Higher Long-Term Treasury Interest Rates

10-year Treasury rates are heading higher, with the yield curve starting to flatten at around 5% (the 10-year is at 4.65% today, the 2-year is 4.96%). A healthy economy leads to higher interest rates. Also Fed Rate cuts are being seen as more unlikely.

decade expected inflation real interest rate market yield
1990s 3.0 to 3.5 2.5 to 4.0 5.5 to 7.5
2000s 2.2 to 2.6 1.4 to 2.2 3.6 to 4.8
2010s 1.6 to 2.0 0.4 to 1.0 2.0 to 3.0
now 2.2 to 2.4 1.7 to 2.0 3.9 to 4.4

=== links ===

What If Fed Rate Hikes Are Actually Sparking US Economic Boom?
A radical theory is spreading as economy defies expectations
‘The reality is people have more money,’ one convert says
"US households receive income on more than $13 trillion of short-term interest-bearing assets, almost triple the $5 trillion in consumer debt, excluding mortgages, that they have to pay interest on. At today’s rates, that translates to a net gain for households of some $400 billion a year, he estimates.

“When rates get below a certain amount, they actually slow down the economy,” Einhorn said on Bloomberg’s Masters in Business podcast in February. He calls the chatter that the Fed needs to start cutting rates to avoid a slowdown “really weird.” “Things are pretty good,” he said. “I don’t think that they’re really going to help anybody” by cutting rates."
“To be clear, the vast bulk of economists and investors still firmly believe in the age-old principle that higher rates choke off growth. As evidence of this, they point to rising delinquencies on credit cards and auto loans and to the fact that job growth, while still robust, has slowed.”

Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity

10-Year Real Interest Rate

10-Year Expected Inflation

Our Drunken Sailors Binge despite Higher Interest Rates, and the Fed Watches them Nervously
"Where does this money come from?
A record number of people are employed, and these workers have received big pay increases that outran CPI inflation in 2023 and so far in 2024.
People are getting 5%-plus on their money-market funds and CDs, up from near 0% two years ago.
Mom-and-pop landlords (1-9 rentals) got big rent increases on the 11.2 million single-family houses they rent out.
Stocks have been on cloud 9 over the past 12-plus months.

And some of this income gets spent, and the rest is saved. On top of it, there is a huge wave of immigrants, 6 million in 2022 and 2023 combined, according to the CBO (the Census Bureau’s algo however have not yet picked up on the surge in immigrants in 2022 and 2023), and most of these people are quickly joining the labor market, and they’re starting to make money and are spending it. Immigration has caused the US population to grow by 1.14% in 2023, the fastest growth since 2005. "


But but but if that is TRUE then I need to rethink!?

So it cannot be true…

d fb

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As I mentioned elsewhere, people younger than roughly 45 or so have never seen “normal” interest rates during their investing lifetimes.

The current Fed funds rate of 5.something is barely above the pre 2000 average. It is not at all high.

So those who think that the current rate is high enough to choke off growth are being unduly influenced by recent history. They aren’t high by historical standards.



Exactly. People have been so brainwashed over 50 years of Grover Norquist inspired propaganda about taxes they don’t understand that operating a multi-trillion dollar economy with nothing but tailwinds in the form of artificially low tax rates and artificially low interest rates literally breeds what I would call “weed companies.” Companies with business models so dependent upon unnatural macroeconomic stimulus and bubble thinking they cannot survive a totally predicable cyclical downturn.

Such companies should be the enemy of everyone in the economy because they can destroy BILLIONS in capital, distort market prices and starve other “legitimate” uses of that capital. As the government has failed to properly regulate companies operating in environments that tend towards monopoly, it seems like the entire “entreprenurial class” has given up hope of hitting it big through competition and instead have adopted a jackpot mentality where they hope to be gobbled up by one of the incumbent near-monopolists rather than duking it out over time and BEATING the current near-monopolists.

Low interest rate and distorted tax policies like abatements and favored treatments for certain types of income encourage the weeds to grow big enough to attract the attention of the big guys, possibly triggering a lucrative buyout before the weed even faces a full business cycle and it becomes apparent…

…they’re a weed, not a tree setting down legitimate roots to last for the long haul.



Queue up the skeptics saying that the interest due on the national debt will throw the Country into a downward financial spiral leading to the collapse of our way of life, lol.

It feels like the Stock Market is digesting the apparent no rate cut coming after all. I have no problem with that, it is nice to actually get some payout on fixed interest assets, but perhaps PE ratios will be dropping.


You forgot subsidies and money printing which might be classified as 100% artificial. Fractional reserve banking partially artificial. The FED, good grief!

How do you determine the divide between artificial and natural taxes and between artificial and natural interest rates. The arbiters are free markets which, excepting black markets, the world has not seen in ages. Stock and mercantile exchanges? Maybe.

The Captain

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Economics certainly has changed since i did my degree in it :slight_smile:

Rates are hiking because investors are seeing that lending to the US government might not be a good long term bet:

The US government has to rely more and more on the sale of T-bills to plug the gap. These have risen from the traditional 15% of US debt to over 20%, again with rising rates:

Treasury Bills Are Paying Above 5%. Here’s Why It Matters - NerdWallet

Strange to see this as creating any sort of economic revival, let alone a boom!

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