He has his guy in there now, so he can't complain if a rate increase happens. Question is, will his guy let it burn down to avoid upsetting Trump?

10 year treasury at 4.6% now, just shy of the peak in 2023.

30 year yield hasn't been this high since 2006.

Trump needs to get this Iran thing done.

Quote:

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BREAKING: The odds of the Fed HIKING interest rates in 2026 surge to a new high of 37%.

US treasury yields are now up to 2007 levels, inflation is heading above 4%, and rate cuts are no longer in discussion.

Talk about a turn of events.

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BREAKING: The odds of the Fed HIKING interest rates in 2026 surge to a new high of 37%.

US treasury yields are now up to 2007 levels, inflation is heading above 4%, and rate cuts are no longer in discussion.

Talk about a turn of events. pic.twitter.com/QXYSskMBkG

— The Kobeissi Letter (@KobeissiLetter) May 19, 2026

No, hold steady then a CUT in August and September. Probably a half or full point.

Powell thinks he's mucking things up but his too late approach has stored some dry powder to exploit prior to the midterms.

Logos Stick said:

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He has his guy in there now, so he can't complain if a rate increase happens. Question is, will his guy let it burn down to avoid upsetting Trump?

10 year treasury at 4.6% now, just shy of the peak in 2023.

30 year yield hasn't been this high since 2006.

Trump needs to get this Iran thing done.

Quote:

---

BREAKING: The odds of the Fed HIKING interest rates in 2026 surge to a new high of 37%.

US treasury yields are now up to 2007 levels, inflation is heading above 4%, and rate cuts are no longer in discussion.

Talk about a turn of events.

---

BREAKING: The odds of the Fed HIKING interest rates in 2026 surge to a new high of 37%.

US treasury yields are now up to 2007 levels, inflation is heading above 4%, and rate cuts are no longer in discussion.

Talk about a turn of events. pic.twitter.com/QXYSskMBkG

— The Kobeissi Letter (@KobeissiLetter) May 19, 2026

---

Market has one priced in by March, but I don't see it happening.

I thought this would be about homeowners insurance.

flown-the-coop said:

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No, hold steady then a CUT in August and September. Probably a half or full point.

Powell thinks he's mucking things up but his too late approach has stored some dry powder to exploit prior to the midterms.

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That would have the most "see what I'm doing to boost the economy!" impact for sure. Do it now, with all the prices as high as they are, even if things do come down a little bit because of the cuts, they'll still be "see, Trump made prices higher than when he took office!". But do them before the midterms and people can be told it's the first big step to people getting their cost of living back, even if it'll likely take much longer than what they think.

But so long as they vote the right way, mission accomplished.

HTownAg98 said:

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Lowering rates while inflation is increasing sounds like something Jimmy Carter would have done. But even he wasn't that dumb.

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LOL... nice

HTownAg98 said:

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Lowering rates while inflation is increasing sounds like something Jimmy Carter would have done. But even he wasn't that dumb.

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There are some very very smart economists, several who advised Reagan, who would disagree with your not so hot take.

No, stable most likely, small chance of hike but I think no.

Democrats solution to lowering the cost of goods (i.e. inflation): Raise interest rates, so the cost of barrowing money to produce every good is MORE expensive, which drives up costs (INFLATION), so much that nobody can afford to buy much, causing rising inventories and panic mark-downs by companies in order to avoid bankruptcy. In short, lower prices through lower production caused by shared misery.

Republicans solution to lowering the cost of goods (i.e. inflation): Lower interest rates, so the cost of barrowing money to produce every good is LESS expensive, which drives producing more goods for less money, causing increased productivity, jobs and goods for everybody. In short, lower prices through increased productivity and prosperity.

No cuts. No hikes. Go to your fav betting market site and buy a position.

To me the increasing bond rates are mostly a result of the Iran conflict and lack of resolution. People loaning money to the government demand a higher rate because of increased risk in the national balance sheet and the government needs the money to continue spending on the conflict . More money/spending means higher inflation. Definitely can't cut rates as that may lead to hyperinflation. Holding steady or increases in irates are way more likely. It's all a sign that smart folks don't think the conflict is going to end soon or if it does then not all that much has really been changed by the conflict.

I think a lot has been changed by the conflict but how durable those changes really are is another discussion. Stopping now seems like just kicking the can down the road.

flown-the-coop said:

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No, hold steady then a CUT in August and September. Probably a half or full point.

Powell thinks he's mucking things up but his too late approach has stored some dry powder to exploit prior to the midterms.

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1-month sig bet that we don't cut >= 0.5% (cumulative) by end of September.

FTC/DTJ was right and I was wrong.

halfastros81 said:

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To me the increasing bond rates are mostly a result of the Iran conflict and lack of resolution. People loaning money to the government demand a higher rate because of increased risk in the national balance sheet and the government needs the money to continue spending on the conflict . More money/spending means higher inflation. Definitely can't cut rates as that may lead to hyperinflation. Holding steady or increases in irates are way more likely. It's all a sign that smart folks don't think the conflict is going to end soon or if it does then not all that much has really been changed by the conflict.

I think a lot has been changed by the conflict but how durable those changes really are is another discussion. Stopping now seems like just kicking the can down the road.

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As the saying goes, "you can't fool the bond market."

Condition #1:

Quote:

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Rather, bond yields tend to jump when there is a major change in a country's tax and spending policies or a deterioration in its economic outlook. For the U.S. to experience a bond market revolt, doubts would likely have to emerge about both its fiscal and economic trajectory, Davis said.

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We meet condition #1 already.

Condition #2:

Quote:

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In addition, another bond market would likely have to emergeperhaps out of a more unified Europethat could rival the U.S. market in size and liquidity.

Right now, "there is not a close second," he said.

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What's saving us is that condition #2 doesn't exist. There is not another market like ours on the planet that anyone can go to.

The pressure on the bond market has been building for years with our increasing national debt. We're running an annual deficit of 6% to 7% and keep borrowing money to fill the gap instead of cutting spending or increasing taxes. Despite what some Modern Money theorists want to believe, you can't do that forever consequence-free. Coupled with the government spending largesse, a variety of supply-side shocks (covid, Iran, etc) have added inflation to the mix. Lenders will insist on a higher premium to cover expected inflation, plus a higher risk premium as our national debt keeps increasing.

TLDR = "ain't no such thing as a free lunch"

What is not clear is what is the spark that moves bond rates up to a more natural range of 5% to 7% for a 10 year Treasury? Is it the Iran war? Is it the Japanese pulling capital back home to invest now that their long rates are rising and thus cutting off the "carry trade" that has helped prop up the US stock market? Is it an obvious AI bubble that pops?

No one knows for sure. But something will trigger a reversion to the mean for long term rates, and along with it, we'll see even higher mortgage rates, business loan rates, credit card rates, auto loan rates... you get the picture. That will obviously depress economic activity for a while until the exuberant surplus we've built into risk assets washes away and we reset to a new norm.

The outcome is pretty clear. The 64-million-dollar question is what triggers it and when?

I think you are right, long term directionally.

When it happens, the only way I see politicians handling the budget deficit is encouraging inflation, which creates a really nasty feedback loop. Gold anyone?