Well, well.
This, in a couple of senses, was only a matter of time.
Investors snagged 5% yields on 30-year Treasuries for the first time since 2007, as surging energy prices push inflation — and expectations for more of it — higher.
That’s a number that will have been noted in Tehran, among other places, as the regime there tries to calculate the White House’s tolerance for the economic (and thus domestic political) pain brought about by the war.
The immediate trigger was the rise in wholesale (PPI) inflation, which rose a seasonally adjusted 1.4 percent in April (an annualized 6 percent), a lot higher than expected. Much of the blame lies with higher energy prices brought about by the Gulf conflict, but, ominously, not only that:
The services index accelerated 1.2%, the biggest gain since March 2022. Two-thirds of the move was attributed to a 2.7% gain in trade services, a sign that tariff costs could be starting to have a larger impact on prices. . . .
“Inflation is sticky and accelerating. The core reading confirms a deeper structural trend, especially in services,” said David Russell, global head of market strategy at TradeStation. “The Hormuz crisis is aggravating the problem, but this goes way beyond oil.” . . .
Market pricing points to little chance of any interest rate cuts through the rest of the year, though odds for a hike climbed to about 39% following the PPI report.
And, of course, the country’s debt is still climbing.
Kevin Warsh, confirmed today in the Senate as the new Fed chairman, is in for a torrid time.