UST Yields: Sept 2024 UST in Historical Context

We provide a UST curve image to frame where the Sept 2024 lows stood vs. today and the Oct 2023 peak.

Alas poor duration?

• There will be no shortage of UST bear vs. bull debates to have around the question of “to extend or not to extend?” with duration vs. credit being the ground zero of bond allocation. While we don’t want to blur our Shakespeare scenes, the fate of inflation in a post-tariff world is still spooky when unit costs would be rising in a market with healthy demand and pricing power. What that means for duration risk will stay a hot topic as we await a debt ceiling and budget that feeds supply scenarios.

• How lofty, sweeping tariffs will dovetail with duration risk vs. cyclical anxiety will remain on the front burner until the tariff details get delivered in full and trade partners show their hands on retaliation as Trump continues his pressure campaign on Canada, who is our largest export nation and natural resource provider (see Aluminum and Steel Tariffs: The Target is Canada 2-10-25).

• We will add the following chart to our State of Yields weekly piece to underscore how low that bottom tick was in context and to keep in mind how hard that will be to get back to if Trump delivers on his growth promises or the cycle rebels and stagflation fears keep rising as they already are for some market watchers (see Footnotes & Flashbacks: State of Yields 2-16-25).

• We have seen a renewed hint of a UST rally, but we remain a long way from Sept 2024 coming off a warm CPI print (see CPI Jan 2025: Getting Frothy Out There 2-12-25). Trump’s frictionless wheel of tariffs cannot dislocate from the transaction reality of “buyer pays.”

While we look at UST deltas each week from numerous angles, we thought we should add a new visual on where the Sept 2024 lows and the 3.6% 10Y UST fits into the recent picture. The full visual of the curve across a period that saw a 200 bps swing in 30Y mortgage rates was worth reproducing and especially with tariff news flow heating up each week. That includes a busy mix of misinformation and some wholly misleading commentary on what “reciprocal” means over the past week (see Reciprocal Tariffs: Weird Science 2-14-25).

Most will have a view on where fed funds rates trend (consensus is lower and we agree) but the slope of the UST curve segments that we look at each week tell a story not as helpful. If the market sees a remotely normal UST slope for 3M to 10Y, that will spell trouble for the duration trade (see Footnotes & Flashbacks: State of Yields 2-16-25).

The anxiety around stagflation gets more airtime that is also now more defensible in 2025 than in past bouts of anxiety from curve bears. The radical policy shift on tariffs by a President who still says the selling nation pays (“collected billions and billions from China,” “External Revenue Service,” etc.) raises fears of intellectual cowardice at the Cabinet level (“shhhh, don’t tell him!). The cost of honesty hurt Cohn in Trump 1.0 and Senator Toomey and Corker were GOP Senate casualties for violating the “Don’t clarify, Don’t tell” rule. Deportation stress on labor will be slow to roll in but also lurks for later in the year in wage inflation. For those of us who reached working age during the stagflationary 1970s, that sort of replay risk is hard to contemplate.

See also:

Footnotes & Flashbacks: State of Yields 2-16-25

Footnotes & Flashbacks: Asset Returns 2-16-25

Mini Market Lookback: Headline Frenzy, Sloppy Details 2-15-25

Iron Mountain 4Q24: Performance Bar Gets Raised 2-15-25

Retail Sales Jan 2025: Warning Sign or Holiday Hangover? 2-14-25

Industrial Production Jan 2025: Capacity Utilization 2-14-25

CPI Jan 2025: Getting Frothy Out There 2-12-25
Footnotes & Flashbacks: Credit Markets 2-10-25
Footnotes & Flashbacks: State of Yields 2-9-25
Footnotes & Flashbacks: Asset Returns 2-9-25
Mini Market Lookback: Simply Resistible! 2-8-25
Mini Market Lookback: Surreal Week, AI Worries about “A” 2-1-25
4Q24 GDP: Into the Investment Weeds 1-30-25
4Q24 GDP: Inventory Liquidation Rules 1-30-25
Credit Crib Note: Lennar Corp 1-30-25
D.R. Horton: #1 Homebuilder as a Sector Proxy 1-28-25
Durable Goods Dec 2024: Respectable ex-Transport Numbers 1-28-25
New Home Sales Dec 2024: Decent Finish, Strange Year 1-28-25

Tariff links:

Reciprocal Tariffs: Weird Science 2-14-25
US-EU Trade: The Final Import/Export Mix 2024 2-11-25
Aluminum and Steel Tariffs: The Target is Canada 2-10-25
US-Mexico Trade: Import/Export Mix for 2024 2-10-25
Trade Exposure: US-Canada Import/Export Mix 2024 2-7-25
US Trade with the World: Import and Export Mix 2-6-25
The Trade Picture: Facts to Respect, Topics to Ponder 2-6-25
Tariffs: Questions to Ponder, Part 1 2-2-25
US-Canada: Tariffs Now More than a Negotiating Tactic 1-9-25
Trade: Oct 2024 Flows, Tariff Countdown 12-5-24
Mexico: Tariffs as the Economic Alamo 11-26-24
Tariff: Target Updates – Canada 11-26-24
Tariffs: The EU Meets the New World…Again…Maybe 10-29-24
Trump, Trade, and Tariffs: Northern Exposure, Canada Risk 10-25-24
Trump at Economic Club of Chicago: Thoughts on Autos 10-17-24
Facts Matter: China Syndrome on Trade 9-10-24