You Can Never, Never, Ask Me to Stop Printing

The long end of the curve continues to see rates spike higher. Currently, rates on the 10-Year Note are at eighteen month highs, with multi-decade highs lingering above at 5%. From my perch the consensus is still expecting some type of "TACO" by Trump and/or magical intervention from Bessent to ameliorate the situation and see rates dip lower back into the range, at least. Simply put, even those who are not particularly bullish on bonds are not necessarily expecting a further, substantial spike higher in rates on the long end from here.

And that begs the question of whether that very scenario is now more viable than ever. 

If you have been following my work for years, then you know that I continue to be in that camp, with a long end implosion being the quintessential "pain trade" for several generations of investors who only know a benign, PG-rated bond market and not the wild beast it became during the inflation amid various monetary and fiscal blunders of the 1970s. 

Putting all conjecture aside, we are not getting out of this inflation without serious austerity. Clearly, however, there is no political stomach for that, as DOGE is a distant memory at this point. And The Fed looks squeamish about even a 25bps hike at the coming FOMC.

Bessent and Trump have both claimed that we can grow our way out of this debt and inflation. But the market seems to finally be taking nominal growth data points with the many grains of salt they require.

Ultimately, not unlike the main character in Leaving Las Vegas (1995) who is drinking himself to death, those folks in charge inside the Beltway need to stop printing (and spending) and understand that this is one of those rare times when the American people will actually reward austerity since it will come with the benefit of lowering an unaffordable (and unsustainable) way of life for most of the country.