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🚨 TL;DR: THE BOND MARKET HAS ENTERED THE CHAT AND IT IS ABSOLUTELY NOT VIBING 🚨
Alright regards, put down the 0DTE calls for approximately 90 seconds because the U.S. Treasury market is doing something spicy.
The 10-year Treasury yield has gone:
📈📈📈📈📈
And everyone is asking:
"WHY BOND NUMBER GO UP?"
First lesson:
When Treasury yields go up, bond prices go down.
Congratulations. You now understand fixed income better than half of Reddit.
🏦 THE FED: "EVERYTHING IS UNDER CONTROL"
Fed Chair Kevin Warsh and the Fed control the short end of the curve.
Fed:
"Inflation is elevated but we're monitoring the situation."
"The economy remains resilient."
"We have the tools."
Bond market:
LMAOOOOOOOO
10Y:
5%+
30Y:
HOLD MY BEER 🍺
The Fed can bully overnight rates around.
But when Uncle Sam walks into the bond market asking:
"Hey bro can I borrow another trillion?"
the market gets to decide what yield makes that proposition attractive.
And the market currently appears to be saying:
"Absolutely, king.
That'll be 5%+."
🇺🇸 UNCLE SAM'S CREDIT CARD HAS ENTERED THE CHAT
Federal debt:
\~$40 TRILLION
Government:
"We should probably address that."
Also government:
💳💳💳💳💳💳💳💳
Treasury:
"Who wants some 30-year bonds?"
Bond traders:
"What's the yield?"
Treasury:
"4%?"
Bond traders:
😂
Treasury:
"4.5%?"
Bond traders:
😂😂
Treasury:
"5%?"
Bond traders:
👀
This is called:
PRICE DISCOVERY, KIDS.
💵 BUT WAIT, THERE'S MORE
Remember 2020?
M2 money supply:
🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀
Government:
STIMULUS
Fed:
QE
Congress:
MORE STIMULUS
Everyone:
MONEY PRINTER GO BRRRRRRRRRRRRR
Economy:
🔥🔥🔥🔥
Inflation:
"Bonjour."
Policymakers:
"This should be temporary."
Inflation:
"I LIVE HERE NOW."
🛢️ THEN THE ENERGY MARKET SAID "F\*\*\* YOUR SOFT LANDING"
Just when inflation was supposed to quietly crawl back into its cage:
WAR
STRAIT OF HORMUZ PROBLEMS
REFINERY PROBLEMS
OIL $100+
And then diesel walks into the room.
Diesel:
"Sup nerds."
RECORD PRICES.
And diesel isn't just Chad's lifted F-350 rolling coal outside Applebee's.
Diesel moves:
🚛 Trucks
🚜 Farms
🏗️ Construction
⛏️ Mining
🚢 Freight
🏭 Manufacturing
🚂 Rail
📦 Basically your entire Amazon addiction
So diesel goes:
📈
Truckers:
"Guess we're charging more."
Companies:
"Guess we're charging more."
Walmart:
"Guess we're charging more."
Consumer:
"BRO I ALREADY PUT GROCERIES ON KLARNA."
🤡 WARSH NOW HAS A SMALL PROBLEM
Normally:
Economy 💩
Fed:
CUT RATES
Stocks:
🚀🚀🚀🚀
Everyone:
🥳🥳🥳
Except now imagine:
GDP 📉
Jobs 📉
Consumer 📉
BUT
Oil 📈
Diesel 📈
Inflation 📈
Warsh:
"...well, shit."
Because cutting rates into another inflation shock is how you unlock the secret DLC:
🎮 STAGFLATION
Low growth.
High inflation.
Expensive money.
Everyone miserable.
Achievement unlocked.
🏠 MEANWHILE THE 10-YEAR IS OUT HERE COMMITTING WAR CRIMES AGAINST MORTGAGES
10Y:
📈
Mortgage rates:
📈
Homebuyer:
"I'd like to purchase this charming 1,600 sq ft starter home."
Realtor:
"$687,000."
Homebuyer:
"Excellent. What's the payment?"
Bank:
"$4,900."
Homebuyer:
"I WILL SIMPLY DIE."
🏢 CORPORATE AMERICA GETS TO PLAY TOO
Company borrowed money at 3%.
Debt matures.
Company:
"Hello bank, I'd like another loan."
Bank:
"Absolutely."
Company:
🥰
Bank:
"8%."
Company:
💀
CFO:
"Johnson."
Johnson:
"Yes?"
CFO:
"Remember those 800 employees?"
Johnson:
"Yes."
CFO:
"We don't anymore."
👨‍💼 AND THIS IS WHERE THE RECESSION THESIS GETS INTERESTING
Consumer currently getting punched by:
🥊 Gas
🥊 Food
🥊 Insurance
🥊 Housing
🥊 Credit cards
🥊 Auto loans
🥊 Energy
Eventually Consumer says:
"Perhaps I don't need another $1,400 iPhone."
Apple:
🤨
Consumer:
"Perhaps I don't need a new car."
Ford:
🤨
Consumer:
"Perhaps I'll cook tonight."
Restaurant:
🤨
Revenue:
📉
Margins:
📉
Hiring:
📉
Layoffs:
📈
Consumer spending:
📉📉
Revenue:
📉📉
Layoffs:
📈📈
Congratulations.
You have discovered the:
🔄 RECESSION FEEDBACK LOOP
🚨 BUT WAIT, BEARS 🚨
Before every 🌈🐻 on Reddit begins furiously calculating how many Lambos their SPY puts are going to buy:
THE ECONOMY HASN'T ACTUALLY BROKEN YET.
That's important.
People are still working.
People are still spending.
Businesses are still investing.
AI capex is enormous.
Economic activity has remained surprisingly resilient.
So:
"RECESSION GUARANTEED TOMORROW"
is currently:
🌈🐻 FAN FICTION.
The economy has been eating punches like prime Mike Tyson.
🧠 HERE'S THE ACTUAL BATTLE
Two gigantic forces are currently arm wrestling.
🔴 CORNER #1: INFLATION / FISCAL / ENERGY CHAD
Oil 📈
Diesel 📈
Inflation 📈
Deficits 📈
Treasury issuance 📈
Term premium 📈
Result:
10Y 📈📈📈
🔵 CORNER #2: RECESSION CHAD
Jobs 📉
Consumption 📉
GDP 📉
Inflation eventually 📉
Fed cuts ✂️
Institutions panic-buy Treasuries
Result:
10Y 📉📉📉
Right now:
🔴 INFLATION/FISCAL CHAD IS WINNING.
But here's where things could get hilarious.
The 10-year keeps climbing.
5%.
5.5%.
6%.
Mortgage rates:
💀
Corporate refinancing:
💀
Commercial real estate:
💀
Consumer credit:
💀
Stock valuations:
👀
Federal interest expense:
😬
Eventually the high rates themselves potentially cause:
ECONOMY.EXE HAS STOPPED RESPONDING
Then suddenly the bond market goes:
"WAIT."
"Growth is collapsing?"
"Unemployment is rising?"
"Inflation might finally collapse?"
"WARSH CUTS INCOMING?"
And every institution that was dumping Treasuries suddenly:
BUY BUY BUY BUY BUY
Bond prices:
🚀🚀🚀🚀
Yields:
📉📉📉📉
CNBC narrative changes overnight from:
"INFLATION IS BACK"
to:
"HOLY SHIT ARE WE IN A RECESSION?"
🧮 THE WHOLE THING IN ONE HIGHLY REGARDED EQUATION
Money printer + fiscal deficits + Treasury issuance + energy shock + inflation
⬇️
Bond investors demand more yield
⬇️
10Y 🚀
⬇️
Mortgages + corporate debt + consumer credit 🚀
⬇️
Economy gets progressively kicked in the nuts
⬇️
Consumer eventually stops consuming
⬇️
Businesses stop businessing
⬇️
Jobs stop jobbing
⬇️
GDP stops GDPing
⬇️
Warsh:
"Gentlemen, perhaps we have cooked this motherf\*\*\*er."
⬇️
Fed cuts
⬇️
Treasuries 🚀
⬇️
CNBC:
"NOBODY COULD HAVE SEEN THIS COMING"
Reddit:
WE LITERALLY POSTED ABOUT IT 11 MONTHS AGO
🦍 TL;DR OF THE TL;DR
Fed controls the short end.
Bond market controls the long end.
Government needs gigantic amounts of money.
Bond market wants more yield to provide it.
Energy shock is making inflation harder to kill.
Higher yields themselves tighten the economy.
The economy has NOT broken yet.
But the pressure gauge is rising.
The real question isn't:
"WHEN RECESSION?"
It's:
WHAT BREAKS FIRST?
Inflation?
Oil?
Consumer?
Employment?
Credit?
Housing?
Treasury market?
Or somehow absolutely nothing breaks and America once again performs the greatest economic shitpost in recorded history:
🇺🇸🦅 SOFT LANDING 2: ELECTRIC BOOGALOO 🦅🇺🇸
WARSH somehow sticks the landing.
SPY goes to infinity.
Bears return to hibernation.
Your neighbor refinances his F-250 for 96 months.
Housing somehow gets even more expensive.
CNBC declares the consumer "resilient" for the 847th consecutive day.
And everyone who spent six months learning about Treasury term premium goes straight back to buying calls on companies with no earnings.
GODSPEED, REGARDS. 🫡🦍

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