The article examines why investors and entrepreneurs should focus on the 10-year Treasury yield rather than the short-term interest rates set by the Federal Reserve. It explains that while the Fed’s rates are relatively stable, the 10-year yield—which has fluctuated between roughly 4.8% and 4.2% since the election—is a more sensitive barometer of economic sentiment and policy effects, including those from the Trump administration’s tariffs, deregulation, and immigration policies. Treasury Secretary Scott Bessent underscores the administration’s desire for lower rates to support the economy, even as rising yields risk tempering investor enthusiasm and economic growth. The piece also delves into the complex relationship between bond markets, inflation, future interest rate expectations, and policy moves by the government, noting that actions aimed at boosting economic growth could paradoxically contribute to higher long-term interest rates.

Key Points:

• The 10-year Treasury yield is a critical indicator for the economy, influencing mortgages, corporate debt, and global bond pricing.
• The yield has fluctuated between 4.8% and 4.2% since the election, significantly above the 20-year average.
• Trump administration policies, including tariffs, deregulation, and immigration restrictions, are impacting market expectations and Treasury yields.
• Treasury Secretary Scott Bessent emphasizes focusing on the Treasury yield rather than manipulating the Fed, whose independence is largely respected.
• Rising inflation, oil prices, and potential increases in government debt supply could further push up long-term interest rates.
• Former Treasury secretaries warn of the risks associated with disruptive policy changes that threaten the financial system.

Why did the bond trader bring a ten-year-old to a party? Because he heard that even the yield wanted to join in on a long-term commitment!
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