BOND MARKET TOUCHES 5%, IMMEDIATELY PRETENDS IT DIDN'T

The 10-year Treasury yield reached 5.014% on Monday, its highest level since October 2023, and then lost its nerve and slid back under 5% before the afternoon. It started the day at Friday's close of 4.938%. The reasons are boring and expensive. Large deficits, heavy debt issuance and sticky inflation have all pushed up the term premium, the extra pay investors want for holding long bonds instead of rolling T-bills, and surging crude prices piled on. Real 10-year yields hit 2.622%, the highest since 2008. Treasury also has to unload $13 billion of 20-year bonds on Tuesday, which is a rough week to go door to door. The Fed is widely expected to raise rates at this week's meeting, and CME's FedWatch put hike odds around 90%. The coverage splits on why. The wire copy hangs it on deficits, issuance and inflation. Breitbart counters that market-based inflation expectations and longer-term consumer expectations haven't moved much, then takes a lap through 2024, when the yield fell below 4% and the Fed cut by half a point in September under Biden. Everyone agrees the number is 5. Nobody agrees whose fault it is. Meanwhile Treasury Secretary Scott Bessent has been leaning on an expanded buyback program to hold down the long end, in a market where $1.2 trillion changes hands daily. Bring a bigger bucket.

Why you should give a shit: The 10-year is the number your mortgage copies its homework from, and the 30-year fixed already went from 6.15% in January to 6.76% last week, so the bond market throws the fit and your house payment pays the fine.