Never underestimate the bond vigilantes

Investment Analysis Clubs Macro Economic Trends and Risks
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Although TMF and METARs often focus on stocks the bond market is actually larger than the stock market.

According to the Securities Industry and Financial Markets Association (SIFMA) as of mid-May 2025:

The U.S. bond market had a total outstanding value of approximately $55.3 trillion.

The combined market capitalization of U.S. stocks was approximately $49 trillion.

While the Federal Reserve determines the fed funds rate (overnight) the bond market determines all other bond yields. (With some input from the Federal Reserve which has an enormous book of Treasuries and mortgage bonds.) Supply and demand determine the prices. The yields move opposite the prices.

Bond investors want to receive their interest and principal. We want to be sure that we are compensated for the risk of tying up our money for long periods of time and for the risk that inflation might increase.

The fed funds rate wasn’t too high last year based on the historic real yield, the employment picture and the strength of the economy. The Fed shouldn’t have cut the fed funds rate. The chart below shows that the bond market pushed up the yield of the 30 year Treasury after the Fed started cutting the fed funds rate since would result in higher inflation and/or a stronger economy. Mortgage rates correlate with the long-term yield, not the overnight fed funds rate.

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https://www.wsj.com/economy/central-banking/trump-fed-pressure-rate-cuts-8e91185f?mod=hp_lead_pos5

The More Trump Pressures the Fed, the Less Likely He Gets Lower Rates

If the president thinks the Fed is hard to deal with, wait until he tries to negotiate with the bond market

By James Mackintosh, The Wall Street Journal, July 24, 2025

The Trump administration has ramped up its attacks on Fed Chairman Jerome Powell in the past few weeks as the president pushes for lower interest rates. The louder he shouts, the less likely he is to get what he really wants: lower government borrowing costs and cheaper mortgages…

The problem is that how rate cuts are achieved matters, because the Fed’s institutional structure matters. At one extreme if the Fed cut rates because Trump broke the Fed’s independence, it would trash investor confidence and push up Treasury yields…

If Trump thinks the Fed is hard to deal with, wait until he tries to negotiate with the bond market. [end quote]

The Treasury’s largest 10-year TIPS auction in history got a warm welcome from investors yesterday, generating a real yield to maturity of 1.985% — a bit below expectations, an indication of solid demand. This is CUSIP 91282CNS6, a new 10-year Treasury Inflation-Protected Security that will mature on July 15, 2035. Its coupon rate was set at 1.875%.

I bought some of this issue at the auction. It’s now listed on the secondary market so its actual yield will fluctuate from day to day although its coupon will stay the same.

This issue will yield more than the 10 year Treasury if inflation turns out to be higher than expected.
Wendy

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I finally saw the rest of the encounter with the press in the Fed building that is being renovated. Most clips just show the POTUS claiming the cost had inflated to something over $3B. The clip I saw last night showed Powell taking the piece of paper that the POTUS was waving, and read it. He said that that $3B+ cost was adding in a different building, that was renovated five years ago, and had nothing to do with the current project. Keep that in mind whenever the regime starts making claims with numbers in them.

The interesting bit starts at the 30 second mark of this clip.

Steve

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Looks like his Wharton professor giving him a bad grade.

“If you just draw a line on the other side of that F it’s an A.

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He said the increase from $2.7 to $3.1 billion was for the fifth, older building.

DB2

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Yes, that is what I was saying…iirc, actually a third building, completed five years ago. Must not have made myself clear.

iirc, I saw that longer clip, where Powell was pointing out his nibs’ faulty math, on PBS. Congress already yanked their funding, so they don’t have much to lose by showing the whole thing.

Steve

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I saw the whole thing on CNBC.

DB2

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They better watch out, or they will be in the kimchee with the regime.

Speaking of which, did you notice that the $16M bribe, and firing Colbert, had the desired effect? The FCC has approved the buyout of Paramount. Now all the Paramount honchos can have their 8-9 figure payday.

Steve

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It’s worse than that. Now CBS has a monitor, who reports directly back to Trump. Seriously people, how can ANYONE back this person?

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Not only will CBS have a Political Commissar overseeing content, but his nibs will also receive $20M in free broadcast services, on top of the $16M cash paid earlier.

Steve

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I heard Powell pointed out that the math was wrong because the contracted estimate was from five years ago.

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Yes, called an ombudsman. And way back in 2011 with the Comcast and NBC Universal merger, Comcast had an ombudsman for NBC “to oversee compliance with the memoranda of understanding, voluntary commitments and the Federal Communications Commission’s recent approval order and conditions.”

DB2

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If you don’t think this CBS monitor is solely about making sure they stop reporting bad things about Trump I have a bridge to sell you. Open your eyes.

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If you don’t think this CBS monitor is solely about making sure they stop reporting bad things about Trump I have a bridge to sell you. Open your eyes.

The fact that multi-million dollar bribes are being paid to his nibs, should make clear what is going on.

Steve

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And what did your eyes tell you about the NBC monitor in 2011?

DB2

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How many millions of dollars flowed to the president in that situation? How many show hosts and programs of a less-than-flattering nature get cancelled?

You can’t both-sides your way out of this.

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I’m saying it seems like a normal thing for the government to do when it allows a big change in a broadcast network.

Can people use it to their own advantage? Yes. Nothing new there, no matter what the regime.

DB2

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While you do your “both sides waltz” (and I hope you can hear over the music), there was nothing remotely political about the ombudsman NBC hired during the 2011 merger with Comcast.

At the time (and oh, so long ago) the broadcast networks were held to standards of objectivity and fairness, which day is obviously long past. The CBS situation is because of the endless cries of “bias” among - and especially including - the occupants of the White House.

For the record, NBC already had an ombudsman when owned by GE, to insure there were not conflicts of interest in news coverage between a major network and a super-major defense and government contractor.

(NBC was not required to continue the ombudsman position after the acquisition, but did so anyway, jet least for a time, to assuage fears of, uh, something.)

Skydance Media is not a government contractor, and there are no perceived or imagined conflicts of interest job between their original business and CBS. This is about charges of political bias , and it is clear that out has already begun, with the departure of the chief “60 Minutes” producer (who claims interference), the firing of Stephen Colbert (because of “big fat bribe”) and others yet to come.

This is political interference in the national media, writ large, plain to see unless you keep your eyes wide shut.

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Run by David Ellison, spawn of Larry, who has had close connections to his nibs in recent years.

So, CBS will probably lean more toward the Fox Noise/OAN model. The Fox Noise model does seem to be a money maker.

Steve

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There is something drastically new here, different here. The fact you cannot see that is concerning.

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It seems normal for the government to withhold approval of a deal unless the buyer sets up an ombudsman to root out DEI and perceived bias?

Are we living in the upside down?

Hypothetically speaking, what would it take for you to acknowledge that TFG is doing very corrupt and dangerous things? Accuse a former president of treason, without any proof? Done. Profit billions from conflicts of interest? Done. Detain citizens without due process? Done. Send undocumented immigrants to get tortured in foreign countries? Done.

Have you no sense of common decency?

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