OECD has just predicted that US inflation for 2026 will increase to 4.2% from 3.0% originally which is the highest of the G7 countries. Bond yields will increase even further as a result - good luck with Trump’s plan to lower interest rates in that environment.
Is this why Scott Bessant rushed out of that TV interview and came back later, shaken and nervous? Or that Deutsche Bank records regarding his links to Epstein are at risk of being scrutinized?
Not enough watching or reporting the really important reactions from this presidency that affects the entire country and globally but will report every all cap posts, nonsensical speech and executive orders.
Could be on track to bankrupt the country. Trump has a track record of that, does he not?
He’s familiar with debt problems…
The difference is this time you can’t just restructure and move on.
When a country’s credibility gets questioned, the bill doesn’t disappear...
it gets more expensive.
Sadly, true.
Exactly what I was thinking! I'm glad I sold all my American investments when trump became president.
A lot of people are rethinking exposure right now.
Not because of headlines… but because the underlying plumbing is starting to shift.
That’s a different kind of warning.
OECD has just predicted that US inflation for 2026 will increase to 4.2% from 3.0% originally which is the highest of the G7 countries. Bond yields will increase even further as a result - good luck with Trump’s plan to lower interest rates in that environment.
That’s the trap right there.
Higher inflation → higher yields → higher borrowing costs
You don’t lower rates in that environment… you get dragged the other way.
Response to Fred Ferguson
You are right to focus on the auction.
But the deeper issue is not demand “weakness” in isolation.
It is a shift in how the system is absorbing supply.
This is not a failed auction.
It is a repricing of the world’s most important asset.
The United States does not operate like a normal borrower.
It sits at the center of three overlapping systems:
the global reserve currency
the collateral base of the financial system
the safe asset in times of stress
That structure does not disappear because of one soft auction.
But it can change behaviour at the margins.
And that is what we are starting to see.
Higher yields are not just a sign of stress.
They are also a sign that:
risk is being redistributed rather than rejected.
Investors are not walking away from Treasuries.
They are demanding compensation for a different environment:
higher structural inflation
persistent fiscal expansion
geopolitical fragmentation
increased issuance across both sovereign and corporate layers
The key point is this:
Supply is no longer the only dominant force.
Uncertainty is.
And uncertainty changes time horizons.
Shorter duration.
Faster repricing.
Less patience.
That is why the long end moves even without the Fed.
The market is no longer anchored in the same way.
Where I would extend your argument is here:
This is not just a debt story.
It is a systems convergence story.
Energy prices rise → inflation expectations shift
War expands → fiscal demand increases
Industrial policy accelerates → capital is redirected
All of this feeds into the same place:
The price of money is becoming geopolitical.
That is the real shift.
Not that the U.S. cannot sell debt.
But that it must now sell it in a world where:
capital has alternatives
risk is multidimensional
and trust is no longer unconditional
So yes — trust matters.
But it is not “cracking” in a binary sense.
It is being continuously renegotiated.
And when trust becomes a variable rather than a constant,
the entire system becomes more expensive to run.
That is the feedback loop worth watching.
Not collapse.
But cost escalation across the system.
Well said Hans.
I’d translate that into plain English like this...
The system isn’t breaking… it’s getting heavier.
Same structure.
More friction.
Higher cost to keep it moving.
And that friction shows up first in yields.
My impression too Fred
Is this why Scott Bessant rushed out of that TV interview and came back later, shaken and nervous? Or that Deutsche Bank records regarding his links to Epstein are at risk of being scrutinized?
There’s a lot flying around right now… most of it unverified.
Meanwhile, the bond market is doing something very real and very measurable.
That’s where I keep my eyes.
Not enough watching or reporting the really important reactions from this presidency that affects the entire country and globally but will report every all cap posts, nonsensical speech and executive orders.
Noise gets clicks.
But money moves on signals… not speeches.
And the signals right now are coming from places most outlets barely touch.
China just sold off more. Is Japan still selling off theirs?
We should have known this is on the horizon.
Yeah… this didn’t come out of nowhere Kay.
It’s been building quietly… and now it’s starting to show up where it matters.
People pretend that the Fed sets interest rates. They do, inside a small bubble protected from the market somewhat.
Yep.
The Fed can guide…
But it can’t force investors to accept a price they don’t believe in.
That’s when yields start moving on their own.
- The world walking away from the US is starting to have its impact.
- Jerome Powell issuing a warning to the government to get their overspending under control was another 'whisper´.
- a US president who has made bankruptcy a way of doing business
It all adds up to a path to a US default, capital running for the exit, trust following suit, an inflation spiral. Brace yourselves.
The ingredients are there Lex… no question.
But it’s less “brace for impact” and more “watch the pressure build.”
Higher yields, higher costs, less room to maneuver.
That’s how this usually plays out.
Under normal circumstances I would agree with you. Such a path takes years, IMF intervenes, trouble averted.
But Trump has managed to cause havoc in months, 'achievements' which took many other authoritarians years or decades.
I am with you on the 'wait-and-see´ mode, but with more caution than usual.
Last year Trump said he would essentially conquer countries economically. It appears that is happening to the U.S.
That’s the part most people miss Thomas.
You can’t project economic power outward if the foundation underneath you starts shifting.
And the bond market is where that shows up first.
Excellent analysis. The big question is: will Trump default on some debt soon? He has a long long history of not paying debts.
Countries don’t “miss payments” the way businesses do Dean…
They get squeezed by the market instead.
And that squeeze is already underway.
Thank you for the clarification.