It undid more than the entire haven trade that had started on Thursday and blew through the hot PPI inflation on Friday.
By Wolf Richter for WOLF STREET.
The 10-year US Treasury yield spiked by 14 basis points to 4.066% at the moment, from 3.925% in overnight trading amid massive volatility.
It thereby backtracked on more than the entire plunge from 4.05% early Thursday, to 3.95% at the close on Friday, despite a hot PPI reading Friday morning, to below 3.93% in overnight trading on Sunday, amid massive but short-lived demand, after the US and Israel had started bombing Iran over the weekend (hourly chart via Investing.com).
Market memes flipflopped vigorously from searching for a haven, as stocks were getting rattled, and damn the inflation torpedoes that the hot services PPI on Friday warned about, and searching for more haven after the Iran bombing had started, to suddenly worrying about these damned inflation torpedoes all over again that could be made worse by the consequences of the Iran war on energy prices?
Rising yields means falling bond prices; falling yields means rising bond prices. That may not be a big deal for regular bond holders, especially those intending to hold to maturity, when they get paid face value.
But much of the Treasury market is tangled up in highly leveraged complex trades, and those sudden moves make substantial ripples.
Markets do what they do because they do it. Why exactly they ignored the hot PPI inflation reading on Friday, and went all in on the haven trade, then flipflopped like this today on the haven trade and refocused on inflation, or whatever, remains subject of speculation.
One thing is for sure: at these below 4% 10-year Treasury yields, demand vanished, and yields are having to move higher today to find buyers. And they could of course re-flipflop for whatever reason. But these still very low yields – amid rising inflation and massive supply issues facing the Treasury market – are mightily unappetizing to this bond investor.
And look what that did to mortgage rates today: The average 30-year fixed mortgage rate spiked by 13 basis points this morning from Friday, to 6.12%, according to Mortgage News Daily.
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War is the fastest way to destroy a fiat currency that I know of.
Iran’s currency has been getting destroyed for many years day after day. The Iranian rial has collapsed by 98% or so against the USD in just the last 10 years.
But the dollar jumped today. And the DXY dollar index is back where it had been 50 years ago.
This is just a reminder that in a global crisis, the dollar often remains the “cleanest shirt in the dirty laundry pile,” even when war is the catalyst.
and yet in last 10 years our fiat $dollar has lost only 31.1% of value
$1 now needs $1.45 – in just past 10 years
based on official US inflation rate chart
Wise man say, “Dollar milkshake theory”
Or maybe Brett Johnson said that.
Regardless… I couldn’t resist saying that .
I will go back to shutting up now.
MW: Bonds head for biggest selloff in 9 months as Iran conflict sparks unusual Treasury moves
Is there anything that isn’t inversely related to interest rates?
Palantir, Lockheed and other defense stocks are rising on heels of Iran conflict
War is big business.
A currency exchange.
The income of buy-and-hold bond investors is NOT inversely related to rates. Ditto for the financial pain of borrowers who need to refinance!
P.S. There are many investments with near-zero correlation to interest rates.
Actually the sustained inflation of the various monetary bubbles are all inversely related to the interest rate.
Which suggests an avenue of unproductive inquiry
I smell a crash coming, says former GOLDMAN boss…
Socaldude,
I smell it too.
Thank God I have $385 billion in T-bills to buy at the fire sale.
Sincerely,
Oracle of Petaluma.
The market has no interest in being chill, and honestly, the whole thing is de-bond-able. Why are yields even allowed to move? If we just glued the numbers to the screen at 3%, everyone would be happy. It’s simple architecture. Plus, if the 10-year bond is too volatile, we should just use ten 1-year bonds instead; they’re smaller, so they’re probably easier to manage.
I can’t tell if this is a serious comment or not… yields need to be able to move to account for inflation and risk. Freezing or “glueing” the numbers would destroy the economy and no rational person would buy. While this “simple architecture” phrase is witty I recommend you head back to elementary school to learn about the most basic parts of the economy before leaving a comment like this again; and don’t even get me started on ten 1 year bonds. That fudging absurd.
It was sarcasm, that’s how I read it. I thought it was obvious. But then I missed a lot of sarcasm too.
I think they actually did lock interest rates at around 2-3% after WW2 for a few years. Surprised none of the debt addicted politicians hasn’t suggested bringing it back.
The Fed did the same thing essentially during the pandemic QE, though it didn’t announce a long-term rate that it wanted. And it triggered the worst inflation in 40 years.
Very different world now. Back then America was THE world’s producer. That, combined with a progressive tax structure that paid for government expenses, the country thrived and sold our wares to the world.
So glad that I had plenty of time to get all the wisdom I did from my grandparents. Coming in very handy these days.
XXXTentacion,
1. He was being facetious.
2. In this economy, you’re going to have to learn to laugh, or you will be crying.
3. No crying allowed. Wolf is an economist, not a therapist.
Feels like I have been molested by the obvious the AI bot that your persona exudes. Mindlessly selling something/anything it doesn’t matter
If we know Treasury yields always go up when people get scared about inflation, why don’t we just stop telling the investors what the inflation numbers are so they stay calm and keep the rates low?
Well IMO the treasury yields are fixed by the ready application of monetary stimulus provided by the obese Fed Balance Sheet, not a random walk down wall street.
“Clark that treasury Auction gonna be Gooooo-oooooooddddddd” -Cousin Eddie
“Real Nice”
Pretty fireworks and a big boost to GDP from military spending which will reduce the debt to GDP ratio keeping bond buyers in a happy mood? I know bonds had a bad day but perhaps some of this is part of the long term play?
Re: safe havens
Gold rose to 5,338.51 USD/t.oz on March 2, 2026, up 1.15% from the previous day. Over the past month, Gold’s price has risen 7.93%, and is up 84.68% …
It’s a volatile risky instrument that plunged 20% just a few days a month ago, and 50% after the 2012 peak. It has massive historic plunges that can last years, and then it soars again and goes into periodic manias. Risk is defined that way.
Prophetic as of 10AM ET…
Just another example of why we support Wolfstreet.com!!
And, just because I am too lazy to make more than one comment this morning, to another comment on this tread:
PLEASE please please DO NOT call Wolf an economist!!!
Not only his he a reporter of GREAT value, with only a bit of ”opinionating” that is usually right on the money, but almost always, he has the right and clear information that ”others” either totally ignore or report with a very clear bias…
Yet everyone prices gold in dollars. If you really want to see how gold “stores” it’s “value”, check out the charts of how many Big Macs an ounce of gold will buy you.
Hint: it dropped from 500 to 150 between 1980 and 1995. Shoulda just hoarded Big Macs!
And Twinkies, let’s not forget the Twinkies: just a couple of the food-substitute products that will hold ALL their (nutritional) value in the coming years and decades!
Plus, you can replace the bun on the Big Mac with Twinkies, and have a sort of Mac-Cristo style breakfast!
(More recommendations like this available on the “not quite food network.”)
Lol. Truly a food for the post economic collapse apocalypse!
But choose almost any real item you want and your ounce of gold bought about 1/4 as many in 1995 as it did in 1980.
Hey, don’t bash those Twinkies! I ran a Twinkie experiment about 25 years ago, bought a box of 10 or so (can’t remember the number due to old age) and put the full box on top of the shelf above my office desk. They lasted over 10 years, were a little firm and no mold. Threw ’em out after another 5 years or so. I guess they would be “good as gold”, because they held their “value” before tanking in the trash.
Yes, apparently a 40 year old big mac tastes just as good as a fresh one. Talk about a store of value!
Gold 5,148.00 -163.60 -3.08%
As a modern day philosopher commenting on the Naked Capitalism site, aptly described it as old yeller. There is an element of magic in gold An element if there were more of it would replace all conductive metals.
Never replace iron the miracle element that by its own metallurgical morphology is proof that their may be an inexplicable force in our environment that influences the outcome in mysterious ways.
“Never replace iron the miracle element”
Would like to hear more details.
My vote for simple but fairly amazing molecules goes to…
1) H20
and
2) CH4
I don’t see any reason why the 10-year would stay below (or even as low as) 4%.
The momentary “plunge” is technical noise. It seems like there’s a bit of repositioning about.
A flurry of demand, before a holdout for yield?
The real question is: a holdout by whom?
With an exquisitely overpriced stock market and a potential global recession at the doorstep, which category of buyers is going to stop buying?
Long term it seems unavoidable, sure. But short term? Everyone is flush, that money needs to go somewhere. Historically it’s gone to US treasuries. What’s the alternative? Overpriced gold? Thin air bitcoins? EU Bonds with half the yield and a weak dollar? Real estate? I think not. Folks are going to go with the ‘safe’ option and double down on US treasuries, comfortably ignoring the credit rate warnings like everyone else does.
Only chance for meaningful short-term change I see is EU institutions & funds, or Japanese government making significant policy changes. I don’t think either of those is very likely atm.
Which is insane if you think about it. It basically means that, due to dollar hegemony (even if less than before) and the lack of good alternatives, the U.S. seems to be able to borrow money at 4-4.5% no matter how bad the financial situation. It’s a gift, but I fear we’re squandering it.
I agree the interest rates seems too low to reduce inflation.
I have a hypothesis that inflation is a programmed variable. Not random.
Trained to prevent a drop in asset prices by injecting liquidity from the obese Fed balance sheet
If inflation really gets going based on increases in energy costs rising for the next several months, it could function the same way the 2nd oil shock did in 79.
“Although the global oil supply only decreased by approximately four percent,[2] the oil markets’ reaction raised the price of crude oil drastically over the next 12 months,”
Last week, approximately 20% to 25% of the world’s total daily oil consumption, or about 20 million barrels per day, traversed the Strait of Hormuz,
The oil shock of 79…. a mere 4% decrease in oil supply….was when my mortgage climbed to 18%.
These predictions! The world of energy has completely changed since the 1970s. The US was completely dependent on oil imports at the time. Now the US is the largest oil producer in the world, a huge exporter of petroleum and petroleum products (gasoline, diesel, jet fuel, pet coke, propane, ethane, etc.), exporting a lot more than it imports, and the largest NG producer in the world, and a HUGE exporter of NG, including via pipeline to Mexico and Canada, and the largest exporter of LNG in the world. The US oil and gas industry is going to benefit from any increase in global prices and ramp up production and exports – frackers can ramp up production so fast it makes your head spin. The US imports essentially no LNG. It imports only minuscule amounts of oil from OPEC. Canada is also largely independent from global energy markets. And the US and Canada are joined at the hip, with electricity grids being connected and the US selling more electricity to Canada than it imports from Canada due to BC Hydro’s issues, but buying more NG from Canada than it exports to Canada (function of where producing areas, pipeline, and population centers in both countries are). In terms of petroleum imports by the US, Canada is its largest source, providing about 60% of total US imports.
The natural gas part of this is here:
https://wolfstreet.com/2026/03/02/drill-baby-drill-for-20-years-us-natural-gas-production-jumps-to-record-exports-via-lng-pipeline-spike-to-record-in-2025/
The oil part of this will be published here is a few hours. So check back.
Here it is:
https://wolfstreet.com/2026/03/03/oil-jumps-but-its-not-the-1970s-anymore-us-crude-oil-production-hits-record-net-exports-soar-imports-decline-further/
The VIX spikes and Gold sells off to a 5% draw down 🫡
7:06 AM 3/3/2026
Dow 47,783.91 -1,120.87 -2.29%
S&P 500 6,735.08 -146.54 -2.13%
Nasdaq 22,241.68 -507.18 -2.23%
VIX 26.42 +4.98 23.23%
Gold 5,064.40 -247.20 -4.65%
Oil 76.84 +5.61 7.88%
Markets recovered 2/3rds or more of those losses. Two days in a row. The “buy the dip, it’s free money” mentality is so ingrained at this point I don’t know how it’s ever going to be removed and inflation brought under control.
Closed at a minus 400 points a mere scratch on the skin of the bloated valuation
The ones that have been right are still bullish
US$ up quite a bit. Gold down a lot, a bit of surprise for me.
Will be interesting to see gold vs BTC going forward.
Typically when gold comes down off a peak it’s run is over for a decade…
Here, who knows – it’s just another speculative asset at this point. And it’s often being packaged and sold with Silver bundled in the ETF so that’s not going to work out well.
Gold left safe asset behind about a year ago 🤷♂️
Still at $5,280 per ounce, and still the preferred collateral globally. looks pretty safe to me. LOL!
Lots of commodities are require for war, let alone maintain a decent standard of living for 8+ billion souls.
Its not personal, it MATH and PHYSICS.
There’s been a historic increase in liquidity. There’s an excess of savings over real investment outlets.
“Full Faith and Credit”
I wonder how the balance sheet is going to look after this? Come on Wolf, don’t be afraid of truth.
You’re having a wet dream.
Of coarse there is correlation of bond prices to the economy but there is also a significant factor of pure speculation, day trading, and algorythmic trading that affects bond prices; maybe more so. And lets not forget the part the media plays in spinning news one way or another to provide catalyst to all of this. In a nutshell, it’s just trading like everything else.
I can’t think of anything less susceptible to pure speculation & day trading than the bond market.
Silver is basically acting like a Gold 2x ETF right now, which tells you exactly how unrelated to fundamentals the recent surge has been. We sure there’s not another Hunt brothers out there?
I still dont understand how international stock, stocks, midcaps, gold, silver metals, xle/feny and bonds all went down today
MW: Stocks and gold are declining while the US dollar strongly rallies. A move like this hasn’t happened since the 2008 recession.
but bonds rallied back then
LMFAO!
Declining to $5,180 per ounce as of this typing. You are an idiot.
“Full faith and credit”
MW: Dow goes negative for 2026 as stock-market ‘fear gauge’ soars on intensifying Mideast conflict
SPX -1.36% DJIA -1.41% COMP -1.44% VIX +13.06%