Spectacle Ensues after 10-Year Treasury Yield Pierces 5%: Huge Demand Piles in, Yield Plunges 19 Basis Points in Hours

Yield fixes all demand problems. You just have to hit the right number, and the right number today was 5%.

By Wolf Richter for WOLF STREET.

The spectacle that everyone has been sort of waiting for happened after the 10-year Treasury yield went over 5% briefly this morning for the first time since 2007: Huge global demand emerged at this yield.

As if someone had flicked a switch, human investors and algos that had apparently waited on the sidelines for just that moment jumped in, buying hand over fist at this signal, pushing up prices of those maturities, and thereby pushing down the 10-year yield by 19 basis points in a matter of hours, from 5.02% in early trading, to 4.83% currently, back where it had been on October 18 (hourly price chart by Investing.com):

Obviously, there was no such sudden change in sentiment about the US debt; and Congress hadn’t just voted this morning to drastically reduce the budget deficit in a bipartisan manner by cutting spending and increasing taxes in some equitable manner, LOL. It was a market reaction to one of the most anticipated key numbers: the 10-year Treasury yield hitting 5%.

Every time yields rise to meet demand, demand emerges, but a key figure like 5% for the 10-year yield triggers a special reaction – a veritable spectacle to amuse us?

This is what “resistance” is all about – lots of buying pressure emerges suddenly on a highly anticipated signal. And when that pent-up demand is sated, the 10-year yield starts rising again to where demand will be, and it will make another run for the 5%, and it may fail too as more demand emerges at this yield. But that demand may someday be sated too, and then yields would have to go higher to pull in more investors to absorb the tsunami of issuance of longer-term Treasury securities to fund the tsunami of deficits washing over the country in an inflationary environment.

The unloved 20-year Treasury yield went over 5%-line first on October 3, and today trades at 5.17%. And then the 30-year Treasury yield pierced the 5%-line on October 18, and amid the spectacle around the 10-year yield today, it fell 13 basis points, to below the 5%-line again, to 4.96% at the moment.

Getting the 10-year yield to trade over 5% for more than just a few moments will take some doing because there is a huge amount of global demand at this juicy yield, and it will have to be sated before the 10-year yield can go to the next level.

At the same time, a huge amount of demand will be required to absorb the tsunami of new issuance of longer-dated Treasury securities, and for now, there are no signs at all that Congress will do anything that might slow this tsunami of deficits, and therefore slow the tsunami of new issuance of longer-term debt to fund these deficits.

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  119 comments for “Spectacle Ensues after 10-Year Treasury Yield Pierces 5%: Huge Demand Piles in, Yield Plunges 19 Basis Points in Hours

  1. Leo says:

    This week many big tech companies will report earnings. The big tech rally of ~50% is responsible for taking Nasdaq 30% higher this year.

    So, do we expect Earnings and Revenues to increase by 50%? Lol, the wallstreet doesn’t care about fundamentals. The narrative is that there will be lowered earning estimates, and the posted numbers will only be judged against this. So even if earnings are same as last year, as long as big tech manages to beat estimated earnings, we will see a 10% rally on these stocks. No big mainstream media website will publish YoY results but will only publish earnings beat to stimulate the AI and satisfy the passive investors. But, the big tech has high EPS, and to hold them accountable, we should correct revenue for inflation and check real revenue growth. LOL, don’t expect that from investors that are still high on cocain.

    That’s how effed up this free money driven market is! QE was too huge and too fast, and QT remains too little and too slow.

    The script to prevent stock meltdown from bad results may also include treasury yield backing down early in the week :).

    • Bill Ferrer says:

      Please stop saying “LOL,” first off your comments are not even a little bit funny (if you need to laugh at your own jokes, they are likely unfunny.) Secondly “Laugh Out Loud” is redundant. Laughing requires making sounds, if your “laugh” is quiet then it is not a laugh. Thirdly saying “LOL” makes you sound like a middle school kid, hard to take you seriously.

      Your insight wreaks of an overconfident (the American Disease) amateur CNBC watcher. The QQQ was down 33% in ’22, did sales and profits fall 33%? No. The rebound in ’23, only has the QQQ back to the levels of the summer of ’21. There is a lot that goes into valuation and stock analysis they don’t tell you about on cable TV, such as discount rates, long-term margins and sales estimates, CapEx estimates, terminal growth, etc. Small changes to these estimates can have large swings on valuation (the future is unknowable), which is why the stock market can move around so much, not as simple as y/y EPS changes. “Correct revenue for inflation”, you mean adjust the discount rate? When inflation rises, professional investors discount cash flows back with a higher discount rate (the main reason why higher rates are bad for stocks).

      It doesn’t matter what the mainstream media or cable tv says, professional long-only investors (whales) are not waiting for Jim Crammer’s input to decide to buy or sell Apple or Google. Hedge Funds (minnows) may watch CNBC, but they only matter for SMID stocks, and in the long run, they are nothing more than noise and trading commissions for the brokers. I am no bull, but you wreck of overconfidence. Put your money where your mouth is, and short AAPL and GOOGL.

      • Wolf Richter says:

        “Please stop saying “LOL,””

        Get used to it, LOL


        • Brian says:

          I’ve heard kids say “lol” out loud in real conversation. Now THAT’S funny! I did a literal LOL at it the first time.

        • NBay says:

          I originally thought it meant “Lots of Laughs”. Anyway, seems Google has the last word on the text idiots lingo…..I never text, as I don’t have to cheat in class anymore. Classic comics and cliff notes worked fine when I did, plus hand signals for ABCD stuff.
          All HS, anyway.

        • 911Truther says:

          The US Government has entered the debt spiral. They have to borrow more and more just to pay the interest on the existing debt and fund the deficit spending. Once the market finally sees this, and I think they are starting to finally see it, US Treasuries will get murdered, which only causes interest expense on the national debt to increase, which further compounds the problem. This isn’t chess, this is checkers. And the masses aren’t even up to speed on Candy Land. This crisis is so easy to see coming.

        • Yort says:

          Humans love rounded numbers, and as such it is so easy to profit from this strange phenomenon…LMAO (and LOL)

      • Bengt Løyer says:

        you probably mean “reeks” (intransitive) as in “emit smoke or vapor”
        “wreaks” means “to cause the infliction of” and is transitive.

        • NBay says:

          You will go nuts as a resident English teacher. As long as you get the message as meant.

          Kurt Vonnegut used “reeks and wrecks” in “Player piano”. A novel about AI producing a super wild gilded age……..from the 60’s!!!…..worth reading (and short). He called our current situation pretty damn well. (non-Econ, just plutocrat goals).

        • NBay says:

          Oh, re; article…….shows people’s love for round numbers, besides the other info. Hope I didn’t miss mention of that, I just scanned it….sorry……”switch was flipped” is same, I spose’.

          Still think Leo is scared (rightly so) realtor or some part of the biz.

        • NBay says:

          Back to pushing good (I know, everyone hates, “You just gotta read this”) Vonnegut read.

          So in this future, the only jobs were CEO (and a his secretary, just as a tradition) of a TOTALLY automated factory.
          Or, you could join the Army, or the “reeks and wrecks”, who lived in crowded cities and worked on the roads and drank beer.

          IIRC, c late 60s……..plot had something to do with yearly CEO Games, and maybe having a lower class pal…..fuel source was Ice 9?

      • Jon says:

        You know, Bill. If you are as financially smart as you say you are, we would appreciate more of your insights. I’m serious. But talking smack to Leo is not helpful.

      • SS says:

        What’s up Bill? Are you on that time of the month?

        Geesh, I am sorry. I sounded like a middle schooler.

        “Put your money where your mouth is, and short AAPL and GOOGL”.

        So, now if you say a market is a bear market, you have to short it? That’s a pretty heavy standard.

      • jon says:

        Rare bull in WR website who proclaims he is not a bull!

        As long as we have liquidity sloshing around, the markets would be up!! Valuations and fundamentals be damned. Good example is Look at BTC.

        Welcome LOL!

      • Dr Mike Jenkins says:

        Sorry… ur ramblings r much worse 😳🤔😊 1) NO whales watch CNBC for ANYTHING except … MAYBE… data, but they have their own data feeds. 2) You sound as if u believe the only way to make money in the market is by being long … ??? Not sure, but ur ranting isn’t clear. 3) He’s 100% correct – stocks haven’t increased in value 50 – 100%, with doctored inflation numbers telling us inflation is 3.5% VS LAST YEAR = OVER 12% VS 2020. U buy eggs lately…tools, motor oil, ANYTHING. 4) Stock value is 100% ARBITRARY, and r worth whatever value traders place on it – regardless of ANY fundamentals. Is Tesla woth more than the Big Three .. COMBINED?? Absurd, but where’s it trading? 5) Money flow in stocks has VERY LITTLE to do with “value”, and everything to do with whales manipulating the markets either up or down. 6) ALL – 100% – of whales use TA and super computers to “fade and trade”. 7) Overwhelming sentiment on the markets is a PSYCHOLOGICAL phenomenon, with prices reflecting he emotions of either greed/desire to make money, or fear of losing money. Again, any given stock is priced at whatever “the crowds is willing to buy it for or sell it for.

        Lighten up… ur far from knowing everything. I’m a strict TA guy and follow those who DO know everything. Any individuals trying to read markets based on news or brokerage advice or “analysts” opinions WITHOUT TA r suckers, period. The markets move BASED ON TA, so how the hell can idiots who believe the only way to make money in the market is being long – or short – for that matter??

      • NBay says:

        So Crammer must “need” more money, because he is trying to start an extra special stock tip club (more special than his CNBC show and not cheap)…..I guess that is somehow ok with CNBC? Maybe his show is gone?

        Anyway, my main point is that exactly when he hits his ad’s punch line, “The club is the place to be!!!!” he looks just like a cross between Gollum and those poor folks that rolled out without helmets in “Total Recall”.

        Maybe some kiddy show will get all his noisemaker props, and he will finally vanish.

    • dang says:

      Of course an excellent presentation of the current data about the yield on the Fed’s mope, the 10 year. One of the worst investments would be stocks at this point.

  2. Dave D'Rave says:

    Wow. You can’t make this stuff up.

    • rojogrande says:

      Sure you can, but it’s not advisable in the Wolf Street comments section.

    • The dude says:

      In a few years when the QE we did during pandemic has completely destroyed the remaining public perception of fiat value – stock in certain growing fields will make a new era of billionaires.

      But it’s only going to be those narrow industries while all the facebooks of their day couldn’t manage to become the facebooks of tomorrow.

      Stocks based out of commodities or desired tech/businesses to fit modern needs is a complex concept though. Market could collapse while these rule (in the same way that FANG is a disgusting amount of all market share)

      It’s not about the markets being bull or bear. It’s about where the value is headed. And that value is in no way going to be cash. Just bc an economy isn’t liquid doesn’t mean there is no market for stocks. If buffet was 20 right now, he’d be buying stock for the long term.

  3. jon says:

    Thanks WR for this report.
    I think it needs to go much higher than 5%.

    Nothing goes up in a straight line.

    FED is no more buying. Govt still has ~2T deficit and thus they need to sell more bonds.

    This paints a picture of higher and higher.

  4. kramartini says:

    Perhaps there was a lot of short-covering once the yield hit 5%?

    • Robert Schelly says:

      Dan Ackman tweeted today that he has closed his short 30 year bond position.

      • Wolf Richter says:

        Usually when Ackman tweets something, the market does the opposite 🤣

      • Bobber says:

        So if Ackman and many other market participants think long bonds are a buy, what are they selling in order to buy the bonds? Whatever they are actively selling will put downward pressure on those prices.

        Stocks and RE out on a limb here, including the almighty Big Tech stocks.

        • dang says:

          IMO, the long bond is still overvalued by 45 pct.

        • Carlos says:

          Ackman will just say things to benefit his existing positions.

          When the COVID crash happened in 2020, Ackman said this would spell the end of the US economy.

          Soon after, he sold his short position for billions.

      • JeffD says:

        The great(est?) value of short positions is that they stabilize markets (cf Cushion Theory). If a stock dives, you know the shorts will step in along the way to buy and take profits, slowing the falling knife or creating a bounce. If shorts dwindle to almost nothing, though? Look out below for falling bond prices.

      • Franz Beckenbauer says:

        Bill Ackman needed some suckers to cover his shorts.

        One tweet did the trick.

    • Wolf Richter says:

      It’s buying either way.

      • kramartini says:

        Big money players closing out short positions all at once at a round number like 5% says nothing about the appetite of long term investors for treasury bonds.

        • JeffD says:

          But it does say that market moves are based on feelings much more than *economic* data. And *financial* data is almost all “managed”, yet is more likely to cause big moves than facts.

  5. Thomas Curtis says:

    I have been delightedly watching this AM and hoping we can avoid a recession as a result.

    • MM says:

      I don’t see a recession in the near future, regardless of what yields do – just look how low unemployment is right now.

      • Thomas Curtis says:

        No mm, no recession right away even if bonds keep falling but if bonds don’t find a floor fairly soon we will have a recession because the economy will slow and equities and bonds will fall together and there could be a housing crash.

        It would be best for all if bonds could find a floor around 5% and we could all get on with living.

        • Julian says:

          It depends on what the recession will be like. If it’s not big the Fed will cut rates by 1 or 2 percent for a few months until it passes and then if inflation picks up it will raise them again.

          0 percent interest rates and QE are history.

        • jon says:

          Why do you think 10Y yield above 5% is a problem ?
          When it was at zero percent, a of of expert said, that 10Y at 5% would be disastrous to economy but still here we are.

          I personally think we need higher rates to remove all the excesses for last 15 years or so.

          BTW, FED does not directly control bond yield unless they do QE or QT.

        • SoCalBeachDude says:

          Not a chance of that happening at all if the federal government continues its nearly $2 trillion in deficit spending requiring a net new issuance of that amount of bonds every year.

        • MM says:

          “if bonds don’t find a floor fairly soon we will have a recession”

          They said a 3% 10-year would cause a recession… then 4% would… and here we are with the 10-year at 5% yet I still don’t see a recession on the horizon.

          Equity investors and asset holders probably want to see bonds find a floor to minimize their losses, but that’s not the same as a recession.

        • longstreet says:

          Take a look a this chart.


          We are just getting back towards what is the average for the past 50 years on the ten year.

          There has been a tremendous amount of “pre hedging” for the coming onslaught of issuances.

      • JeffD says:

        A huge pile of money was dumped into the economy as an erroneous overreaction to the pandemic. That money was not “spent”. It is still out there circulating and recirculating every single day causing agressive economic activity, a component of which causes inflation. Worse still, the money was dumped into the economy in a bifurcated manner, giving the lions share of money to people who were already wealthy, and thus they will definitely spent that excess cash in a way that leads to long term inflation for the masses. Until M2 comes down closer to pre-pandemic trendline growth, whether through QT, less fical spending, or (fingers crossed) a market crash, distortions will remain in the market causing serious economic consequences to society as a whole. I know many people think my focus on pre-pandemic M2 trendline is wrong, but time will be the judge of who is right on this. If M2 doesn’t come down, an economic failure will occur that brings down the system, sort of like a mechanical failure in an engine when a connecting rod breaks.

  6. SoCalBeachDude says:

    MW: Bill Ackman cashes out bet against Treasury bonds as yields hit 16-year highs

  7. Charlie says:

    From CNBC today “Pershing Square’s Bill Ackman revealed Monday he covered his bet against long-term Treasurys.”

    Article doesn’t say the term, but possibly others following him?

  8. Paul says:

    Yield solves demand.

    • Cas127 says:

      I get what you and Wolf are saying…but looked at from 30,000 feet, the “yield can solve anything” POV gets a bit dicey as economic extremis approaches. That applies to the Russian war-ruble, the Argentine panic-peso…essentially, anything that “promises” a yield in order to offset ever worsening risk.

      Look at it this way – at some level of accumulated debt/poor economic outlook, “promised” returns (at any non-incinerating level themselves) are just not enough to offset default/inflation-dilution risk – the G/currency is terminally branded “a bad little pony and I ain’t gonna bet on you any more.”

      5% is fine…unless you think the issuer ain’t gonna be around in 20 years (your breakeven, ignoring compounding and/or secondary mkt sale).

      Again, this dynamic applies to any issuer…the USG just happens to be the most engorged, with one of the worst records of reform (50+ years of ever increasing trade deficits, indirectly financed by 50+ years of fiscal deficits, in turn financed by lied-about money-printing/inflation).

      (Russia and Argentina, both very resource rich nations, have long since ruined their reputations via economic abuse – with massive impacts on their long term growth rates, due to capital flight and foregone capital invt)

      US economic leadership just looks less foolish/gangster like because it has been eating away at a much larger inherited legacy of wealth than Russia/Argentina/etc ever managed to accumulate in the first place (their economic gangsterism starting much earlier in their histories).

      At some point ($32+trillion in G debt, from 50 years of deficits?) faith is lost because it has been betrayed so often. “Promises” of more printable scrip (higher yields) from the same old sleazy G salesmen stops having much meaning. It was true of Confederate dollars and there is no intrinsic reason why it can’t be true of greenbacks.

      Sure “we aren’t there yet”…but 50 years of US history has not generated a single effective American leader who has been able to flatten – let alone reverse – the decline.

      Why will the next 50 years “yield” anything different?

      • Wolf Richter says:


        “… “yield can solve anything” POV …”

        You’re twisting my words around. That’s not AT ALL what I said. What I keep saying is: “Yield solves all DEMAND issues.” It means, you can sell the bonds if the yield is high enough. This is in response to people here who keep saying that no one will buy the bonds, which is BS.

        Then there is a different question beyond selling the bonds: If the government doesn’t get the core problems under control, it will have all kinds of other problems, including inflation and a shot economy. Been talking about this forever.

    • Naren says:

      Yield solves demand, just like wage hikes solve “nobody wants to work anymore.” Supply and command, as one Ricky LaFleur would say.

  9. Debt-Free-Bubba says:

    Howdy Folks. The Lone Wolf has made this so much fun for me this time around. Armed with some real truth because of him, well, JUST GOLLY AND THANKS

  10. William Leake says:

    I am not sure why anybody in his right mind would buy Treasuries over over six months, unless they were legally obligated to. T-bills (six months and less) have higher yields, and it is easy enough to get out of them and into longer term CDs when, and if, inflation ever cools off.

    I also do not know why anybody would ever buy Treasury ETFs or mutual funds. Just buy the Treasuries.

    Money market funds are in fact mutual funds. The largely Treasury based money market funds are okay, as they seem to offer maximum flexibility, but sometimes it is difficult to get the state income tax-free benefit that you get from buying actual T-bills. Buying actual T-bills also avoids any redemption gating possibilities that you might get with money market funds, and they avoid management fees, and generally have a higher yield. The large brokers, like Schwab and Vanguard, do not charge a commission to buy or sell Treasuries. Buy at auction and hold to maturity.

    • MM says:

      “I am not sure why anybody in his right mind would buy Treasuries over over six months, unless they were legally obligated to.”

      I have 5 and 10-year CDs in my 401(k), since I can’t/shouldn’t touch this money for at least that long anyways. Both have a ~5% coupon.

      But outside of this specialty case, I generally agree with your sentiment.

      NB: not financial advice.

      • sufferinsucatash says:

        Why a CD and not a money market fund?

        are CDs in retirement accounts protected by FDIC?

        • MM says:

          I have both – a ladder of CDs and the rest in a short term MMF. Also, I bought this CD at the start of the year, when short term rates were lower.

          Yes these CDs are FDIC insured, same as any other brokered CD.

    • Indelible says:

      “I am not sure why anybody in his right mind would buy Treasuries over over six months, unless they were legally obligated to.”

      I have bought 2-yr and 3-yr T-notes in the past couple months. 5.1% interest on the 2-yr. 4.7% and 4.8% on the 3-yrs.

      I planned for 3% returns when I retired…not reliant upon big tech (or crypto) gains.

      Non-callable. Essentially risk-free.
      Sleeping well at night – always seeing green numbers (gains) in the portfolio.

    • bandaid says:

      “I am not sure why anybody in his right mind would buy Treasuries over over six months, unless they were legally obligated to.”

      Because the game is rigged. Fundamentals don’t mean squat.
      You don’t know what lies are coming.

    • Jan de Jong says:

      There is a speculation that a recession will sharply lower long rates within 2 years or so that will lead to hefty capital gains on long bonds.

      • phillip jeffreys says:


        But…just another variant of timing the Fed. Spin that wheel!

    • blahblahbloo says:

      If you are 40 years old and this is money you have earmarked for retirement, it makes sense to buy 30-year bonds and hold them to maturity.

  11. Eastern Bunny says:

    This sucker will hit 6% before the end of the year. Its trading like a penny stock.

    • Desert Dweller says:

      I don’t disagree with your 6% target. With that said, a couple of months seems a little too fast for getting there. If you are correct, equity investors will be going through cases of Depends by year end.

    • Franz Beckenbauer says:

      The global financial system is trading like a penny Stock now.

  12. Desert Dweller says:

    The 10-yr chart is screaming that rates will eventually move higher, and to my eye 5.35% is the next major target. When is hard to say, perhaps by year end, plus we should expect some backing and filling along the way. A wise market sage once said: “Nothing goes to heck in a straight line.”

  13. Not Sure says:

    Here’s what I don’t get… If the appetite suddenly changed for the 10-year at a magical 5% level, then why are shorter term bills still so heavily inverted? A lot of much shorter term bills are still floating around a half percent above the 10-year. If 5% is the magic number, it seems like investors would be slurping up safe short term gov debt like mad and/or continuing to demand a higher yield from notes & bonds, causing the yield curve to un-invert by now. Unless bond investors are comfortable assuming that inflation will be licked and yields will be falling in the next year or so where locking into 5% will seem like a pretty good deal. Either investors are comfortable at 4.8% or this is just a blend of not-so-sophisticated algos and covering.

    Maybe some combination of un-inversion and future weakening jobs reports will be the final indicators to tell us that the most anticipated recession of all time has already begun. Maybe folks buying in at 4.8-5% are going to look pretty darn smart. Clearly there’s demand betting that this isn’t going to be the early 80s again with double digit interest rates.

    • Wolf Richter says:

      What’s moving now is the long end, which is no longer propped up by QE. So you are going to see a lot of movement there up and down, as the market comes to grips with this environment. The hourly ups and downs mean nothing in terms of the macroeconomic conditions. Just the chaos of trading.

      The T-bills are bookended by the Fed’s policy rates, particularly what it pays money market funds (big buyers of T-bills) for RRPs, and what it pays banks for reserves, and where it says it expects these policy rates to be within the term of these T-bills. That’s why those short-term yields are where they are.

      Locking in 5% for 10 years is not the same decision as locking in 5.5% for one year. If over the term of the 10 years, T-bill yields go back to 3%, you’re still making 5% on your notes and bonds. But if you think that longer yields will go to 6% or higher, then you’d stick with T-bills right now.

      So this is a long-term bet on a consistent 5% income by some portion of investors that on average would exceed T-bill income over the same period. The bet may be wrong, but that’s what it is.

      That the bet may be wrong is supported by all the people who SOLD 10-year maturities today, perhaps to buy back at a lower price and higher yield later (each Treasury security that was bought by someone was sold by someone else).

      • bill says:

        Remember Abba P Lerner, What Would We Do Without Speculators?, adapted from the article “The Myth of the Parasitic Middleman”, that appeared in Commentary, July, 1949. Discusses the value of Price Seekers.

      • economicminor says:

        Why would anyone buy a 10 yr note over a 6 mo.T bill?

        Because they think that rates won’t go any higher.

        So I’m thinking about this. What is really likely to happen longer term?

        The government’s deficit is huge and growing. There is a need to support a lot of things from infrastructure, climate disasters and wars outside the normal demands meaning deficits will probably continue to grow. So lots of money will be needed by the government. This is outside other demands..

        Yet money isn’t just created out of thin air. It is created by the creation of a new loan on a new asset or the inflated value of an existing asset. Housing was working for decades as the latter. So was CRE and stock buybacks on borrowed money.

        So what’s the outlook for more money. Well, the optimists think there will be no recession and things will soon return to normal. Others think the fed will lower the interest rates to encourage new lending. I guess that could happen, eventually. But housing isn’t selling and what is is selling for less. Meaning less money. CRE is hurting, same thing, less new money. I don’t see the Unicorns getting a lot of new funding but they will get some. I don’t see much New Lending in the near future and virtually none for More Value.. Meaning less liquidity as seen in the FRED M2

        So less money chasing more issuance should mean higher and higher rates. No matter what the Federal Reserve does. And anyway, whatever they do, it takes time to get into the system..

        My guess is that rates will be considerably higher before they move lower.

  14. John Apostolatos says:

    “Obviously, there was no such sudden change in sentiment about the US debt; and Congress hadn’t just voted this morning to drastically reduce the budget deficit in a bipartisan manner by cutting spending and increasing taxes in some equitable manner, LOL. It was a market reaction to one of the most anticipated key numbers: the 10-year Treasury yield hitting 5%.”

    Thanks for being the voice of reason. Zerohedge was explaining it all based on Bill Ackman’s tweet that he had closed his bond short position. You should really read it for belly laughs.

    P.S. Moody’s is seriously considering downgrading US debt, and they have said that if the government shuts down they will do so. How much will that push up bond yields now that Fitch and S&P have downgraded?

    • blahblahbloo says:

      What’s with the whole Fight Club theme over there?

      • William Leake says:

        ZH appears to be a pro-Russian, anti-Ukraine, anti-Israel site. It seems a lot like RT. The commenters seem to be mainly trolls, leftists, conspiracy nuts, and teen-agers. I heard it was once a good site.

  15. SoCalBeachDude says:

    MW: Dow Jones closes 190 points lower, S&P 500 books longest losing streak of 2023

  16. Bandon says:

    C’mon 7.5%. You can do this!

  17. JERRY MAC says:

    Just the fundamentals matter. Of course, 5% must be offered because of the REAL inflation ( when we count Energy, Food, and Housing it is closer to 10% ) .
    The Govt offering a 2% yield or 3% will not find buyers, so it must be realistic. We are no longer in a fantasy world of 1% interest.

  18. SoCalBeachDude says:

    Bonds will keep falling in value across all durations while yields (interest rates) on bonds continue to rise, and the only thing that can possibly hold back yields is cutting fiscal stimulus in the US which is gushing out in the form of $1.7 trillion a year deficit spending which must be financed by the issuance of US Treasuries if Congress refused to cut spending.

    • ru82 says:

      Had a conversation with a friend who works for government approving loans and grants to rural businesses in a Midwest state.

      He said they used to be fairly conservative department. Allocating about 10 to 12 million a year. This year it was $160 million. More than 10x the normal amount and no end in it.

      Government spending is a big part of why the economy is still doing well even with higher interest rates.

  19. SoCalBeachDude says:

    DM: Elon Musk ‘acted like a little baby’ during Tesla’s terrible earnings call and ‘blamed high interest rates’ as profits fell to $1.85 billion, sending shares tumbling 15%

    The backlash has been growing since the world’s richest man announced a 44 percent drop in profits at a ‘terrible’ earnings call with shareholders on Wednesday.

    • sufferinsucatash says:

      Elon obviously wants to borrow money at low rates. When tech companies based on the low rate cash model get pinched off from their secret sauce, they wither up.

      He prob wanted to do a hostile takeover of some legitimate legacy car company.

      Meanwhile Toyota is doing well. :) big grin

      • Wolf Richter says:

        “Elon obviously wants to borrow money at low rates.”

        Yes, for his $44 billion LBO of Twitter. X may be sunk by high interest rates.

        Yes, for customers being able to fund car purchases with low interest rates, which would maybe stimulate new vehicle sales, though we have not yet seen a hit to new vehicle sales from high rates — sales are up 20% yoy.

        All billionaires love free money. Free money is the best money. Many wouldn’t have become billionaires without it.

  20. AV8R says:

    Someone tell the Russell 2000 the crisis has been averted.

    Yield has solved the problem.


  21. Gary Yary says:

    5.55% for all Treasury issues across the board. 4 week to 30 year. Inversion diversion. Inclusive for all?

    NVDA at $100 p/e. Every human needs a NVDA calculator. AI will butter my toast. Google will give AI tips. Apple phone will take a picture of the toast for your Facebook page. Microsoft will arrange your info in an excel file. Amazon will sell you and deliver all the above listed crap.

    Or one can just venture out like a good hunter gatherer and get what you need for survival.

    Or drive a Tesla? Maybe take a rocket to a Mars designated colony of people fleeing the financial massacre they created?

    Fire extinguishers are my hedge for this flaming pile of financial garbage.

    Is the US Mexico border wall there to prevent US citizens fleeing? I was gonna ask for a friend…but my Jiffy Pop Popcorn tin foil hat scares people away. I think my buttery grey hair smells great.

    Swimming to Cuba is another option. Tin foil SPF 1000.

    • MOFO says:

      When I reach a certain age, an AI controlled app that wipes my a** could be a godsend.

      Of course, I will miss that human touch.

      • Cookdoggie says:

        Joke of the day…

        I bought a toilet brush recently. Long story short, I’m going back to toilet paper.

    • Sufferinsucatash says:

      AI is like manufacturing.

      My can of tomatoes to make marinara comes from a factory.

      At the farm the tomatoes are picked by machines, (maybe?)

      Then they go in a bin, then that bin is dropped in some other bin. Then there’s prob some conveyor belt thing.

      Cooked or steamed, machine pealed and dropped in a machine made can. Sealed in the can and boxed for transit to my grocery store.

      Now what I do with them once I get them is up to me.

      So I think AI will be like that, it will automate tasks that the consumer personally could not even care about.

      However this mundane stuff, like what I do in my house all day. Is so far off the map, and there’s no money in it. So No AI in the home, unless it’s just some parlor trick like Alexa is.

  22. WB says:

    The unbridled optimism of Wolf!!!



    • Ryan Merritt says:

      Yeah the word “Markets” doesn’t really encapsulate the fact that USA banks have been mandated by law to buy treasures, does it ?

      Now that I think of it, “legally obligated” is closer to the opposite definition of the word “market”.

      But of course we are not at 100% of all bond purchases being done under coercion of the law so I’m the crazy guy in the room, I guess.

      • Wolf Richter says:

        Banks hold about $4 trillion in Treasury securities and agency securities. There are $33.6 trillion in Treasury Securities outstanding and $2.1 trillion in Agency securities, total of $35.7 trillion, of which banks hold 11%.

        And they’re not “forced” to buy Treasuries either — they can put their excess cash on deposit at the Fed, no problem, to maintain their regulatory capital.

        • Franz Beckenbauer says:

          They are forced to buy treasuries if they are primary dealers.

          They signed that with their blood.

        • Wolf Richter says:

          Primary dealers buy and then sell. They don’t hold what they buy. They’re just a transmission channel to the secondary market.

  23. WB says:

    As Wolf pointed out in an earlier thread. Bernanke looked at Japan and said, “hey, they did QE and it didn’t cause inflation, let’s try it”. Long story short, central banks around the globe followed suit. Unlike every other economic disaster the world has experienced, this thing is global. Higher interest rates, and higher prices (inflation) are here GLOBALLY, for much longer…

    • Colin Maxwell says:

      In some ways WB, this was arguably one of the very few observations that Brenanke actually got half right as Fed Governor.

      It was Professor Richard Werner who actually coined the term QE and back in 1995 he published an article in Japan’s leading financial newspaper the Nikkei entitled – “How to Create a Recovery through Quantitative Money Easing”.

      The principle was centred on increasing the money supply of Japan’s real economy by encouraging banks to loan money to companies for investment to stimulate the productive economy.

      There is a vast difference between newly created money that creates new goods and services compared to when it is used for thev unproductive sector such as existing asset purchases and real estate transactions., as these are merely transfers of ownership without adding a cent to the nation’s income.

      Also if bank credit is created chiefly to support household consumption, this will inevitably lead to inflation.

      Japan never followed Werner’s advice in the world’s first announced “QE” program in 2001. Instead, they bought well-performing assets such as Govt bonds from retail banks and made no attempt to create new money for the productive economy.

      This is because in most Western economies it is actually bank lending that is responsible for ~97% of money creation in the economy.

      After the collapse of Lehman in 2008 Bernanke did actually adopt the true :”QE’ model that Werner had originally proposed for Japan, but such was the damage already done that it took another months for the retail banks to boost their lending and then a partial recovery after another 6 months.

      The correct stategy is to purchase non-performing assets from banks to clean up their balance sheets. No new money was injected into the economy so this minimised inflationary pressures. In 2010 banks were issuing new loans again which was earlier than the CBs of other countries that copied the failed version of the BOJ form of QE.

      Of course, orthodox Western economic theory doesn’t even recognise bank credit creation and instead focuses on central bank interest rates which are a much smaller factor in money creation.

      CB policies are not the way for a productive economy to handle monetary policy. All that raising interest rates does is create this giant lag where inflation rates don’t respond to rising rates because doing so feeds inflation anyway.

      After a period of 12-18 months, it appears that the rate hikes tamed inflation but they did nothing of the sort – it was the liquidity squeeze that actually stifled the real economy and merely created this appearance.

      Remember too that effectively when this massive percentage of money creation with commercial banks creating money out of thin air when they advance loans, there is effectively no window guidance and the vast majority of these loans are made so that entities can buy existing assets.

      Hence the blowing of massive asset bubbles and the facilitation of the pump-and-dump schemes that the Western banking models absolutely thrive on.

      The bubbles eventually burst, creating credit crunches, and then the banks tighten more which completes the cycle of further selling of distressed assets, and of course, more bankruptcies ensue.

      The lesson that the criminal Western economic maxims hide so effectively, is that money creation needs to support business investment, not asset purchases.

      This is how the public banking solution can come into play where asset purchases are only funded with existing money and by setting up non-bank financial institutions that don’t have the power to create this money.

      Also, these asset price rises attract further overseas investors who have no regard for the financial health of the country they invest in.

      The wrong brand of QE actually supports the big corporations at the expense of Mainstreet and the real economy – it feeds the parasitic financial economy instead and turns capitalism into an obscene form of reverse socialism.

      The unproductive FIRE economy (Financial, Insurance, and Real Estate) is the benefactor and this is why the average US taxpayer now has a debt of over $850K if you include unfunded liabilities.

      And why – well because no one even talks about the public banking solution any longer, let alone anyone making any effort to deploy it.

      William King the Canadian PM in 1935 said it best…

      “Until the control of the issue of currency and credit is restored to government and recognised as the most conspicuous and sacred responsibility, all talk of the sovereignty of Parliament and of democracy is idle and futile.”

      • Steve says:

        Excellent. It is what it is and they are who we thought they were. Now a dissertation on the metamorphosis of greed and its ramifications as a follow up: from mind to heart to soul.

  24. gametv says:

    The plunge coincided with Ackman tweeting that he has closed his short bond position. Hard to believe it, but that was the trigger.

    • Wolf Richter says:

      yes it “coincided.” No, it didn’t trigger it. That’s ZH BS. That guy is a loudmouth talking his own book. Often the market does the opposite of what he says.

      This is the biggest bond market in the world, it’s a $25 trillion market, with global investors who don’t give a f**k about what loudmouth says. That’s just the media and ZH pleasuring itself over a hedge fund manager talking his book. A guy like this cannot move the largest bond market in the world. That nonsense is just nuts.

      Obviously trying to tie down what caused a market move over a few hours is ultimately a fool’s errand.

      I’ll just add this: A 5% 10-year yield is a HUGE global trigger point. What happened today has been discussed for months: The 10-year would reach 5%, and huge demand would emerge to push the yield back down. Everyone has been talking about this demand coming out at 5%… we’ve talked about it in the comments, people said they’d be buyers at 5%, even in the comments of this humble site!

      So demand came out; and then you got some short covering when yields began to head south, and we were off to the party. Looks like it’s over already, a one-day wonder maybe. A typical market reaction to a big resistance number.

  25. Bobber says:

    The large increase in LT interest rates should impact stock prices, sooner or later, particularly for growth stocks. If higher discount rates are put into earnings discount models, we should be looking at 30-40% downward price adjustments for growth stocks, but this assumes the “expert” analysts are actually running discount models and not simply blowing endless hot air. Could be a bad assumption.

    Long bonds and commercial RE took their bath. Stocks and residential RE SHOULD be next, if the big investment banks and stock analysts have an ounce of credibility.

    • Jan de Jong says:

      Should, indeed. Counter to that: the enormous automatic ETF buying that developed over the decades. Awaiting the tipping point..

  26. cobo says:

    Careful dear investors, the kind of thinking here, “by cutting spending and increasing taxes in some equitable manner” since there is no such thing as “in some equitable manner” means that your necks need to be able to stretch considerably. If you think for a second that the huge debt piled up in America, and not by Americans, will be shared – go long on fire insurance. When this baby comes home, your home is not safe. Look around, see it coming. I have no dog in this fight, but you do.

  27. Phoenix_Ikki says:

    Feels like everything is still nuts. Bond market is making some crazy moves and now Bitcoin is back above $30K and last I checked at $33K, 11% in one day…

    Yup, nothing to see here, everything is operating as normal..

    • Depth Charge says:

      The FED has completely failed at reigning in the speculators. There is so much money sloshing around that it’s still searching for yield anywhere. The FED knows this, they just don’t want to pop the bubble. The longer they wait, the more structural damage it does.

  28. nsa says:

    So why are your duly elected rulers willing to “gift” you 5% on a 10 year (3.6% tax adjusted at a 28% marginal income tax rate)? They screwed you with ZIRP / NIRP for the past 15 years, but now you can get a very generous tax adjusted 3.6%? Instead of bending over again, maybe think about some more tangible investment like raw land or a farm needing TLC which will be here long after the purchasing power of that 3.6% and its principal has evaporated. Something tangible you can pass along to your heirs and assigns. Just saying……..

    • Wolf Richter says:

      The farmland bubble is the next thing to implode. Hedge funds have been all over farmland for years, and now it’s very ripe. So good luck.

      • vecchio gatto veloce says:

        8 August 2023, “North Dakota 2023 Farm Real Estate Value and Cash Rent”:

        Farm real estate value for 2023 averaged $2,320 per acre, up $270 per acre (up 13%) from last year. Cropland value increased 13% from last year to $2,660 per acre. Pastureland, at $1,070 per acre, is up $140 from last year.

        Rent prices were unchanged @ $189 per for irrigated cropland, on average in North Dakota.

        Although the sugar beet crop subsidies are a ridiculous distortion of free-markets, this years beet crop around Grand Forks has been very good. In general, yields and quality of crops has been inconsistent and location/rain dependent much more so that typical for the Dakotas & western Minnesota.

        “When the combines stop rolling, it’s very hit and miss,” said NDSU Extension Agronomist Clair Keene.

        Full disclosure: Dad and I sold our wheat seed company 13 years ago, but I still read “Farm Net News’ from the Red River Farm Network when it comes out every Monday. After reading Wolf Street, of course.

      • BS ini says:

        Thanks Wolf for the great response. The collection of land from Hedge Funds is interesting I thought the purchases were from PE and of course the public entities funded from ZIRP. I’m so happy that I disposed of my farm timber land in East Texas. Small tract that only took 20 years to sell. Timber farming takes along time to harvest on 300 acres one can generate about 10k a year . Taxes are rising with the increase in land value and of course the possible storms fires and other natural risks that exist can wipe out the 10k a year. Hurry and by farm land. AI and robotics are creating huge demand for more advanced farms.

  29. Marjoram says:

    Hilarious. I’m sure nobody buying into this will be underwater in a couple of months.

    Waffles! Tasty waffles!

  30. Not Wolf says:

    So Ackman likes to talk and can’t move the market. Rick Rieder doesn’t talk as much, and can move the market. Funny how this works

  31. Ev Last says:

    There is a massive supply of new bonds coming. If I was Japanese, I would consider buying them for the currency kick. If I was American, 2 year only. Debt will be inflated away in waves, with bond rallies duping suckers in between. Returning below 3% will not happen in your lifetime.

    • MM says:

      “Returning below 3% will not happen in your lifetime.”

      30-year mortgage holders with <3% rates will have a carry trade available for the term of their loan.

      • Cookdoggie says:

        That’s what I thought when I started a 12 year mortgage in 2011 at 3 5/8%, that I’d surely out earn that. Never did but at least it’s paid off now. Enjoy, all you sub 3% mortgage holders, nice to see some of us winning.

  32. Dean says:

    Government spending will be relentless going through the election in 2024. Rates will likely continue to edge upward and I’ll be happy to keep cycling t-bills. If you consider that no state taxes are required its hard to find a virtually no-risk investment that pays more. At least none that I know of.

    • dang says:

      Yes, well the US Government has worked it’s way too the untenable position, that it must run a six or seven percent budget deficit in order to avoid a recession caused by offshoring.

  33. Swamp Creature says:

    The high yield bond market will be the next shoe to fall. It’s just one bankruptcy away from a major crash. Investors will be running from them like scaulded dogs. They will be trading at 10 cents on a dollar.

  34. Appletrader says:

    It was just Bill Ackman covering his shorts

Comments are closed.