Tag: 10-Year Treasury Yield

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When Falling Yields Aren’t a Bull Signal

Key Points

  • Brent Crude futures climbed to $114.55 per barrel as conflict in the Persian Gulf intensifies.
  • 10-year Treasury yields fell sharply to below 5.0%.
  • Mega-cap stocks were sold, but the broad-based S&P 500 equal-weighted index rallied on the prospect of lower funding costs.
  • Gold, copper and other energy metals are experiencing a broad sell-off despite falling long-term rates.

Brent Crude futures (Dec ’26) have climbed to $114.55/barrel, headed for another test of resistance from the March and April highs at $118/barrel.

Brent Crude Futures (ICE December'26)

Average US diesel prices are above $6.00 per gallon.

EIA US Diesel Prices

Jim Bianco argues that we are already at the equivalent of $200/barrel crude. Diesel crack spreads are as high as $86.90 per barrel, up from $33/barrel in February, but refiners must cover shipping costs of $35 to $38/barrel versus $1 to $ 2 per barrel before the war.

He says that consumers currently “bitch and moan” when they fill up the truck, but they still drive. Demand destruction is when they park the truck and walk.

Bond Market

10-Year Treasury yields fell below 5.0%, finding short-term support at 4.95%. The sharp fall signals increased investor demand for bonds—a bearish sign for stocks.

10-Year Treasury Yield

Yields on investment-grade and high-yield bonds are rapidly diverging.

The spread between the lowest investment-grade (Baa) and 10-year Treasuries has narrowed to 1.44%, near the 30-year low of 1.38% in November 2024. By contrast, the spread between high-yield bonds (CCC and lower) and 10-year Treasuries has widened to 12.57% from 9.89% at the end of August.

High-yield (CCC and below) & Baa Spreads

From Grant’s Daily:

“The U.S. leveraged finance market is showing classic late-cycle characteristics,” analysts at Moody’s warned late last month. “As financing conditions have grown more selective, the gap between stronger and weaker borrowers has widened.”

A lasting downshift in market sentiment could prove costly to firms sitting on the lower rungs of the speculative-grade ladder. Firms rated Caa and below face $27 billion in debt maturities over the next year and $91 billion by fall 2028, the rating agency warned Tuesday.

Stocks

The Philadelphia Semiconductor Index (SOX) broke support at 11,000. Another bearish sign for stocks.

Philadelphia Semiconductor Index (SOX)

The S&P 500 is testing support at 7600. A lower Trend Index peak warns of secondary selling pressure. A breach of 7500 would warn of a correction to test 7000.

S&P 500

Mega-cap technology stocks are under selling pressure, with the Roundhill Magnificent 7 ETF1 (MAGS) testing support at 70.

Roundhill Magnificent 7 ETF (MAGS)

However, the broader-based S&P 500 equal-weighted index ($IQX) rallied on the prospect of lower interest rates.

S&P 500 Equal-Weighted IndexReuters:

A big week for US corporate earnings will be headlined by ​reports from three of the largest companies at the heart of the huge AI capital investment theme that has driven up equities.

Alphabet (GOOGL), Microsoft (MSFT), and Amazon (AMZN) — three of the so-called ​hyperscalers — will post results at a time investors are becoming wary of the risks of the spending on data centers.

The week will be critical in determining whether third-quarter results lived up to high expectations for US profit growth, with about one-third of S&P 500 companies reporting.

Dollar & Gold

The Dollar weakened as expectations of interest rate rises softened.

Dollar Index

Gold is testing primary support at $4,000 per ounce, driven by rising oil prices ahead of falling long-term rates.

Spot Gold

Energy Metals

Mining stocks for energy-related metals are under selling pressure.

Sprott Copper Miners ETF1 (COPP) is headed for a test of primary support between 35 and 32. Declining Trend Index peaks confirm selling pressure.

Sprott Copper Miners ETF (COPP)

Sprott Lithium Miners ETF1 (LITP) is in a steep downtrend. Declining Trend Index peaks, below zero, signal strong selling pressure.

Sprott Lithium Miners ETF (LITP)

Sprott Critical Materials ETF1 (SETM) has broken primary support at 30, with declining Trend Index peaks signaling strong selling pressure.

Sprott Critical Materials ETF (SETM)

Sprott Uranium Miners ETF1 (URNM) is also in a steep downtrend, with Trend Index peaks below zero indicating strong selling pressure.

Sprott Uranium Miners ETF (URNM)

Conclusion

The outlook for stocks is bearish. Falling 10-year Treasury yields are a bear signal.

Oil prices are rising, and stocks are falling as investors shift towards the security of bonds. Widening spreads for high-yield bonds warn of growing stress among low-grade corporate borrowers. Falling commodity prices warn that manufacturing demand will likely slow as a result of high energy prices.

Gold is testing primary support at $4,000 per ounce, pressured by rising oil prices and the conflict in the Persian Gulf. However, we remain long-term gold bulls and view the current weakness as an opportunity to accumulate.

Acknowledgments

Notes

  1. We analyze exchange-traded funds (ETFs) to determine market sentiment towards a specific sector, industry, or commodity. The analysis is not a recommendation to buy or sell, nor is it a commentary on the merits of the particular ETF.
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What’s Driving Bond Yields?

What’s driving bond yields higher?

Is it the war with Iran, rising crude oil and diesel prices, fertilizer shortages, tariffs, expanding government deficits, semiconductor shortages, or increased AI borrowing?

All of the above expand demand for credit, reflected in rising nominal GDP growth, which competes for a limited supply of available credit.

Nominal GDP & 10-Year Treasury Yield

Credit Supply

Credit supply isn’t growing at the same rate.

Foreign investment in US Treasuries has slowed. Japan and China have both shed more than $100 billion in the 6 months to August.

Foreign Holdings of US Treasuries

Total foreign holdings of US Treasuries fell by $155 billion over the last 6 months.

Foreign Holdings of US Treasuries

Increased holdings by the United Kingdom, Canada, Belgium, Luxembourg, and the Cayman Islands partly offset declines in Japanese and Chinese Treasury holdings. However, only Canada has a trade surplus with the US. Most of the balance reflects custodial accounts in major financial centers used by sovereign wealth funds, multinational companies, insurance companies, pension funds, and hedge funds engaged in highly leveraged Treasury market trades.

Norway’s $2.3 trillion sovereign wealth fund, the world’s largest, has also proposed significant cuts to its government bond holdings. US Treasuries are its largest bond holding, and will be cut by $80 billion to $135 billion in 2027, according to the proposal by fund manager Norges Bank. An increased allocation to non-government bonds would partly offset the decline, but overall exposure to the Dollar would fall.

In addition, Europe’s largest pension fund, the Dutch ABP, cut exposure to US Treasuries in the first quarter. (Reuters)

Bank credit growth is also slowing. The quarterly increase in loans, leases, and securities held by banks fell from $400 billion in Q1 to $200 billion in Q3.

Commercial Bank Credit: Loans, Leases, and Securities

Aggregate Demand

Activity, reflected by nominal GDP, is expected to accelerate in Q3.

The GDP price deflator jumped to 4.0% in Q2 of 2026.

GDP Implicit Price Deflator

The sharp increase reflects a 1.5% rise in Q2.

GDP Implicit Price Deflator

We expect at least a similar Q3 increase of at least 1.5%, taking the annual GDP deflator to 4.6% or more.

The Atlanta Fed GDPNow model projects that real GDP will grow at an annual rate of 3.6% in Q3.

Atlanta Fed GDPNow

That would increase annual growth to 2.1% over the four quarters, with nominal GDP rising to 6.7% or more.

Conclusion

If the Fed, under new Chair Kevin Warsh, lets market forces set interest rates, we expect the 10-year Treasury yield to rise above nominal GDP growth, which we expect to reach 6.7% in Q3 of 2026. That is the typical monetary policy path prior to 2000, before lax policy measures set the US on the path to the current debt-inflation standoff.

10-Year Treasury Yield & Projected Nominal GDP Growth

If the Fed changes tack and intervenes in the Treasury market by buying Treasury securities to suppress long bond yields, it will restore the imbalance and allow inflationary pressures to build.

In the first scenario, as the 10-year yield rises further, we expect demand to contract, stocks to fall, and the economy to go into recession. That would cause long-term yields to fall as nominal GDP growth slows. A new, more stable balance would then improve long-term growth.

In the second scenario,  the Fed introduces further QE, suppressing the 10-year yield as the supply of available bonds shrinks. Nominal GDP growth would accelerate as the gap widens, driving inflation higher. Stocks and Gold would rise until the Fed is forced to tighten monetary policy to curb inflation. This second path is unsustainable and would lead to higher volatility and more extreme boom-bust swings while long-term growth suffers.

Acknowledgments

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What’s Really Driving Treasury Yields?

Key Points

  • 10-year Treasury yields climbed to 5.3% in early October, up from below 4.0% in late February.
  • Central banks are hiking rates and lifting the yield curve.
  • QT by the ECB and Bank of Japan is increasing supply in bond markets.
  • A debt maturity wall and capital expenditure on AI data centers are increasing private debt issuance.

We all know what triggered the initial surge in long-term Treasury yields. The 10-year was trading below 4.0% on February 27 but jumped sharply after the US and Israel bombed Iran that weekend.

10-Year Treasury Yield

The new Fed Chair Kevin Warsh’s keynote speech at Jackson Hole on August 28 added further impetus. Warsh’s hawkish tone, though short on specifics, led the bond market to conclude that rate hikes were coming, with the 2-year Treasury yield jumping by nearly 70 basis points in the next 4 weeks.

2-Year Treasury Yield (CNBC)

Persistent inflation has given central banks little choice. Many are hiking rates, including the Fed, the ECB, the Bank of Japan, and even Australia’s RBA. One notable exception is the People’s Bank of China.

Does this mean that rates will soften if oil prices fall? If the conflict in the Persian Gulf were settled and oil flows returned to normal, oil prices would likely settle after inventories are restored, but are unlikely to return to pre-war levels. However, we attach a higher probability to a protracted war that could drag on for years, with oil prices remaining elevated.

In either case, we are unlikely to see another bout of QE, which drove the 10-year yield below 4.0% for more than a decade.

10-Year Treasury Yield & Fed QE

Central banks are still repairing their balance sheets (QT) after the last expansion, which will likely keep upward pressure on long-term yields for several years. The Bank of Japan (BOJ) has shed $3 trillion of securities since its pandemic peak, while the Fed shed $2.4 trillion under Jerome Powell before resuming purchases in December last year.

Central Bank Total Assets

The European Central Bank (ECB) has gone even further, shedding $4.3 trillion or 53% of its QE assets (blue line below) since mid-2022. The green total assets figure is distorted because the ECB revalues its Gold reserves to market prices at the end of each quarter.

ECB Total Assets

Both the ECB and BOJ are steadily reducing the securities on their balance sheets, increasing supply in bond markets and adding upward pressure on yields. The Fed under Warsh will likely resume its gradual downward path.

A notable exception is the PBOC, which has steadily expanded its balance sheet, adding close to $2 trillion since 2020. This highlights the extent of China’s economic problems. Despite a record trade surplus of $1.2 trillion, the PBOC continues to debase China’s currency to soften the impact of the domestic contraction.

PBOC Total Assets

Debt Maturity Wall

Adding fuel to the increased supply from central bank QT (apart from the PBOC) is the wall of private-sector debt maturities that will need to be rolled over in the next few years.

Debt Maturity Wall

Many corporations took advantage of record-low interest rates in the early 2020s to refinance at lower rates. That debt is now maturing and will need to be rolled over at much higher rates.

AI Financing

Hyperscalers need to spend $9.6 trillion between 2025 and 2032 to build 183 GW of data center capacity, according to estimates by Stijn Van Nieuwerburgh. Morgan Stanley estimates that more than half of the roughly $2.9 trillion required to meet hyperscalers’ incremental compute needs over 2025–2028 will come from outside capital (Morgan Stanley Research, 2025).

Falling Private Demand

“The cure for high prices is high prices.”

The abuse of the large captive investment market for government bonds, suppressing yields to artificial lows through QE, has reduced demand for traditional insurance annuities and pensions. Insurers and pension funds have adapted by increasing exposure to private debt, infrastructure, and alternative investments while reducing allocations to government bonds.

The chart below highlights the decline in France’s government bonds (OATS) held by domestic insurers and pension funds (green below), from about 25% in 2014 to less than 11%.

France: Government Debt Financing

Conclusion

Central bank QE has reduced investment demand for government bonds from traditional investors, such as insurers and pension funds, due to artificially low yields. The US Treasury is increasingly reliant on hedge funds to fund new issuance through highly leveraged repo-market trades.

A number of central banks are now shedding QE assets, increasing supply in bond markets. At the same time, many developed economies run large deficits, increasing government debt issuance. Capital expenditure on data centers and a large debt maturity wall have also increased private debt issuance.

Many central banks are hiking interest rates to curb inflation. It is unclear how long the war in the Persian Gulf and related oil shortages will last, adding to inflationary pressures.

Rising bond yields increase the cost of servicing government debt and drive up deficits, pushing bond markets towards a crisis.

The imbalance between debt supply and demand in bond markets is expected to maintain upward pressure on long-term yields. However, two factors could change this: (1) a steep decline in government deficits, financed through spending cuts or tax hikes; or (2) more central bank QE. Both seem unlikely, but desperate times may call for desperate measures.

Acknowledgments

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Brent at $104/barrel as S&P 500 Heads for 8000

Key Points

  • Brent rallied to $104 per barrel after testing support at $100 for several days.
  • The S&P 500 is at a new record high.
  • The 10-year Treasury yield held firm at 5.28% after a solid auction.
  • The Dollar Index signals a fresh rally after breaking resistance at 102.
  • Gold is headed for another test of $4,000 per ounce as oil and the Dollar strengthen.

Brent Crude Futures (ICE December'26)

Iran is widening its attacks to restrict the flow of crude through the Strait of Hormuz and exacerbate the shortage of tankers.

At least 12 tankers have been attacked in the Strait of Hormuz since 29 September, including multiple Very Large Crude Carriers (VLCCs). VLCC rates have hit around $1.3 million a day, up from $100K (13x) in 8 months.

Following the heightened attacks on tankers transiting the Oman Lane in the past few days, Iran has now attacked two stationary tankers: one near Qatar and one near the Fujairah ship-to-ship hub. (HFI Research)

Stocks

The S&P 500 recorded a new high, heading for a test of 8000.

S&P 500

Mega-cap technology stocks lead the way, with the Roundhill Magnificent 7 ETF (MAGS)1 breaking resistance at 70.

Roundhill Magnificent 7 ETF (MAGS)

Treasury Market

10-year Treasury yields eased slightly from 5.31% to 5.28%.

10-Year Treasury Yield

From Peter Boockvar:

The 10 yr note auction, with yields hovering around 24 year highs, was solid. The yield of 5.30% was almost 2 bps below the when issued pricing. The bid to cover of 2.77 was well above the one year average of 2.51 and that matches the highest since late 2014. Also, direct and indirect buyers took down 97.5% of the auction which is the most I’ve seen.

Bottom line, for whatever reason, likely the 24 yr highs in rates, brought out the buyers and resulted in a great auction. In response, the 10 yr yield has backed off to 5.27% from 5.31% just prior to the results….

The MOVE Bond Market Volatility Index retreated, easing liquidity concerns in financial markets.

MOVE Bond Market Volatility Index

Dollar & Gold

The Dollar Index strengthened above 102, warning of another advance.

Dollar Index

Gold weakened as oil and the Dollar strengthened, signaling another test of primary support at $4,000 per ounce.

Spot Gold

Energy metals are also being sold, with Sprott Uranium Miners ETF1 (URNM) breaking support at 50.

Sprott Uranium Miners ETF (URNM)

Sprott Lithium Miners ETF1 (LITP) broke support at 10.

Sprott Lithium Miners ETF (LITP)

Sprott Critical Materials ETF1 (SETM) is testing support at 28.

Sprott Critical Materials ETF (SETM)

Iron ore is also weak, testing support at $90 per tonne.

Iron Ore

However, Copper continues in a strong uptrend, heading for another test of resistance at $15,000 per tonne.

Copper

Conclusion

Volatility in crude oil and Treasury markets will likely be crazy over the next three weeks before the November 3 midterms.

Stocks are running on massive liquidity in financial markets. Even another rate hike would be unlikely to deter them — though that is unlikely.

We expect Gold to test support at $4,000 as oil and the Dollar strengthen. But these are short-term moves, and we remain long-term Gold bulls.

The risks are too high for us to venture back into long-term Treasuries, and we remain heavily weighted in cash and short-term financial assets which in our view offer a better risk-reward ratio.

Acknowledgments

Notes

  1. We analyze exchange-traded funds (ETFs) to determine market sentiment towards a specific sector, industry, or commodity. The analysis is not a recommendation to buy or sell, nor is it a commentary on the merits of the particular ETF.
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Something Has to Break

Key Points

  • The S&P Global US Composite flash PMI shot up to 58.4% for September.
  • 10-year Treasury yields jumped to 5.114%.
  • We expect 10-year yields to climb higher, causing a correction in stocks.
  • The S&P 500 retreated, heading for a test of support between 7500 and 7600.

The S&P Global US Composite flash PMI shot up to 58.4%, the fourth consecutive month of accelerating growth and the strongest expansion in private-sector activity since July 2021.

S&P Global Composite PMI

The move was echoed by a healthy rise in the European Union’s equivalent flash PMI to 53.1%.

S&P Global Composite PMI

The surge in economic activity boosted market expectations of further Fed rate hikes, with the 2-year Treasury yield jumping to 4.876% compared to the current Fed funds target range of 3.75% – 4.00%.

2-Year Treasury Yield

The 10-year yield broke through resistance at 5.0%, closing at 5.114%, the highest level in more than 20 years. We expect a retracement to test the new support level, but respect will likely confirm another advance. Our medium-term target is 6.0%.

10-Year Treasury Yield

The S&P 500 retreated to 7700 and is headed for a test of support between 7500 and 7600. A breach would signal a correction to test primary support at 7300.

S&P 500

The Outlook for Treasuries

The spread between the 10-year and 2-year Treasury yields is shrinking as in previous Fed rate-hiking cycles (red arrows below). A dip below zero typically precedes a recession. The dip below zero from 2022-2024 was an exception, caused by the unprecedented scale of fiscal and monetary stimulus during the pandemic.

10-Year Treasury Yield minus 2-Year Yield

The Atlanta Fed’s GDPNow model projects real GDP growth of 5.1% in the third quarter, a 3.6% increase from Q2.

Atlanta Fed GDPNow

Even without an increase in the GDP deflator, driven by rising energy prices, we expect nominal GDP to jump from an annual rate of 6.6% in Q2 to more than 10.0% in Q3.

10-Year Treasury Yield & Nominal GDP Growth

The strong divergence between nominal GDP and the 10-year Treasury yield would provide further stimulus to an already overheating economy, causing a sharp increase in inflation.

Conclusion

The Fed is trapped in an inflationary boom that will likely drive long-term yields much higher than 5.0%. Rising interest rates will increase the interest cost on the US Treasury’s $40 trillion debt, expanding the budget deficit above $2.0 trillion.

The Fed is constrained by its swollen balance sheet and will likely resist further QE to suppress long-term interest rates and assist the US Treasury.

Surging economic activity, compounded by crude oil and diesel supply shortages, is also expected to drive a sharp increase in inflation, adding to the Fed’s challenges.

Something has to break, and we are adopting a highly defensive posture, heavily overweight in Gold, short-term financial instruments, and defensive stocks with strong pricing power and stable income streams.

Acknowledgments

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Warsh Hikes While Trump Fumes

Key Points

  • The FOMC voted unanimously to hike the Fed funds rate by 25 basis points to a target range of 3.75% to 4.00%.
  • President Trump criticized the FOMC decision, demanding that the Fed slash interest rates to “1% or less” on Truth Social.
  • Backing a rate hike was a politically brave move by the new Fed Chair, Kevin Warsh, as it will likely sour his relationship with the President.
  • The Fed hike likely avoided a sharp spike in long-term Treasury yields as the bond market was growing restless over loose monetary and fiscal policy.

Fed Chair Kevin Warsh cemented his reputation as an inflation hawk, voting in support of a unanimous FOMC decision to hike the Fed funds rate by 25 basis points to a target range of 3.75% to 4.00%.

President Trump condemned the move, demanding on Truth Social that the Fed slash interest rates to “1% or less.”

“We are ‘carrying’ almost every country in the World, and that cannot go on any longer,” Trump wrote in a Truth Social post.

“LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!” he wrote. (CNBC)

Updated dot plot projections show a strong majority of Fed officials expect another rate hike this year. Warsh did not submit a projection, but 16 of 18 participants expected at least one more rate hike in 2026, of which 4 projected 2 hikes.

FOMC Dot Plot

The 2-year Treasury yield climbed to 4.73%, pricing in 3 further rate hikes.

2-Year Treasury Yield (CNBC)

10-year Treasury yields held firm at 5.0%.

10-Year Treasury Yield

A failure of the Fed to act would likely have caused a bond sell-off, with the 10-year yield spiking upwards, reflecting bond market disappointment with perceived lax monetary and fiscal policy.

Long-term yields will likely still rise, but at a more measured pace than if the Fed’s commitment to stable prices were in doubt.

The Fed Chair gave three factors that are driving long-term yields higher:

  1. The economy is strengthening and at close to full employment;
  2. Increased competition for capital as AI hyperscalers seek to fund capital spending; and
  3. Geopolitical instability.

He did not mention lax fiscal policy, with $40 trillion of federal debt and annual deficits approaching $2 trillion a year, which we consider a fourth factor driving higher yields.

Conclusion

We may have misread the new Fed Chair as a “political animal.” He has delivered on his commitment to fight inflation despite opposition from President Trump. In doing so, he has likely placated the bond market, which was driving long-term yields higher. We still expect long-term rates to rise, but at a more measured pace.

“The era of free money is definitely over,” Kim Crawford, fixed-income portfolio manager at JPMorgan Asset Management, told the Financial Times today. “The bond market is looking for discipline.”

We expect further rate hikes if the economy continues to grow faster than existing capacity allows, fueling increased inflationary pressure.

Credit growth above 4.0% is not consistent with low inflation. A 4.0% target would be consistent with the 2.3% projected real GDP growth and 1.7% inflation (below the Fed’s 2.0% target).

Bank Credit Growth

Acknowledgments

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US Diesel Hits a Record High

Key Points

  • Core CPI ticked lower to an annual rate of 2.4% in August, while headline CPI edged up to 3.4%.
  • However, rising producer prices warn of strong margin pressure that corporations will likely pass on to consumers through price hikes.
  • Energy prices are driving higher inflation, with diesel rising to a record $6 per gallon.
  • Houthi attacks on Saudi Arabia’s East-West Pipeline are expected to drive crude oil prices higher next week.
  • 10-year Treasury yields are testing resistance at 5.0%, while Gold softened to $4,350 per ounce.

Headline CPI edged up to an annual rate of 3.4% in August, while core CPI ticked lower to 2.4%.

CPI & Core CPI - Annual

For the month of August, headline CPI increased 0.40%, in line with expectations, while core CPI’s increase of 0.29% was higher than the expected 0.20%.

CPI & Core CPI - Monthly

CPI remains above the Fed’s target inflation rate of 2.0% but gives little warning of the expected inflation shock ahead.

Producer prices have risen 5.4% over the 12 months to August, warning of strong margin pressure that corporations will likely pass on to consumers through price hikes.

Producer Price Index (PPI)

Finished goods PPI reacts faster to higher energy prices, reaching an annual rate of 6.6% in August. While slower to react, Services PPI is also rising at 4.5%.

Producer Price Index (PPI): Goods & Services

Strong producer price rises are reflected in the ISM Non-Manufacturing (Services) survey. The Prices index climbed to 72.6%, the highest reading since July 2022, and the 21st consecutive month above 60%.

ISM Services Prices

Services Prices tend to lead US CPI inflation by 2 to 6 months, as shown in the longer-term chart below. The current divergence between ISM Non-Manufacturing Prices (blue) and CPI (red) warns of a sharp rise in CPI ahead.

ISM Services Prices

Energy prices are the primary driver of the current CPI spike, as in 2022 when energy prices soared 40% after Russia’s full-scale invasion of Ukraine, followed by a rise in CPI to 9.0%.

CPI & CPI Energy - Annual

Average US gasoline prices rose to $4.16 per gallon in September as crude prices climbed.

EIA US Gasoline Prices

However, distillates are taking the brunt, with average diesel prices rising to a record high of $6.00 per gallon.

EIA US Gasoline Prices

NEW YORK, Sept 10 (Reuters) – The U.S. national average price of diesel on Thursday surpassed $6 a ​gallon for the first time ever, according to price tracker GasBuddy, as the U.S.-Israeli war on Iran and Ukrainian attacks on Russia’s refineries have squeezed supply….

“Every truck, every delivery, every package, every grocery run just got more expensive,” GasBuddy analyst Patrick De Haan said ​on social media site X.

“Record diesel prices will impact every cargo, shipment, every delivery Americans are taking, and are likely to reignite inflation up and down the supply chain,” ​he said.

“In a span of five months, we’ve seen diesel prices more than double. It has rocked our cash flows,” said Alex Ryan, energy director at Kansas-based fuel supplier Oasis Energy. “There’s gotta be a tipping point, I just don’t know when or where it’s going to be,” he said….

U.S. diesel inventories stand ​13% below their five-year ⁠average, the Energy Information Administration said, at 106.3 million barrels. Stocks rose last week as refiners ran plants at full tilt to capture strong margins.

The U.S. diesel crack spread , a measure of refining margins, surged to a record high of $112.17 a barrel on Thursday, LSEG data showed.

U.S. distillate inventories are near multi-decade lows for this time of year, even with refiners operating ⁠at high ​utilization rates, said Linda Giesecke, director of refined products at Rapidan Energy. It will likely be difficult ​to rebuild stockpiles over the next two months as seasonal refinery maintenance gets underway.

Brent crude futures rose to $107 per barrel last week, before retracing late Friday to $104.60, testing new support at $100 per barrel.

Brent Crude Futures (ICE November'26)

Talk of new peace talks is meaningless, but the Trump administration is still able to manipulate oil futures by spamming the media. Iran is likely to increase its attacks on oil transit routes in the Middle East ahead of the November midterms. From Reuters:

“Some headlines of possible new talks in the Middle East are weighing ​moderately on oil prices today,” said UBS energy analyst Giovanni Staunovo. “I keep seeing near-term risks to the upside for oil prices, but we should expect ongoing high price volatility ​too.”

In a further development for Riyadh, satellite imagery showed smoke on Thursday in the vicinity of Saudi Arabia’s East-West Pipeline, vital for the kingdom to divert its crude exports away from Hormuz.

As more reporting said a pumping station on the pipeline had been damaged by Iran-affiliated militants, prices stayed lower.

“It’s surprising the oil market remains down in light of reporting that Houthi rebels attacked the East-West Pipeline, which ​would impact 7 million barrels of crude,” said Andrew Lipow, president of Lipow Oil Associates.

“Repairing a pumping station would require a lot more than repairing a break in the ​pipeline,” Lipow said.

Stocks, Treasuries & Gold

The S&P 500 continues to test short-term support at 7600. A breach would signal a secondary correction to test support at 7000.

S&P 500

The bond market is voting with its feet. 10-year Treasury yields are testing resistance at 5.0% ahead of next week’s FOMC meeting. Many pundits are projecting a rate hike on September 16 because of inflationary pressure. Still, the new Fed Chair Kevin Warsh would have to be really dumb to risk offending President Trump with a rate hike ahead of the midterms.

10-Year Treasury Yield

We expect the Fed to hold off on another rate hike at least until December, but that is likely to cause a strong backlash from the bond market, with the 10-year rising strongly above 5.0%.

We expect Gold to soften as the war in the Persian Gulf continues, testing support at $4,000 per ounce, but remain long-term bullish on its prospects.

Spot Gold

Conclusion

We expect rising energy prices to drive higher inflation over the next six months.

Rising long-term Treasury yields will likely be bearish for stocks.

Gold is expected to soften for another test of support at $4,000 per ounce as the war in the Middle East and crude oil shortages intensify. However, we remain long-term bullish on Gold due to rising fiscal deficits by G7 economies, coupled with strong Gold buying by central banks and private investors, especially in China, as the fiscal outlook deteriorates.

Acknowledgments

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4 Key Takeaways for the Week

Key Points

  • Long-term Treasury yields climbed after the Fed kept rates unchanged.
  • The Japanese Yen is weakening as the Bank of Japan slow walks rate hikes.
  • Gold absorbs selling pressure as long-term rates rise.
  • China’s economy is slowing.

Treasury Market

The bond market has been anticipating a rate hike. This has been signaled since the 2-year Treasury yield broke above the Fed funds target range in March 2026.

2-Year Treasury Yield & Fed Funds Target (Upper Limit)

The FOMC voted to keep the Fed funds rate unchanged, with a target range of 3.5% to 3.75%. There were 3 dissenting votes, calling for a rate hike. The new Fed Chair, Kevin Warsh, is encouraging opposing views, and we can expect more dissent in the future. Warsh has also avoided forward guidance, which is likely to increase volatility in the bond market and consequently the term premium.

10-year Treasury yields climbed to 4.745% on Friday, reflecting market concern that the FOMC is not taking a more hawkish stance on inflation.

10-Year Treasury Yield

GDP grew at 6.5% over the 12 months to June, suggesting that the 10-year yield needs to rise by at least 175 basis points if the Fed is serious about containing inflation. Long-term interest rates below nominal GDP growth (the rate of return on new capital investment) encourage rapid credit growth, with demand expanding faster than output.

10-Year Treasury Yield & Nominal GDP Growth

Japan & the Sovereign Bond Market

Japan’s GDP grew by 3.6% over the 12 months to March 2026. The 10-year JGB yield is 2.8%, indicating that monetary policy remains stimulative, but less so than the US.

10-Year Treasury Yield & Nominal GDP Growth

The Bank of Japan kept its policy rate at 1.0% at last week’s meeting despite an upturn in CPI to 1.7%. The weakening Yen drives higher inflation.

Japanese CPI Inflation

The low BOJ policy rate and ongoing bond purchases aimed at suppressing long-term JGB yields undermine the currency. The Yen has steadily weakened, breaking above 160 against the Dollar in June 2026 to reach its highest level in 39 years. Japan’s Ministry of Finance intervened on Thursday to support the Yen, driving the exchange rate to 157 against the Dollar. However, the effect of these MoF interventions is short-lived because of BoJ policy.

Japanese Yen

Rising long-term yields in sovereign bond markets reflect growing concern over sovereign debt levels and the risk of fiscal dominance. When central bank policy is dominated by government bond markets’ need for support, with lower interest rates prioritized above containing inflation, the currency’s purchasing power is eroded, as in Japan.

The US 30-year Treasury yield has climbed to 5.275%, reflecting concerns over currency debasement.

30-Year Treasury Yield

The Japanese JGB yield is lower at 3.98%, but this reflects sizable ongoing QE by the Bank of Japan aimed at suppressing long-term rates.

30-Year JGB Yield

The Bank of Japan has higher debt levels relative to GDP than the UK and should theoretically trade at a higher yield. The difference in the 30-year Gilt yield lies in central bank monetary policy: the Bank of England is steadily shrinking its balance sheet, while the BoJ is actively buying JGBs in the secondary market to suppress yields.

30-Year UK Gilts Yield

Dollar & Gold

Rising short-term yields are strengthening the Dollar, with the 1-Year Treasury yield gaining more than 50 basis points in the last 6 months.

1-Year Treasury Yield (CNBC)

Gold has softened considerably from its peak of $5,500 per ounce and has been testing primary support at $4,000 over the past 8 weeks.

Spot Gold

Gold ETF inflows slowed in the first half of 2026 but remained positive, driven by continued inflows into Asian funds. North America experienced an outflow of $7.7 billion, European inflows slowed to $3.2 billion, while Asia recorded a strong inflow of $12 billion.

Gold ETF Flows

Average daily trading volumes surged to a record $488 billion in the first half of 2026.

Gold Average Daily Trading Volumes

OTC trading, led by the LBMA, averaged US$249bn/day, substantially above 2025 levels and underscoring the depth of institutional participation. Exchange-traded volumes also jumped, reaching US$227bn/day – 22% higher than the 2025 average – supported by elevated investor activity. Meanwhile, global Gold ETF trading averaged US$12bn/day – up 73% from 2025 – fueled primarily by robust trading in US funds as investors increasingly turned to Gold amid heightened macroeconomic and geopolitical uncertainty.

Comex futures net longs increased to 538 tonnes, up 16% since May, and the highest month-end level since January despite a weakening gold price. A closer look shows retail participation (non-reportable net longs declined in June, while other reportables, which capture large trades outside the managed money category, were up 16% from May. Managed money net longs remained broadly stable, declining by just 43 tonnes year-to-date. Again, H1 investor behavior differed: retail positioning largely tracked short-term price movements while larger traders’ positions have, in general, stayed stable since mid-March. (WGC)

Comex contracts standing for delivery jumped to 13,123 in July from 8,838 in May, and a 9.0% increase over July last year.

Spot Gold

China

The Chinese NBS Manufacturing PMI fell to 49.2 in July, down sharply from 50.3 in June. Values below 50 indicate a contraction in the manufacturing sector.

China: NBS Manufacturing PMI

The OECD Composite Leading Indicator for China fell to 98.6 in June, below its long-term average of 100, signaling a contraction.

OECD: China Composite Leading Indicator

The RBA’s activity indicators for China show industrial production is holding up, boosted by record exports. However, real retail sales growth has stalled, while fixed asset investment has contracted sharply following Trump’s tariff blitz last year.

OECD: China Activity Indicators

Household credit growth (purple below) has also stalled. Business credit has taken up the slack, but government credit growth is also contracting.

OECD: China Total Social Financing

Conclusion

10-year US Treasury yields jumped to 4.745% after the Fed kept its funds target range at 3.5%-3.75%, reflecting bond market concerns over inflation.

The new Fed Chair’s strategy is to keep short-term rates low and allow long-term rates to rise, to slow the rate of demand growth in the economy and curb inflation. However, nominal GDP is growing at an annual rate of 6.5%, which means that 10-year Treasury yields would need to rise by 175 basis points to keep inflation in check. An increase to 6.5% would likely cause a sharp contraction in stocks.

Japan’s Ministry of Finance has intervened to support the Yen. However, the effects will likely be short-lived, as the Bank of Japan continues to maintain stimulative monetary policy, which fuels inflation and undermines the currency.

Rising long-term sovereign debt yields reflect bond market concerns over rising sovereign debt and the risk of fiscal dominance, as in Japan, where the central bank has prioritized maintaining an orderly bond market above price stability. Erosion of the currency purchasing power is the inevitable outcome.

Gold has found strong support at $4,000 per ounce, with long-term investors prepared to wait out the turmoil in the Middle East. Demand from Asian investors has been particularly strong, but could be undermined if China goes into recession.

China’s economy shows increasing signs of contraction, precipitated by a decline in business investment following President Trump’s 2025 tariff attack. Household credit and real retail sales have stalled, and the NBS Manufacturing PMI fell to 49.2, signaling a contraction. Higher fuel prices would be an added headwind that could tip the economy into recession.

Acknowledgments

Posted on

War, Inflation & Gold to the Moon

Key Points

  • The war in the Persian Gulf is hotting up, with both sides trading missile strikes and threatening to blockade shipping.
  • Brent Crude rose to $85.40 per barrel.
  • Crude and finished product inventories are declining, increasing upward pressure on gasoline and diesel prices.
  • Interest rates are rising in expectation of higher inflation.
  • The Dollar is rising in expectation of higher rates.
  • Gold and commodities face increased selling pressure as the Dollar strengthens.

DUBAI/WASHINGTON/CAIRO, July 13 (Reuters) – The U.S. military carried out a third consecutive night of strikes against Iran on Monday and two tankers came under ​fire in the Strait of Hormuz, after President Donald Trump said the United States was reinstating its blockade of Iranian shipping in the Gulf and would ensure that the strategic waterway stayed open — for a fee.

….Soon after, the United Arab Emirates Ministry of Defense said Iranian cruise missiles struck two Emirati oil tankers, the Mombasa and Al Bahiyah, while transiting the southern lane of the strait in Omani territorial waters, killing one crew member and injuring eight others.

The ​United Kingdom Maritime Trade Operations agency said a tanker had been hit by an unknown projectile while traveling 40 nautical miles northeast of Oman’s Qalhat and that all crew were safe.

“The Hormuz Strait is OPEN, and will remain OPEN, with or ⁠without Iran. We are reinstating THE IRANIAN BLOCKADE,” Trump had said earlier on Monday on Truth Social.
“The U.S.A. will be, from this point forward, known as ‘THE GUARDIAN OF THE HORMUZ STRAIT’, but as such, and as a matter of FAIRNESS, will be reimbursed, ​at the rate of 20% on all cargo shipped.”

….The UN’s shipping agency pushed back against Trump’s proposal, saying it opposes any fees for straits used in international navigation and stressing that there is no legal basis for introducing mandatory tolls on strait transits.

….Iran’s state TV cited the Iranian army as saying that it targeted a “hostile” U.S. vessel with cruise missiles and U.S. facilities and equipment in ​Kuwait with drones. Iranian media also said the Revolutionary Guards shot down a U.S. MQ-1 drone over Hormuz, while sirens sounded early on Tuesday in Bahrain – home to another U.S. military base.

Brent Crude (September futures) jumped to $85.40 per barrel.

Brent Crude Futures (ICE September'26)

The Strategic Petroleum Reserve (SPR) fell to 319.5 million barrels on July 3, a decline of 6 million barrels for the week.

EIA Strategic Petroleum reserve (SPR)

Overall crude stocks, including SPR, declined to 1.517 billion barrels, the lowest level in 23 years.

EIA Crude & Petroleum Products Inventories (incl. SPR)

Stocks of Gasoline (blue) and Diesel (brown) are close to their floor of 200 million barrels and 100 million barrels, respectively.

EIA US Gasoline & Distillate Inventory

Gasoline prices declined to a US average of $3.777 per gallon by July 6.

EIA US Gasoline Prices

Diesel prices also softened to $4.578 per gallon.

EIA US Diesel Prices

However, the 3-2-1 crack spread3 widened to $62.17 per barrel, indicating that refiners are taking advantage of low finished product inventories to widen their margins. However, there is speculation that crude futures prices are being distorted, and refiners are paying more than the quoted price per barrel to secure supplies.

Energy Channel: 3-2-1 Crack Spread

The Dow Jones Industrial Average is tentative, with three red candles over the past five days, and a fall below 52,000 would signal a correction.

Dow Jones Industrial Average

Financial Markets

2-year Treasury yields jumped to 4.29%, more than 50 basis points above the target range for the Fed funds rate. Financial markets are anticipating higher crude prices to increase inflationary pressure, forcing the Fed to raise rates.

2-Year Treasury Yield (CNBC)

The Chicago Fed National Financial Conditions Index continues its downtrend, indicating ample liquidity in financial markets.

Chicago Fed National Financial Conditions Index

However, Bitcoin1 is testing primary support at 60,000, warning that financial markets are becoming risk averse. A fall below support would warn of a sharp contraction in liquidity in financial markets.

Bitcoin (BTC)

Treasury Markets

10-year Treasury yields jumped to above 4.6% in anticipation of higher inflation and higher interest rates. A breakout above 4.7% would offer a target of 5.0% — a third rail for the economy.

10-Year Treasury Yield

Dollar & Gold

The Dollar Index rallied in expectation of higher interest rates.

Dollar Index

The stronger Dollar triggered another Gold test of primary support at $4,000 per ounce. However, rising Trend Index troughs below zero indicate buying pressure at the support level.

Spot Gold

Energy Transition

The strong Dollar is also causing a sell-off in energy transition metals.

Sprott Uranium Miners ETF2 (URNM) is testing primary support at 50. Declining Trend Index peaks below zero warn of strong selling pressure.

Sprott Uranium Miners ETF (URNM)

Sprott Copper Miners ETF2 (COPP) crossed below its 50-week moving average, indicating another test of primary support at 32.

Sprott Copper Miners ETF (COPP)

Sprott Lithium Miners ETF2 (LITP) is testing primary support at 11.

Sprott Lithium Miners ETF (LITP)

Sprott Critical Materials ETF2 (SETM) has broken primary support at 30. A follow-through below the previous week’s low would confirm a target of 20.

Sprott Critical Materials ETF (SETM)

Conclusion

We expect a steep rise in crude prices. Lower inventory levels indicate there are fewer reserves to cushion the impact of a supply shortage. Falling gasoline and diesel inventories warn of a sharp price rise ahead.

Interest rates are rising in anticipation of higher inflation, fueled by energy prices, which in turn increases support for the Dollar.

The strong Dollar increases selling pressure on precious metals and commodities such as uranium, copper, lithium, and critical minerals.

High inflation may reduce speculative demand for Gold in the short-term because of the likely increased carrying cost, but it increases investment demand for the metal as an inflation hedge. What will light the afterburners, however, is if the Fed suppresses interest rates to support the Treasury market.

Chinese demand is the largest driver of Gold prices in the long term, and low prices will likely trigger an increase in buying, both through official channels and via backdoor non-monetary Gold purchases.

Acknowledgments

Notes

  1. Cryptocurrencies are the highest-risk asset class, and we analyze Bitcoin (BTC) solely to identify risk sentiment in financial markets. Our analysis is not a recommendation to buy or sell BTC, nor is it a commentary on the merits of cryptocurrency.
  2. We analyze exchange-traded funds (ETFs) to determine market sentiment towards a specific sector, industry, or commodity. The analysis is not a recommendation to buy or sell, nor is it a commentary on the merits of the particular ETF.
  3. The 3-2-1 crack spread is calculated by subtracting the price of 3 barrels of crude from the sum of 2 barrels of gasoline and 1 barrel of diesel. The result is then divided by 3 to reflect the refiner’s gross profit per barrel of crude.
Posted on

IRGC Maintains its Stranglehold on US Treasury Yields

Key Points

  • The IRGC warns shipping that alternative routes not mandated by Tehran were “unacceptable and completely dangerous.”
  • A cargo ship on an alternative route near the coast of Oman is struck by a projectile believed to be a drone.
  • US aircraft retaliated with an attack on Iran’s coastal radar and missile sites.
  • 10-year Treasury yields are falling in response to low oil prices.
  • However, Core PCE figures for May warn that inflation is spreading across the broader economy.
  • Gold rallied above primary support at $4,000 per ounce.

Iran’s Revolutionary Guards are tightening control over shipping passing through the Strait of Hormuz, forcing ships to follow their advised route or face the consequences.

From the Financial Times:

At least four tankers have been turned back by Iran while attempting to exit the Strait of Hormuz on Thursday, as Tehran appeared to challenge an evacuation route issued by the International Maritime Organization.

The IMO on Tuesday said that after “discussions with all parties” it had established a safe evacuation corridor hugging the Omani coast for ships and seafarers that had been stuck in the Gulf for more than 100 days.

But the Blue Star I, SG Pegasus, Azumasan and Omega Trader either made a U-turn or changed course from the IMO’s route on Thursday, according to ship tracking data. Analysts said the diversions were likely to have been made after instructions from Iran’s Islamic Revolutionary Guard Corps, which said routes not mandated by Tehran were “unacceptable and completely dangerous.”

That setback comes one day after 62 vessels managed to traverse the strait, according to data from Windward, the best single-day showing since hostilities commenced on Feb. 28.

Later, an IRGC drone attack was reported on a cargo ship traveling close to the coast of Oman.

LONDON/MAMANA/DUBAI, June 25 (Reuters) – The U.N. International Maritime Organization paused its operation to escort ships through the Strait of Hormuz on Thursday after a vessel reported an attack, reigniting concerns about ‌whether a preliminary deal to end the Iran war will hold.

The cargo ship said it was hit close to Oman by a projectile, British navy agency UKMTO said, hours after Tehran warned vessels against taking routes that it had not approved.

Two U.S. officials told Reuters that Iran had fired on the ship, while Iran’s Persian Gulf Strait Authority, which Tehran established to manage requests for ships to travel through the strait, said vessels outside routes it has set will ​not be guaranteed safe passage.

“Consequences arising from passage through unauthorized routes shall be the responsibility of the owner, operator, and vessel commander,” the Iranian authority said.

The US military retaliated with airstrikes on Friday:

WASHINGTON/DUBAI, June 26 (Reuters) – The U.S. military attacked Iran on Friday in response to an Iranian drone strike on a ‌cargo ship in the Strait of Hormuz, with each country accusing the other of violating terms of a ceasefire agreed on last week.

U.S. Central Command said aircraft struck missile and drone storage locations and coastal radar sites, and a U.S. official reported the operation had concluded. Iran said a projectile struck the area around a pier in Sirik in southern Iran, and that Iranian naval forces responded by striking U.S. military targets in the region.

Brent Crude futures (Aug’26) fell 2%, however, on news that Israel and Lebanon had signed an interim ceasefire agreement while terms of a broader agreement are negotiated.

Brent Crude Futures (ICE August'26)

JERUSALEM/BEIRUT/WASHINGTON, June 26 (Reuters) – Israel and Lebanon signed a framework agreement in Washington on Friday following several days of talks to secure an end to fighting between Israel and Iran-backed Hezbollah militants, though ‌both sides framed the deal as an initial step.

Lebanese Ambassador Nada Moawad and her Israeli counterpart Yechiel Leiter signed the trilateral document with the U.S. at the State Department in Washington, providing few details.

Israeli Prime Minister Benjamin Netanyahu said the agreement allows Israeli forces to continue to occupy southern Lebanon if Hezbollah does not disarm.

PCE Inflation

Headline PCE inflation jumped to 4.1% for the 12 months to May 2026, while the Core PCE index, excluding Food and Energy, rose to 3.4%. The rising Core index indicates that inflation is no longer affecting just energy-related items, but is spreading into the broader economy.

PCE & Core PCE

The monthly increase for May was even higher at annualized rates of 5.4% and 3.8% for Headline and Core PCE, respectively.

PCE & Core PCE Inflation - Monthly

PCE for Energy remained elevated at 4.03% for May, an annualized rate of 48%, but we expect it to decline in June.

PCE Energy Inflation

However, higher fuel prices are now baked into supply chain costs and will likely persist for the next 3 to 6 months before inflationary pressures ease. PCE for Services, excluding Energy and Housing, increased at an annualized rate of 6.3% in May, indicating that inflationary pressures are spreading across the broader economy.

PCE Services Inflation

The spread of inflation across the broader economy increases pressure on the Fed to raise interest rates to slow the economy and halt the spread.

Treasury & Financial Markets

10-year Treasury yields are falling sharply in response to lower oil prices, with expectations of lower inflation running ahead of the supply chain lag.

10-Year Treasury Yield

2-year Treasury yields also eased to 4.12% but remain well above the Fed funds target range of 3.5%-3.75%, with at least one 25-basis-point rate hike expected this year.

2-Year Treasury Yield (CNBC)

Bitcoin1 continues testing primary support at 60,000. A breach would signal another decline, signaling a hard shift in financial markets toward risk-off.

Bitcoin (BTC)

Stocks

The S&P 500 lost ground for the fourth week, while declining Trend index peaks indicate secondary selling pressure, warning of a correction to test 7000.

S&P 500

The Magnificent 7 mega-cap stocks are leading the sell-off, with the Roundhill Magnificent 7 ETF (MAGS) headed for a test of primary support at 55. One of the key signals of the final stage of a bull market is when former leading stocks no longer participate in the advance.

Roundhill Magnificent 7 ETF (MAGS)

Dollar & Gold

The US Dollar Index broke through resistance as the oil price fell, but is now retracing to test its new support level. Respect would signal an advance with a target of 104.

Dollar Index

Gold recovered above primary support at $4,000 per ounce, buoyed by Dollar weakness and declining Treasury yields, which reduce the opportunity cost of holding Gold and Silver.

Spot Gold

Silver has also retraced to test its former support level at $60 per ounce.

Spot Silver

The decline in the broad DJ-UBS Commodity Index since March 2026 coincides with the steep rise in 10-year US Treasury yields. Rising long-term interest rates increase the opportunity cost of holding non-yielding commodities and precious metals.

DJ-UBS Commodity Index

Conclusion

The uptrend in 10-year Treasury yields has reversed amid falling oil prices and will likely strengthen demand for commodities and precious metals, provided crude oil prices remain low.

Iran’s Revolutionary Guards are keeping tensions in the Strait of Hormuz simmering. Not enough to spark a major conflict with the US, but sufficient to keep shipping in the Strait of Hormuz under their control. The US continues to deplete its Strategic Petroleum Reserve to alleviate the supply shortage and keep prices low, but this makes it more vulnerable to further threats to restrict the flow of oil through the Strait.

President Trump would be happy for negotiations with Iran to be drawn out, provided that the Strait of Hormuz remains open to shipping in the interim. But the Iranians are aware that their leverage expires with the November midterm elections, and we can expect ongoing threats to close the Strait. The path of crude oil prices is therefore difficult to predict.

We expect a long-term secular uptrend in Gold and Commodities relative to the Dollar. This is based on CBO projections that federal debt (held by the public) relative to GDP will exceed its post-WWII high of 106% before 2030 and expand to 175% of GDP by 2056.

CBO Projections of Debt Held by the Public as a Percentage of GDP

Aside from default, the only solution to the debt spiral is to suppress interest rates and allow inflation to run hot, so that GDP expands faster than federal debt, as in the 1950s to 1970s.

However, the budget deficit is running at close to 6.0% of GDP, and will likely expand further as the US invests in critical supply chains and ramps up defense spending, so even suppressing interest rates is unlikely to be sufficient.

CBO Projected Federal Deficit as a Percentage of GDP

 

Acknowledgments

Notes

  1. Cryptocurrencies are the highest-risk asset class, and we analyze Bitcoin (BTC) solely to identify risk sentiment in financial markets. Our analysis is not a recommendation to buy or sell BTC, nor is it a commentary on the merits of cryptocurrency.
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