10-year Treasury yield climbs above 5.3% to a level not seen in 24 years
wsj.com
wsj.com
They've been subject to EU Excessive Deficit Procedures for multiple years, must bring deficit-to-GDP ratio from ~5.8% down to 3% within 3 years despite virtually no GDP growth and complete political and societal paralysis about reducing any public benefit or welfare whatsoever.
ECB will most likely get involved after 2029 to start austerity measures. You can predict how that will go over with the French public especially if Le Pen takes the presidency, which looks likely.
Very tough times ahead and the EU is facing a critical point about its future.
We have spent decades selling these billionaires government debt instead of just taxing them correctly.
This is not a argument on if they should pay more tax or not, it is a argument about what affect it has relative to the discussion of a countries debt.
We have seen abundantly clearly that telling the truth is the worst thing you can do for your political career. The correct move is to lie, lie, lie, lie. Reality is completely irrelevant. All you need to do is tell them what they want to hear. Nothing else matters. They will not hold it against you if you break every promise you make. They'll vote for you again and in greater numbers if you ramp up the promises to even bigger lies, nevermind your track record.
trump can do this. it is very rare. you try to do what trump did and you'd be sent to jail instantly.
Most voters cannot handle it.
Obama attempted to close Guantanamo. The political backlash was massive. He essentially ended the Iraq war leaving only a skeleton crew to work with the government.
Those are not even in the same universe as all the lies and corruption Trump has peddled.
Heck, Trump has had a dozen Mission Accomplished moments in the Iran war alone, compared to the 1 stupid photo op by Bush.
If anything, equating very different situations with Trump’s regular lies and corruption like this is why Americans are confused.
If you can keep energy costs down and get out of the way there will be growth. It's a thing that happens when people do business and make new things.
Edit: and probably not as effective, which risks being overtaken by others, I suppose.
Also American peasants / lower tier white collar workers are usually richer than fairly well off Europeans... You cannot even begin to comprehend how much wealthier the US is in some ways - and remember how totally dysfunctional the US economy is in many limits i.e. if Europe could just be as _bad_ as the US it would grow much faster.
Or what? (Seriously.)
Greece was forced to the table because the market wouldn’t lend to it. So long as France has lenders, why does this rule matter?
France has snowballing debt with virtually no prospects of growing out of it by itself. So what is going to happen? It's a very dangerous situation that is only feeding the euroskeptics even more.
It is still a weak (but loud) political movement which lacks backbone and network.
However the wealth of the wealthiest increased substantially, so there's that, I guess.
Perhaps short periods of austerity work in decades past when enough of the foundation was still established for public goods, but a this point of neoliberal economics, austerity just causes economies to slow or shrink
However, most western institutions and governments have used periods which required austerity to bake in long term privatization and government service cuts for ideological reasons, as opposed to treating it as a chapter 11 bankruptcy, for example, where they use it to clean and streamline their operations and programs and restart the services on a better footing.
That's before the military, foreign aid, and everything that starts with "Department of"
We used to have 94% top tax bracket rate at one point, and higher tax rates in general. We’ll find the will to raise taxes as soon as the bond market compels the spineless in Congress to find the will (as the cost of debt continues to rise into the future), because you cannot deceive the bond market.
https://taxfoundation.org/data/all/federal/historical-income...
https://www.axios.com/2026/09/27/rates-borrowing-yields-fisc...
- In projections that the Congressional Budget Office produced last February, net interest costs are already at $1 trillion this year and on track to reach $2 trillion by 2035, meaning that much of federal spending is needed just to service old bills.
- But those projections assumed 10-year Treasury yields were in the ballpark of 4.3%. They're now nearly a full percentage point higher than that.
- In startling numbers that CBO released this week, in a scenario in which interest rates were 1 percentage point higher than its baseline, debt held by the public would grow to 222% of GDP in 2056, 47 percentage points higher than the baseline.
Taxes will go up, voluntarily or involuntarily. If we didn’t want to get here, well, should’ve never spent so frivolously on tax cuts for the wealthy and a bloated military that is unable to pass an audit. But we did, and that debt is going to have to be paid back, with interest. It’s impossible to grow out of this debt, and there are more workers than very wealthy people and their politicians.
If you say, “We should have invested more,” I point you to the 40% of current retirees that were not in a position to invest because their jobs didn't pay them enough above the cost of existing. And then there are any number of events, such as age discrimination, common medical issues, divorce, and bankruptcy, that destroy retirement plans.
From what I can tell, it's not possible for the vast majority of the population to be able to save for a 20 plus year retirement.
One of the things that keep people from saving are the activities driven by their investing in the stock market. To increase returns, "Activist investors" and private equity drive companies to shed jobs. You shed a job, you destroy a person's ability to save for retirement, which makes them more dependent on the social contract of Social Security and Medicare.
Cutting benefits will only cause suffering. The cost will fall on society in other ways in terms of elderly homeless people filling the ERs, begging in the streets, or committing suicide. Is it time for a "Modest Proposal II"?
For example in the year 2000, people aged over 65 were 12.4% of the U.S. population. Today, that demographic has grown dramatically to 19% of the population. That's fewer people working and paying taxes while also simultaneously drawing more from medicare and social security.
This doesn't mean it's "impossible". But to balance the budget today without major spending cuts would require raising taxes 39%. It's just so different than it was then to make the math work out.
That gives a lot more time to phase in any longer term changes to those programs.
> Bond market is in revolt about the national debt and I hear crickets from Washington. You think this would be a crisis. Amazing really.
Some combination of the bond market rejecting Treasuries for other similar investments while also pushing up other debt costs causing excessive failures in interest rate sensitive parts of the economy. Hard to predict when, but it’ll look strikingly familiar to the 2008 GFC I think, the day Bear Stearns collapsed. An event will occur, and there will be a cascading loss of confidence in the bond market. Not a great time when diesel fuel is also at record high prices and will be for at least the next year.
Defence is only 12% of the US federal budget - what are you going to cut it to? It's not going to solve the issue even if it's abolished. Over the last 10 years health, Medicare and Social Security have grown 103%, 83% and 78% respectively for an increase of $1.64 trillion to $3.55t vs a $916b on defence. With an aging population it's only going to cost more and more over time, you can't continue to put higher taxes on a shrinking share of productive population to care for more and more unproductive retirees under any economic system.
> you can't continue to put higher taxes on a shrinking share of productive population to care for more and more unproductive retirees under any economic system.
Start at the top with very high marginal tax rates for the wealthiest, work your way down. The wealth exists, tax it.
https://en.wikipedia.org/wiki/List_of_wealthiest_Americans_b...
https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...
(The top 10% of U.S. households own roughly 67% to 68% of the total household wealth in the United States, the vast majority of which are securities)
This is not a serious argument based on total property tax collected across all 50 states on an annual basis (~$2T) [1]. Federal government spends ~$7T/year against $2.4T in personal income tax, $1.7T in payroll tax, and $530B in corporate income tax (~$4.9T in revenue) [2].
Could we tax real estate more? I’m sure, not opposed based on fair valuations and implementation details. We should start with securities first imho, as we already tax real estate today. Conveniently, the top 10% of households own 93% of US equities. US GDP is ~$32T annually.
[1] https://www.nahb.org/blog/2025/03/state-local-property-tax-c...
> Are you proposing to institute a wealth tax?
Ideally, but failing that raise the estate tax to 90% for estates over the current exemption limit of $15 million and eliminate all trust loopholes.
The billionaires would be able to enjoy their money in their lifetimes and still ensure that their children are taken care of in their lifetimes all while paying their fair share to society upon death.
Cutting defense doesn't even need to be complicated. Just stop forever wars in the middle east. It won't hurt our actual defense capabilities and will raise America's stature in the world. Heck, we have the best defense imaginable given to us for free (the Pacific and the Atlantic oceans), to the extent that two world wars combined didn't see a major attack on the US mainland.
Cutting (or better still privatizing) social security, medicare and medicaid, while being the Republican wet dream, actually translates to direct harm to millions of citizens.
In 2025, federal gov revenues (total, not just tax) were $5.26T: https://fiscaldata.treasury.gov/americas-finance-guide/gover...
In 2026, entitlements plus interest is projected to cost $5.45T: https://fiscaldata.treasury.gov/americas-finance-guide/feder...
The reason the US is a comparably "low tax" country is because we're borrowing the difference.
What worries me the most is that this is at a high point in our economic cycle, when tax collection is arguably the highest. The deficit and debt will expand significantly in the next recession.
I.e. have a Fed-like entity that gives Congress a max in spending for the current tax policy, and Congress is required by law to stay below that number
Fixing US debt has always been politically unpopular, and it always will be.
Unfortunately the U.S. constitution was written with the, in hindsight, naive assumption that political parties could be avoided.
This just led to a system that has political parties but doesn’t really acknowledge their existence and therefore makes it difficult to regulate their behavior.
Wild times. Maybe it's information overload, since it probably happened in the past as well. But being bombarded with implications of these changes left and right is kinda weird.
Well, it turns out that we did it with the COVID economic shocks, and for a while there was talk of a “soft landing” but that’s all but disappeared from the conversation.
> everyone had seen Japan fail to pump up its economy
Agreed about this, but I feel like everyone is watching Japan right now again. And I fear people will make wrong assumptions, given how its "economy is growing right now".
Not saying you're wrong about anything you're saying, to be clear.
Even songs we don't like have a lot of 'poetry' in their notes...
Interest rates were kept at historic lows for a decade because the 2008 crisis caused available credit to absolutely implode, which destroyed a huge swath of the effective money supply. Leverage ratios at banks went from north of 40:1 to closer to 10:1. Without ZIRP and QE and all of the rest, we would have had outright deflation, kicking off the kind of deflationary debt spiral that made the Great Depression so bad.
That kind of dramatic destruction of credit did not happen during the pandemic. The banks were fine [0]. What happened was that the economic output of actual goods and services collapsed. So high levels of stimulus led to more money chasing fewer real resources, and you got inflation instead.
This should not have been a surprise.
[0] Modulo a few like SVB that blew up a couple of years later because they had forgotten that interest rates could also go up.
I don't have deep knowledge, other than a bunch of "pattern matchings" I've done throughout my readings, but as people get older, on average, their wants/needs change over time. Older people, especially as they get closer to retirement age, have more free time as well. Implicitly, these desires eventually bubble up into economic/political action, that's more or less unprecedented. It would be very cool to research this more in depth, but unfortunately i'm in the wrong field.
- Most of the AI Companies are HQed in the US, and that's the 'hot thing' for the market overall
- Google and Apple have enough presence (i.e. some may be doing tax things but...) in the US and at least one of them has gotten 'too big to properly antitrust'.
- If we look deep enough, even some of the fanciest ASML tech is a result of IP sharing from US companies that are almost certainly government backed (i.e. ASML might be the ones working with other companies to help make it useful/scalable, but the tech is invented here.)
Ironically, something I would have listed at the top 10-15 years ago but is now last on the list...
- For the last (well, now) 80 years the US has been able to project an outward image of overall economic stability and relative growth; The closest it came to a crisis in the past was when the Bretton-Woods system collapsed and France came over and collected their gold.
On the flip side, there is the 'guard'.
- Any current bondholders have to choose between holding at the current rate, or selling at a discount. It becomes a 'Well do we really thing it will all fall apart before then or do we just hold?'. Because any new bonds, even at the current rate, would be carrying that risk on the open market if a sell-off occurred. IOW 'Is a bond I have now less the arbitrage cost going to be worth more than just holding it'.
What's important is what happens next. If we look at the Bretton-Woods collapse, there were a number of actions taken, many (most?) of them questionable, however it was pulling a bunch of levers at once and unpulling versus debating which lever to pull.
There is the confounding factor where parties are arguing that there is market manipulation going on, that changes the question of whether to hold onto existing bonds rather than making other options. After a certain maturity percentage one has to ask whether you hold or sell based on climate.
> There is the confounding factor where parties are arguing that there is market manipulation going on
My understanding is, it’s not even an argument anymore. Like the latest Yen intervention from the states was basically a state level manipulation, no? I mean there’s nothing really illegal. And it makes sense, and very much public. But one can assume there are just many more behind-the-scenes activity going on as well.
As for the people that will inevitably bleat about how this is just horrible and we need to lift the cap on taxable SS income, that wouldn’t solve the core problem either unless you pair it with spending caps or cuts.
Yes because everyone paid into it and wants their money back with interest as promised? This isn’t weird.
Your money --> older generation
Younger generation ---> you
The main thing that makes my description incorrect / incomplete is that baby boomers, such a large cohort, broke the system. This was predicted and so the baby boomers actually did get their money back: they were taxed to fund OASI, which then goes back to fund baby boomers’ retirements, until it runs out.
Baby boomers (only, sort of) <---> massive cushion in the OASI fund
Also an underdiscussed issue with such a policy is that while it increases social security fund revenue, it decreases the amount of federal revenue collected. The CBO estimates that about 15% of revenues gained by an uncapped SSA tax are offset (lost) by a reduction in federal revenues. Worsening the deficit problem.
It’s actually pretty easy- pick three or four options that have the very wealthy kick back into society what they have been syphoning out and it balances.
Yes, there are reasons why this isn’t working out as planned. But the idea that “Social Security is the biggest driver of spending” is not a cogent argument.
Thus, I think "Social Security is the biggest driver of spending" is a perfectly cogent argument. The mandatory social security contribution is just another kind of income tax.
Obviously we can't just turn off Social Security, for many political, moral, and practical reasons, but any solution to the deficit or debt that ignores social security will be fighting with one hand tied behind its back.
No it's not. It's about 15% of the 2 trillion dollar defecit. Whoever told you that mislead you.
It’s literally not a spending problem at all.
On the other hand, I’ve been paying into ss for like 3 decades easy. Bitch better have my money!
You forgot the huge one, which is uncapping the amount of income it is applied to.
Social security is easy to fix. Just raise the retirement age. Or do nothing and benefits drop by 25% or whatever it takes to become balanced based on current tax revenue.
Good luck rationing hip replacements and breast cancer treatments whose provision is statutorily required by law and whose cost will continue to rise with inflation.
None of this even begins to consider interest on the debt. As interest rates continue to rise and the debt continues to grow this line item will eventually dwarf everything.
Social Security is chump change compared to these two. But at least it’s nominally fixable by faking the CPI numbers used to set the cost of living increases. You can’t charge less for hip replacements or cancer treatments, they cost what they cost.
Stock market dynamics are fundamentally different now compared to the last period of sustained high inflation (70s)... And stocks have done fantastically over the last few years of stubborn inflation.
Eventually the cycle/bubble collapsed, and the same 1930s tariff policy literally starved people for almost a decade.
I really hope we don't repeat that history. However, the Bear market distant roar can't be ignored. =3
Don't get me wrong, I want to be in that category, but still.. this is our reality. It's an interesting experiment we are running. Without external factors like global wars and climate catastrophe, could the market even crash in our current environment?
Take a look at the S&P 500 vs. the equal-weight S&P 500 over the last 6 months:
https://finance.yahoo.com/quote/ES%3DF/
https://finance.yahoo.com/quote/RSP/
The equal-weight S&P 500 has been on a steady march downwards since it became apparent in August that the Iran war was not even close to over, and is now getting close to correction territory (7% down). This is exactly what you would expect given the news. It is the opposite of what you would expect from the inflation story, which would lift the earnings of everything in the S&P 500 (which, after all, is composed of the 500 largest companies and overweights monopolies or oligopolies in broad industries).
The S&P 500, however, has been basically flat over that same time period, holding at the 7700 level. It basically has a leg down over the course of the week, and then always pumps on Friday to regain the previous level. I'm not sure if it's government intervention or irrational exuberance in a small set of AI stocks, but the divergence between the broad market and the S&P 10 is becoming increasingly noticeable.
But on the scale of years inflation will dominate all transient idiosyncracies.
I think there's a decent chance that Warsh gets inflation under control. The recent rise in bond yields is 100% due to Fed action: the Fed stopped rolling over long-term treasuries and MBS into like-kinded securities in June, instead rolling them over to short-term treasuries. This shrinks the Fed's balance sheet on the long end of the curve and adds to it on the short end, just like Warsh said that he would do. It's net-neutral for the Fed's balance sheet as a whole, but the effect is to push up long-term yields, hold short-term yields steady (which have a floor of the Fed funds rate), and steepen the yield curve.
The next step - and Warsh has made no secret that this is his plan - is that once the long-term Treasury market finds an equilibrium without Fed support, use that information to figure out what the neutral rate is, and set short-term rates accordingly. The price action we're seeing is a strong indication that the neutral rate is significantly higher than anybody expects right now.
The bond market is also not expecting significant inflation over the next 10 years. You can see this through the TIPS spread, the difference in rates between the 10-year TIPS and the 10-year Treasury bond. It currently stands at about 2.35%, indicating that the market as a whole expects about 2.35% (CPI) inflation over the next 10 years.
https://en.macromicro.me/collections/51/us-treasury-bond/846...
Maybe we collectively just over-lend at very high interest rates and the real economy cannot anymore catch up with the promises?
Note that it is widely predicted that transformative AI will increase real interest rates for several reasons. I’m not sure we are there yet. But if progress continues I expect things to get weirder.
But the yields are going up simply because investors do not want to buy at lower interest anymore. It indicates that investors view the bond as riskier than before. A real fear is materializing that US will default on it's debt. Sure, the fed can always print money to bail them out, but the inflation is on track to cost the Republicans in the midterms.
There are a combination of factors which is causing this fear- those are radical changes in immigration, trade and military policies. The stability of the bond market is built on the trust that US will act rationally when it comes to skilled immigration, free trade and avoiding direct military conflict. Clearly it's no longer the case.
US population view themselves as immune to fallouts from global events. But we're starting to see that when you breaki promises left and right, people lose trust, and you pay the price, even when you're a superpower.
My money is on 8% yield by the end of Q1 '27.
Steady march towards Argentina
Unlike most Trumpists, I see the the problem as a revenue issue, not expenditures; unlike many non-Trumpists, I doubt "tax the rich" is going to be enough to plug the hole.
Government healthcare payments would be a good start -- it seems likely that the amount most employees already (effectively) pay for health insurance could fund equivalent government coverage with some money left over to help pay for other government expenses.
But it doesn’t matter. Those historical parties have nothing in common with their namesake parties today.
So, I agree with your conclusion.
The facts are that surpluses were routine before the 1960s, under both parties. Since then, not so much.
1998 was the first year the United States government recorded a budget surplus since 1969 [0] (Clinton with a GOP Congress).
Since 1981, the deficit deepened under Republican administrations and shrank under Democratic ones [1]
That aligned with the creation of a right-specific media system where "Republicans don't fight Republicans" - so there can never be any internal accountability.
[0] https://clintonwhitehouse3.archives.gov/WH/New/html/19981028...
[1] https://www.yahoo.com/news/articles/fact-check-us-deficit-gr...
Interest rates are a function of inflation and joblessness. Both of which the current administration has created via terrible (for the country; great for the family members of the administration) policies.
The terrible policies are destroying jobs and causing the prices of goods to go up, thus increasing interest rates. The administration could balance the budget, but that would not correct the interest rate problem unless they also stop enriching themselves at the expense of the rest of the country.
My amateur understanding is that prevailing interest rates are more directly a function of supply and demand for capital; I agree that higher prices increase demand for capital. Joblessness would seem to be correlated with lower demand; the unexpected combination of high employment and persistently low interest rates in the 2010s was a source of a lot of commentary, as I recall.
A 5% revenue tax on the fortune 500 would get us half way there. I could not quickly get a number for total revenue of more than the fortune 500, but I would not be surprised if a 3% VAT would cover the entire deficit. We lose so much tax revenue due to all the loop holes deliberately left in the corporate tax code.
On top of that, ban stock buy backs entirely, that way more of the record breaking profits have to go to wages or other means of investing in the business.
Given that ~20% of that group have net income margins below 5%, how much of such a tax policy would simply be an inflationary tax on consumers? I.e., we know Walmart cannot simply pay a 5% revenue tax, that would instantly make them deeply unprofitable. So they would have to raise prices to afford the tax. And if they know Target, Kroger, Costco, and Amazon also need to pay the same 5% tax, there is less competitive pressure to eat into margin. Even with zero collusion, there is perfect information symmetry regarding the tax.
At their present 3.1% net margin, if Walmart passed a 5% gross-revenue tax entirely to consumers while all else stayed equal, prices would have to rise MORE than 5% -- about 5.44% just to preserve its existing margin. Of course, some of the tax burden likely gets shared between Walmart, its customers, supply chain, vendors etc... In a world where the Fortune 500 (Walmart) has to pay the 5% revenue tax but a supplier of some SKU (not a Fortune 500) does not pay it, I imagine Walmart would lean extra hard on them to eat some of the tax. It all seems like a very messy and inefficient tax.
On the VAT, the CBO has actually studied a 5% VAT tax and modeled that it would raise $330B. That's 16% of the current $2.1T deficit.
https://m.youtube.com/watch?v=AmzadQE9UD4&pp=ygUKQmlsbGlvbmF...
There are plenty of places to cut spending before we start raising taxes on the W2 wage earners that are contributing the most to federal tax receipts.
How would nationalizing health insurance even make a dent in spending? Ultimately the same amount of healthcare will be consumed. You are truly clueless about the federal fisc if you think these are even remotely serious ideas for fixing the federal budget deficit.
1. https://fiscaldata.treasury.gov/static-data/published-report...
The problem is that the level of debt overall in the US - across both private and public sector - is just astronomical. We are truly in unchartered waters, outside of a world war. There's just no model or playbook for how this should work from here forward, other than it seems very clear we will hit a point where the math stops "mathing" and that point is getting closer and closer.
There you go. After ww2 USA just inflated away its debt. It's actually chartered territory.
People need to study this graph https://fred.stlouisfed.org/series/FYFSD and think about what changed when.
https://www.cbo.gov/publication/54994
So that's about $52B per year in taxation added back on that extra GDP growth, so the net effect of the cuts are around $380B reduced federal revenue per year, or 18% of the deficit.
18% of the deficit is a lot but if you could snap your fingers and undo it, you now have a $1.7T problem instead of a $2.1T problem. Eventually you have to look at entitlements. There's just no way around it.
$ 1 T : total defense (roughly)
$ 1.7 T : total social security
$ 1.1 T : total medicare
$ 0.7 T : total medicaid
$ 0.7 T : total other entitlements (SNAP, VA, etc)
$ 1.1 T : net interest on the debt
$ 1.0 T : all other discretionary spending
So ... we can't fix this by doing any one thing. Even if we were willing to completely end social security (while keeping the separate contribution tax), that wouldn't be enough. If we threw away our military entirely, we would only be half way there.
We need to do everything a little bit, all at once.
Raise taxes - corporate and personal, on every bracket, progressively more on the rich ... but this will not even be half of enough because of the strength of the debt bomb and the global flexibility of corporations.
Cut defense spending - but not too much, because we also need to provide funding to repair alliances, rebuild our ancient navy, and rebuild our standoff and interceptor stockpiles after the recent middle east adventurism.
Repair social security - cut benefits, add a means test, raise the contribution amount and limits ... lots of things to do here.
Fix health care - it's just too damn expensive across the board; the US pays for this in the VA, medicare, medicaid, and the poor health of its workforce. I have no idea where to start on this one.
The CBO has a ton of data on this kind of thing. I like their budget options page for exploring the forecasts for specific changes. Of course it's not as simple as adding the numbers together to get to the deficit, but it's a good place to learn more and ground some assumptions.
https://www.cbo.gov/budget-options
I got some of these numbers from:
https://www.cbo.gov/publication/62105
I used Claude to research this, but I wrote the post myself.
There's some details, like Hungary actually being down to 5.8%, presumably through more trust in the current government vs the last. But the pattern vs 3 years ago is one of constant rise.
And there are exceptions, India, for example, is showing a different pattern. China does not make sense (but I'm sure that's just by design). Russia, but I have a guess for that one. Ukraine ...
Almost like bond investors are expecting something dramatic to happen soon, with odds rising fast, at least across US and EU, including individual countries. At the very least, investors are expecting an economic disaster for the next 10 years (at least compared to the last 10 years)
Even if it goes down going forward, Bessent was incredibly reckless. Basic emotions have a surprisingly significant influence on financial markets’ behavior. I won’t be surprised if the rates would have been at least a few basis points lower if it wasn’t for Bessent’s silly bravado.