10-year Treasury yield climbs above 5.3% to a level not seen in 24 years

valleyer

Oy. I'm no fiscal conservative, but the US federal government absolutely needs to balance its budget. Otherwise, it's bound to either choke on interest payments, devalue the dollar, or both. Unlike most Trumpists, I see the the problem as a revenue issue, not expenditures; unlike many non-Trumpists, I doubt "tax the rich" is going to be enough to plug the hole. Government healthcare payments would be a good start -- it seems likely that the amount most employees already (effectively) pay for health insurance could fund equivalent government coverage with some money left over to help pay for other government expenses.

missedthecue

In 2026, entitlement spending + interest expense will be over 100% of federal tax revenue. That's before the military, foreign aid, and everything that starts with "Department of"

gradus_ad

Stocks keep marching higher. And it's not irrational. Because the only way out of this mess (debt with high rates) is inflation.

zmmmmm

It's very hard to gauge realistically what this means. There are a lot of vested interests in the financial system not crashing and those put strong reinforcing effects back on things. But in the end it is a game of chicken where eventually being the last to bail out becomes higher risk than continuing to support a system where an imminent crash is possible. It feels like there are strong non-linear tipping points where things could go exponential pretty suddenly here. The problem is that the level of debt overall in the US - across both private and public sector - is just astronomical. We are truly in unchartered waters, outside of a world war. There's just no model or playbook for how this should work from here forward, other than it seems very clear we will hit a point where the math stops "mathing" and that point is getting closer and closer.

GenerWork

The primary issue is Social Security. It’s the biggest driver of spending, and nobody wants to do anything to cap its costs such as means testing or straight up lowering the amount it can pay out. As for the people that will inevitably bleat about how this is just horrible and we need to lift the cap on taxable SS income, that wouldn’t solve the core problem either unless you pair it with spending caps or cuts.

tokioyoyo

My knowledge of new-gen-econ is pretty subpar, but isn't the strategy of US "don't dare to bet against us, we're writing new rules of the game"? It feels like all governments are acknowledging "letting it rip will suck for everyone, so why would we even bother". Normal monetary policy has been thrown out of the window, and every large state bank has stated it very openly throughout the wars that have started in this decade. And this leads to a lot of state-level financial backdoor discussions, deals and "stuff" that I'm not knowledgeable enough to even think about. Wild times. Maybe it's information overload, since it probably happened in the past as well. But being bombarded with implications of these changes left and right is kinda weird.

petcat

You want to see what's really bad, a train wreck in slow motion, just look at what France is doing. They've been subject to EU Excessive Deficit Procedures for multiple years, must bring deficit-to-GDP ratio from ~5.8% down to 3% within 3 years despite virtually no GDP growth and complete political and societal paralysis about reducing any public benefit or welfare whatsoever. ECB will most likely get involved after 2029 to start austerity measures. You can predict how that will go over with the French public especially if Le Pen takes the presidency, which looks likely. Very tough times ahead and the EU is facing a critical point about its future.

guelo

It's weird how the discussion on this rarely mentions Trump's giant 2017 and 2025 tax cuts, plus the insane increase in military spending. Somehow it's always about we need to cut entitlements. People need to study this graph https://fred.stlouisfed.org/series/FYFSD and think about what changed when.

jsw97

The less reported fact is that TIPS yields are moving in lock step with nominal yields. Breakeven inflation is approximately constant at 2.2-2.3%. So this is not about inflation expectations. It feels like a genuine capital shortage, possibly driven by massive AI-related investment demand.

hliyan

In a world of continuous population growth, there is some excuse (but not justification) for running governments at deficit, which is essentially a bet that future generations will produce enough to meet their needs and fulfill debt obligations from past generations. When population growth halts, so should deficit spending. Smith himself, in The Wealth of Nations : "What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom."

sans_souse

Now let's see some data from the past 5 or so years of the total sum of ransoms paid behind closed doors (ontop the few that are forced to disclose publically)

whatever1

All countries somehow are struggling at the same time. I don’t think we have seen something like this in the recent history. Maybe we collectively just over-lend at very high interest rates and the real economy cannot anymore catch up with the promises?

blueblisters

I am wondering how much of this is because AI capex is pulling dollars from everything else because it’s so lucrative. Note that it is widely predicted that transformative AI will increase real interest rates for several reasons. I’m not sure we are there yet. But if progress continues I expect things to get weirder.

state_less

It probably doesn't help rates to spike oil prices by starting a(nother) war of choice in the middle east while inflation is already running hot. Eventually you get demand destruction and outstanding debts don't look so good.

digitaltrees

Go Brandon go. Or whatever stupid maga phrase is appropriate. Can we ask trumps dad to buy treasury bills like he bought casino chips to bail out the Casino?

rkagerer

https://archive.ph/mqklu

esalman

Different factors have been discussed in the comments, like tax cuts, military spending, social security etc. But the yields are going up simply because investors do not want to buy at lower interest anymore. It indicates that investors view the bond as riskier than before. A real fear is materializing that US will default on it's debt. Sure, the fed can always print money to bail them out, but the inflation is on track to cost the Republicans in the midterms. There are a combination of factors which is causing this fear- those are radical changes in immigration, trade and military policies. The stability of the bond market is built on the trust that US will act rationally when it comes to skilled immigration, free trade and avoiding direct military conflict. Clearly it's no longer the case. US population view themselves as immune to fallouts from global events. But we're starting to see that when you breaki promises left and right, people lose trust, and you pay the price, even when you're a superpower. My money is on 8% yield by the end of Q1 '27.