Treasury yields took a rocket ride skyward today in another spectacular Bessent fail after all of his smug talk. Perhaps the more he plays his lame games the more the bond vigilantes will beat him up for it to show him who’s boss. Suddenly the US10YR is tickling the underside of 5% (which, of course, sent stocks down):
The Treasury market’s painful rout intensified Thursday, as a fresh auction of 30-year U.S. government debt and Treasury Secretary Scott Bessent’s first beefed-up buyback operation failed to calm the market.
The tumult comes [as] oil prices jolt higher and inflation data increased the odds of a Federal Reserve interest-rate hike next week. That combination had the benchmark 10-year Treasury yield up 12 basis points to 4.96%—its highest level in about three years, and putting it in jeopardy of hitting the 5% threshold.
“Everybody is selling everything,” said Tom di Galoma, a managing director at Mischler Financial Group
This huge spike in yields happened, as the article mentions, in spite of the fact that Secretary Scott Bessent’s Operation Twist was intended to bring down rates on longterm Treasury bonds ranging from the 10YR up to the 30YR, which, instead, climbed a staircase today to 5.37%!
Earlier this week, Bessent dared traders to “bet against me if you want,” while also declaring: “I am the house now.”
Well, the house just lost a bundle on that bet, so his chest puffing didn’t get him very far.
Thursday’s reaction “shows the house is the market, not the Treasury,” said Horan at Chilton Trust. The Treasury may be “the big kid on the block” and trying to “draw the line in the sand with the buybacks,” but the market is “bigger than this line in the sand,” he said.
We call that MAJOR bond vigilante action when bond investors beat up the Treasury and/or the Fed and show them who is boss about where yields are going. Today was a head-slammer. So, here is how this likely goes if the Fed doesn’t cooperate by moving its rates to where the bond market is now telling the Treasury interest is going to go:
If the Fed doesn’t hike rates next week, there’s a risk that long-dated Treasury yields could become “unanchored” and more disorderly, said Ed Al-Hussainy, portfolio manager at Columbia Threadneedle.
If the Fed and feds know what is good for them, the bond vigilantes have them quivering in their pretty pink and rhinestone cowboy boots:
Al-Hussainy said the Treasury and the Fed likely will be more concerned about the potential for bond-market tumult to unleash financial stability concerns. He noted that hasn’t happened yet, but it’s something to monitor given Thursday’s violent moves, especially in shorter-dated Treasury yields. That was prompted by rising odds of a Fed rate hike and the leg higher in oil prices.
As the Treasury buys back its longterm bonds to try (very unsuccessfully) to pull down longterm interest rates on the national debt, they raise the money for those buybacks by selling a lot more short-term bonds. The increased supply of short-term bonds on the market naturally lowers the price investors are willing to pay to buy the surplus of short-term bonds. (Simple supply and demand.) When the Treasury gets a lower price for the bonds it is auctioning, that raises the yield on those bonds when they mature and the Treasury pays them off at face value—the effective interest the Treasury ends up paying once any semi-annual coupon interest paid by the Treasury over the years of the bond’s life is added in to the payoff.
So, short-term bonds are experiencing even greater upward yield pressures than longer term bonds, which were supposed to see the payoff of a drop in yields that did the opposite. And that is where the whole mess can get disorderly and see all bond rates take off. After this bruising tumult, you can be sure the Fed and feds are now both monitoring this trouble that suddenly emerged because it shows the bond market no longer has faith in the losing Trump Treasury. Too much game playing, too much jawboning, too much added debt, too much war, raising the price of oil and fuel and, thereby, the price of everything!
Speaking of which, how was that inflation?
Volatile fuel
Let’s start with crude oil as foundational and work our way up.
Oil prices launched to the moon in a single day. Brent crude, which had been hovering about two bucks below the $100/bbl elevation for the past week bolted up to $108.6 today, and WTI broke the $100 barrier, too, cruising in at $102.5 as of the time of this writing.
Next, we’ll move up to Gasoline. Try this headline on for size, which I’ve raised up to the editorial section here so even the non-supporting readers of this site can read it, because we just passed a critical juncture in the inflationary push I’ve been claiming you will see this summer due to this war:
Gas stations in America are starting to max out their displays with $9.999 prices
They’re going to have to buy bigger marquees and new pump displays in order to keep up or they can just hand-write “x10” with a Sharpie after the readout like Mexico does for pesos, so that the price reads “$1.099 x10.” once they break into prices with a ten-buck handle. That is what we are coming to. We’re becoming that kind of country anyway.
There was a solitary reader who was telling me how wrong I was about all of this trajectory a month ago. I’m hoping he’s kindly recalibrating his opinion and decides its worth staying around.
“As the conflict with Iran drags on longer than many expected, inflation pressures are becoming increasingly entrenched.
That was part of the big news today. Trump gave up on implying the war may be up in a week or so and said clearly it will last through the November election. (I’ll come back to that because there is a detail I don’t want you to miss.)
The Producer Price Index edged up another 0.4% during the month of August. Wrong direction for voters sick and tired of rising prices! (But “B-b-b-baby you just ain’t seen nothing yet!”) Oh, and July got revised up (as these things tend to go), leaving us with an annual inflation rate in the PPI of 5.4%. Nobody wants to see that because that is what is coming our way down the pipeline. It’ll arrive here from producers … quickly now … especially with the clearly protracted war that even Trump admits will remain hot or hotter until the day after the election, and it is getting hotter everyday as we saw quite clearly today under Iran’s escalation plan. That will keep pressuring oil, which will keep pressuring the prices of everything.
Here’s the detail: Trump, in all of his lameness, admitted to more longevity for the war than he has ever admitted to before (since he won the war back in March) but only by sugar coating it with another outright lie of the magic-thinking kind where he tries to speak new realities into being like he is some kind of god. He assured America that oil and fuel prices will plunge the day after the election because Iran desperately wants out of this war.
How MANY times does Trump get to tell this obvious lie before all his supporters finally yell in unison, “Shut up!” and flee the stadium? No, they applauded the good news that will never be, believing their demigod will bring it into being. Trump so completely underestimates his enemy, which is why he is losing this war without being able to understand why, that he thinks the Iranians are only keeping the pressure up to try to force him into losing the election. So, he believes they will finally run out of gas, so to speak, the day the election is over. Yes, they want that pressure to keep rising all the way to the election; but, NO, it doesn’t end there. And that also tells you how long Trump intends to keep feeding into this war.
What a joke. The Iranians will still want to grind him into the dust after the elections to humiliate him and America for what he has done to them, and the war news today was bad for the US, but I’ll leave it for you to read all about that in the headlines if you want, continuing my very brief step back from much war talk in the editorials to focus on the economy (and the election, desperately intertwined) directly today, though Trump’s two wars—on tariffs and on Iran—have everything to do with the economy right now.
Purchasing the election
So, what does Trump do now that he is getting more desperate because the election is so near that he’s now speaking from his convention podium on a day when the war is getting much worse and inflation is reported still rising? What new and outrageous thing could he do to try to turn this around for himself like a caged animal? Trump has decided to outright buy American votes!
Trump, hoping to salvage midterms, makes a dubious pledge to give every US adult $5,000 if the GOP wins (There that is two free headlines even for non-supporters just to be be generous.)
Within an hour, Vice President JD Vance appeared to try to walk back Trump’s proposal — at least in part — by suggesting the dividend payments would not go to the wealthy. Vance suggested it could be paid for by U.S. tariff revenues, though the suggested payment dwarfs what the U.S. has taken in through the protectionist measures.
Ah, so it’s a Republican downward redistribution of wealth then? It is mind-boggling that his remaining supporters, former fiscal conservatives, can endure the cognitive dissonance needed to buy that lame explanation. The tariffs have never brought in enough, even at their highest point, to eliminate the annual deficit. That means, if you add another $1-trillion plus to annual government expenses to create this enormous cash prize, ALL of it gets piled onto the debt! ALL OF IT! These guys just lie through their teeth on a constant basis. And most of the Republican Party doesn’t care. That or they went to those modern American schools that stopped teaching arithmetic because it is racist.
We’re already struggling to figure out how we are going to cover social security payouts each year, and now Trump wants to add another $5,000 per person in a single year right after the election (which he doesn’t have the authority to do anyway, but when has that slowed him down):
If you go down to the headlines section, I’ve posted a link to a convention video where you can watch the Republicans applauding enthusiastically because their president is BRIBING all voters in the USA to vote for him with a pledge that, IF his party wins the midterms, he will pay EVERYONE off with taxpayer money! They are openly applauding one of the most brazen public political bribes I've ever heard. “If Republicans win both houses, I will send everyone a government check for $5,000!”
Wow! His MAGA crowd is cheering the offering of public funds to try to buy everyone’s vote with a bribe that will make him the BIGGEST-BY-FAR deficit-raising president in history! Welcome to the completion of the transition to the NEW REPUBLICAN PARTY—something so utterly different from the Republicans of the past (at least, as they stood in word, though rarely in deed when in power) that he would make their former hero Ronald Reagan turn green in his grave and throw up all over his weary bones.
This is a plan of throwing candy to the taxpayers that their grandchildren can pay for as they hand them a bankrupt nation. Yet, the actual Neocons that filled that convention hall couldn’t help but applaud a spending plan that makes Democratic socialism look conservative.
Of course, a trillion or so extra dollars packed into the deficit that packs onto the mountain of debt is probably just chump change now that the government is rolling right through an additional $2.5-3-trillion added to the debt every year anyway, especially with all these wars over oil in Venezuela, drugs in Mexico, Central and South America, support for Ukraine and a failed-regime change/failed uranium recovery effort in Iran, plus the tidbits ongoing in African skirmishes.
I think we have reached the “Let’s just blow it all to hell” stage of imperial collapse. “Burn it all down.” I mean, now that it is all just one big drunken brawl already, why not have another drink and swing your fist another time before you topple over into the water trough in a stupor? That’s where we are when those who still pretend to think they are conservatives physically applaud a campaign pledge like this!
While politicians always promise to work to bring about legislation that creates big spending programs that they claim will serve all parties if they win, they don’t promise, as a single individual, to write government checks out of the Treasury’s bank account and pay everyone with taxpayer funds if their party wins an election, but these Republicans In Name Only LOVED it!
Why take more than $5,000 from every taxpayer so you can pay $5,000 to every American, which includes people who pay zero to almost-zero taxes? It will be a case of using the United States credit line to issue everyone in America a prepaid free $5,000 credit card where each gift gets added to the national debt so that no one has to pay. It’s FREE money because it is all on the plastic! (They think in their math-shy heads.) And what is one more trillion dollars, which it will take to do that giveaway, when we already have $40-trillion in debt anyway? It’s chump change for all the chimps in the circus.
This plan, if he pulls it off, will make 2027 the hottest consumer spending year on record with fiat money pouring into stocks from average folk using online retail investment services like Roadrunner and buying stuff from the big-box stores like they did during the Covid stimulus, creating even more inflation than that stimulus did, lasting even longer than that inflation has (which never ended to this day) because it is MORE money in the hands of consumers than what the Covid stimulus provided, and because it is piling in on top of already rising inflation and because it is all created out of thin air via government issuing a ton more Treasuries just like last time—the very government that cannot afford the Treasuries it has to service now to where they are already starting to pile up yields like a train wreck (even as Bessent can be seen in the video linked to below smiling bigly in the background when Trump announced the massive new electioneering stimulus package), which pileup is being made worse at this moment by central banks now ditching US debt as the petrodollar cracks to pieces under the Trump Tariff Wars and Trump War with Iran!
Now that’s a mouthful, and every word of it true! As I always say, “We learn nothing!” We repeat the same stupid cycles endlessly like rats running on a wheel in a cage. (You can read it all in my hopefully humorous little book DOWNTIME: Why We Fail to Recover from Rinse and Repeat Recession Cycles.)
Ultimately, though, all of that money does come out of your pockets, not just your grandchildren’s … in the form of slightly higher interest on your own credit lines as the expanding supply of Treasury bonds to raise that money increases the interest on US bonds (at a time when Treasury Idiot-in-Chief Bessent is already sending interest through the roof with his irresponsible smile-based money management). It comes in the form of an ever weaker nation surviving on the grift taken from the next generation. It comes at the expense of national integrity … though we really have none of that left now that we are openly trying to seize the lands of our former friends. And, of course, at the expense of all that massive inflation I just said will pile on top of the inflation that is already arriving if they do this lame-brain, free-lunch program for children from 18-118 years old (“every adult in America”).
There are still a few people in the land who understand math … and I suspect there are many among the readers here:
Marc Goldwein, the senior policy director at the Committee for a Responsible Federal Budget, a think tank in Washington, said Trump has no authority to send money to Americans without approval from Congress.
Goldwein added that dividends are something that companies pay when there’s a surplus, but the U.S. is running $2 trillion annual deficits and has $40 trillion in debt.
“The idea that we’ve had fiscal success is backwards and bordering on laughable,” he said. “We don’t have surpluses to give away.”
However, vote-buying is now becoming standard procedure in Republican campaigns anyway:
The move was reminiscent of billionaire Elon Musk’s efforts to buy votes in last year’s Wisconsin state Supreme Court race, where he handed out million-dollar checks to voters to try to boost a candidate who ultimately lost.
How far are Trump supporters going to go before they recognize what a national and international train wreck this is and jump off the Trump train?
Republicans in congress are actually still leaping onto the train:
“I will get a bill ready so that we can get the Trump Dividend passed immediately after the November 3rd election,” Republican Sen. Bernie Moreno of Ohio wrote on X late Wednesday. “Because Republicans (and America) will win!”
There isn’t a conservative bone left in their spineless bodies.
A $5,000 check would give each American more money than they received in direct government payments from COVID-19 relief measures during Trump’s first term.
AND WE ALL SAW HOW THAT ENDED IN MASSIVE, RELENTLESS INFLATION!
So, we really need stimulus checks like that sent throughout the nation, paid for by no one, adding fuel to the fire that oil is already burning through all of our dollar bills. They just can’t burn up what is left of those petrodollars fast enough! What a grand ol’ party this next year will be!
This is some of the lamest, most fiscally irresponsible politics we’ve ever witnessed. Yet, look at their lawyers already bending over backwards to find ways to justify it:
Trump’s proposal would be legal because the payment would go to everyone regardless of how they voted, or whether they voted at all, said New Mexico-based attorney John Day.
“This is a campaign promise,” Day said. “It’s not a payment to individuals to try to get them to vote in a particular way.”
No, it’s not an attempt to sway votes! Not at all! How could anyone make such a slanderous suggestion that swaying votes in the intention?
Some Lawyers sometimes make me want to puke just like poor Ronald in his coffin.
Republicans are on defense as they look to defend their narrow House majority against strong headwinds. Trump is unpopular, and Americans overwhelmingly oppose the war in Iran. Even the Senate, which Republicans once were well-positioned to keep, is up for grabs.
With fiscal budgeting plans like this and marauding warmongers like Trump for president, who has profiteered off this war more than any president in history, having started more wars in his first year than any president in history … well, Republicans should be on defense because they just keep shoving the slop down the trough for the hogs to eat as willing Trump sycophants
“Let’s declare an enormous $5,000 ‘Free Feast of Fun for Everyone’ and send the bill to our grandchildren!” That should be their new socialist campaign motto. And let’s do that while we run low on ammo for our new forever war that the president pretends will automatically end the day after his party wins or loses, even as we are seeing the terrible results of war described in the headlines below.
There are still a few Republicans whose brains are not drunk on Trump who can see what this is because they don’t look at everything through a orange-colored glasses:
Some conservatives slammed the policy as an example of exactly the kind of socialism that Trump and the GOP warn Democrats will usher in if they regain power.
Yes, it is. I’ve always said it’s a uniparty, and I warned everyone back in 2016/17 he was nothing but a Trojan horse to kill conservatives in the Republican Party. They are mostly gone now.
Apparently the “post-conservatives” who make up today’s GOP will!
But just 90 minutes into his speech, Trump undermined all the socialist fear-mongering talking points by announcing the Trump Dividend, five thousand dollars to every adult citizen if Republicans hold Congress. That’s two hundred forty-five million adults getting five thousand apiece, which adds up to $1.25 TRILLION, or more than all three rounds of pandemic stimulus checks combined.
Will the utter nonsense and chaos never end?
This massively costly vote-buying is coming from the party that has made irresponsible and unfair wealth redistribution the central charge against its opponents for most of a year. And is proposing the largest one-time direct payment in American history from the stage of its own midterm convention? It’s either jaw-droppingly mind-numbing, or mind-numbingly jaw-dropping. You choose.
It was as if Trump said, “We’ve pretty well kicked the petrodollar down to the ground. Now let’s smack it across the bridge of the nose with the edge of this shovel and bury it.”
(Note that I have learned that simply clicking the “restack” button may do even more to get Substack to share articles than clicking the “like” button, though both are a simple finger click toward boosting the site that costs you nothing if you are getting value from it.)
