The Fed Funds rate is now almost a full point above the 2-year yield, reflecting an immense amount of overly tight monetary policy from the Fed. They were slow to respond just like this in 2001 and 2007, and each time it caused big problems.
It’s a level not seen since George W. Bush was president. Wall Street forecaster Jim Bianco is predicting the benchmark 10-year Treasury note yield will hit 5.5% this year — its highest level since May 2001. A major part of his thesis is built on the economy’s strength and resiliency. “I don’t think the economy
Right around the start of November, two words suddenly disappeared from the chatter in the bond market: debt supply. As bond prices surged across the developed world day after day, sending yields tumbling and handing investors some much-needed profits, the angst about soaring budget deficits melted away. But for how long? Over the next several
Treasury bond Sentiment is at its highest level since August 2020, the all-time peak in bond prices and the middle of the lockdowns. Sentiment had been bearish on bonds as late as September but made a strong move higher on the back of the Fed’s pivot heading into 2024.
The 10-Year minus 3-Month Treasury Yield Curve has been inverted for 293 consecutive trading days, the longest stretch of time in history.
Some forecasters are currently predicting that 10-year rates will end the year above 5%, others are predicting a level below 3%, and the chart below shows the standard deviation of the 12-month ahead forecast for 10-year Treasury yields for 26 private sector forecasters since 2019. The rising trend in the standard deviation of forecasts shows
There are three numbers worth watching this year: $34 trillion, $1.7 trillion, and $1 trillion. This time last year, US government debt was below $31 trillion. This means that in 2023 alone, debt grew by more than $3 trillion, or 10%. Since the outbreak of COVID, the chart of US debt growth has been parabolic:
The spread between 2 vs. 30-year yields just turned positive. Last time this happened from deeply inverted levels was in late 2000, right after the S&P 500 also marked a double top that resulted in the tech bust.
Billionaire investor Stan Druckenmiller said he’s bought “massive” bullish positions in two-year notes, as he’s become more worried about the economy. In recent weeks, “I started to get really nervous,” Druckenmiller, founder of Duquesne Family Office, said in an interview with hedge fund manager Paul Tudor Jones at a conference last week. “So I bought
A decade ago, foreigners owned 33% of U.S. government debt. That number has now declined to 23%, see chart below.