As we write this, the 10 year yield is trading at 4.48%, up over a big 1.3 this morning. This takes this all-important yield to a 15 year high.
We have been stating for months to pay little attention to the Powell-led central bank. He/they only mattered when they were printing trillions. They took over the bond market causing all kinds of distortions we have railed about for quite a while. We have simply stated “pay attention to the 10 year yield!” If it kept going higher, it would be bad news as the market and the economy were used to and acting off of ridiculously distorted and rigged rates.
This is the bond market shooting a certain finger at a central bank that has little clue. This is the bond market shooting a certain finger at this administration and past administrations. The only problem is we are the victims. This is the bond market recognizing the $33 trillion of debt and rising fast. This is the bond market recognizing that this president is going to run an unimaginable $2 trillion deficit this coming year while patting himself on the back that he cut spending and deficits. Cue Jon Lovitz.
Since Powell cannot print money to take rates down because of the inflation he created and now fighting, the free market is taking over. The free market is accounting for all that debt. The free market knows in the next couple of years that trillions of debt with low rates is coming due and must be put out again but this time at much higher rates. This is the free market demanding higher yields because of the nightmarish debt and deficits created by all over the past couple of decades…only now, it is being supersized. (ECONOMICS 101 WHEN A CENTRAL BANKER ISN’T PLAYING GOD AND INTERFERING WITH THE FREE MARKET.) In case you did not know, Mr. Biden has taken federal spending from $4.4 trillion in 2019 to somewhere to the estimates in the mid $6 trillions. Talk about taunting markets. Talk about increasing the size of government.
We are in hopes that yields hit a wall soon. Anything is possible but a firm sticking above the 15 year high does not augur well. AND the same people that brought us here are still running the show. Some have been in DC for 50 years like the man in the White House.
From the individual to the home buyer to the credit card user to the small business to the big business to the big corporations, these yields affect everything up and down the food chain. The big worry is that since 2008 when the original Mr. Bubble Bernanke started his great experiment of printing money, deficits have skyrocketed and we mean skyrocketed. The real free markets have not had a chance to adjust to all this debt because of his and Powell’s interference with conjured up money. Let’s hope this does not have more legs. Will keep apprised.