hate surprises/uncertainty...they handle good news and bad news well...as long as the news is expected...that's why when the market prices something in, even if it's not entirely rational, the Fed and/other players will hesitate to rattle it)

- Government reducing its anticipated borrowing needs could result in tightening supply (constant or rising demand with constant supply = price goes up)

- Anticipated inflationary pressure due to tariffs that was already priced in - the impact is less than anticipated (everyone caves, tariffs less than originally thought, or they don't have the inflationary effect) and the air is let out

- They stop cooking the books on the economy/jobs now that Trump is in office. What was propped up is adjusted to reality, showing a "negative trend" that was an illusion all along. Efficient Market Hypothesis suggests the market reflects all available information...but nothing says the information is accurate. Add in the emotional side of the market (beliefs, sentiment, etc.) and you can see how the markets can become detached from reality.

Add about 10-20 more things to that list.

The result? Investors demand higher/lower yields on newly auctioned bonds and/or demand for bonds on the secondary market goes up/down, which plays off of supply to drive price...which in turn drives yield (yields move opposite demand/price)

- Demand/price moves opposite market sentiment, i.e.: higher confidence in the market = nobody wants bonds (because they can do better elsewhere) = price goes down

- Yields move opposite to price; therefore, yields move the same direction as sentiment.

Long story short...

Yields will probably stay elevated for at least another quarter, maybe longer. There will likely be a lot of volatility day-to-day and week-to-week.

If they do drop and drop fast, people might cheer (mostly because FR mortgages are benchmarked off the 10-yr UST), but I'd suggest it's an indication that we have a bigger problem on our hands.

No worries. There’s a lot more to it, but that’s 20 pages’ worth of explanation. It’s also more sophisticated (highly quantitative/mechanical), but that’s the “in a nutshell” version of it.

There are mechanical aspects of the markets and human/emotional/sentiment-driven aspects. Sometimes they play nice and sometimes they fight each other.

Money can (and is) made off the volatility. You and I need to be right; the big players just need it to move/swing since they have ways to make money regardless of the direction.

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SDV in a tailspin as mortgages have skyrocketed since the Fed started cutting. His understanding of long term yields is questionable at best.

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This cant be serious

Skyrocketed?

10yr dips below 4.5

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Does anyone think the 10 year treasury will drop back down to 4% or less any time this year?

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Yes could be as early as Friday if the BLS is honest

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Interesting to see yields fall this morning with tariffs. I thought the market was concerned tariffs would cause inflation. Thoughts?

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I think the market is overly optimistic about DOGE.