Group 1: Treasury Exposure Concerns - China has issued a warning to banks regarding their concentrated exposure to U.S. treasuries, advising them to reduce excessive holdings, particularly not affecting state banks [1][2] - The global ownership of U.S. treasuries is significant, and concerns are rising about the U.S. government's high debt levels and international policies, leading to potential reductions in treasury exposure by foreign investors [3][4] Group 2: Japanese Market Dynamics - The Japanese stock market is experiencing strong performance, with the Nikkei index up by 3.9%, and the yen showing volatility [4] - There is an expectation that Japanese Government Bond (JGB) yields will continue to rise, which could positively impact the Japanese economy and sustain the bullish trend in Japanese stocks [7] Group 3: U.S. Economic Outlook - There is a bullish sentiment regarding the U.S. economy, despite concerns about stagflation signals from upcoming inflation and jobs data [8][10] - The current jobs data for January is negative, and inflation is not expected to soften, indicating potential challenges for risk assets in the near term [9][10]

I want to start with this China story on treasuries, not a big market reaction. Are we going to get a bigger one as this story develops. Yes, I think this is a real grower of the story.I understand why there has not been a panicked reaction. This is China warning banks to basically watch out for their concentrated exposure to treasuries and trim where it's excessive. Not for state banks.It is really just a kind of warning to the market. And it happened a couple of weeks ago. So during kind of the Greenland ...

Core Insights - The yield on the 10-year Treasury note was 4.22% on February 6, 2026, while the 2-year note was at 3.50% and the 30-year note at 4.85% [1] - An inverted yield curve, where longer-term yields are lower than shorter-term yields, is a reliable leading indicator for recessions, with the 10-2 spread being particularly significant [1] - The average lead time to a recession based on the 10-2 spread is approximately 48 weeks from the first negative spread date, or 18.5 weeks from the last positive spread date [1] Treasury Yields Overview - The long-term view of the 10-year Treasury yield shows significant historical context, starting from 1965 [1] - The 10-2 spread has been continuously negative from July 5, 2022, to August 26, 2024, indicating potential recession signals [1] - The 10-3 month spread also shows similar patterns, with negative periods leading up to recessions [1] Mortgage Rates and Federal Funds Rate - The Federal Funds Rate influences borrowing costs, and recent trends show that mortgage rates have declined despite the Fed's rate-cutting cycle starting in September 2024 [1] - The latest Freddie Mac survey indicates the 30-year fixed mortgage rate at 6.11%, one of the lowest since October 2024 [1] - Fed policy has been a major influence on market behavior, particularly in relation to Treasury yields and mortgage rates [1]

Core Insights - The article analyzes the historical trends of the 10-year Treasury yield since 1962, highlighting its relationship with key economic indicators such as the Fed Funds Rate (FFR), inflation, and the S&P 500 [1] - It discusses the contrasting monetary policies during periods of high inflation and economic recovery, particularly the drastic measures taken by the Federal Reserve in the early 1980s and the ultra-low interest rates following the 2008 financial crisis and the 2020 pandemic [1] Group 1: Historical Trends - The 10-year Treasury yield peaked at 15.68% in October 1981 and reached a historic low of 0.55% in August 2020, reflecting significant economic events [1] - The FFR was raised to a historic high of 20.06% in January 1981 to combat inflation, leading to a peak in the 10-year yield shortly thereafter [1] - Following the 2008 financial crisis, the FFR was lowered to approximately 0.04% in May 2020, resulting in a corresponding drop in the 10-year yield [1] Group 2: Recent Developments - From May 2022 to August 2023, the Fed raised the FFR to its highest level in over 20 years, which was mirrored by a rise in the 10-year yield [1] - The Fed held rates steady for over a year as inflation cooled, but shifted to three consecutive rate cuts in September 2024, while the 10-year yield increased despite declining FFR [1] - By the end of December 2025, the 10-year yield was at 4.24% with inflation at 2.68%, indicating persistent inflationary pressures [1] Group 3: Treasuries vs. Equities - Generally, Treasuries and equities move in opposite directions, but during inflationary periods, both can rise due to the impact of higher interest rates on corporate profits [1] - Adjusting the S&P 500 and 10-year yields for inflation reveals the severe impact of stagflation on real equity values from the mid-1960s to 1982 [1] - The Fed's historical extremes in the FFR demonstrate its ability to implement significant policy shifts in response to economic conditions, with varying success in stimulating the economy [1]

Core Viewpoint - President Donald Trump nominated Kevin Warsh as the next chair of the Federal Reserve, which is seen as a safer choice by market watchers compared to other candidates previously discussed [1] Group 1: Nomination and Background - Kevin Warsh became the youngest member to serve on the Fed's board of governors in 2006 and held the position until 2011 [2] - Warsh's experience includes working with renowned investor Stanley Druckenmiller, enhancing market confidence in his qualifications [2] Group 2: Market Reactions - Warsh's nomination positively impacted the U.S. Dollar while causing a decline in precious metals prices, such as gold and silver [3] - The Fed's independence has been a crucial factor in the precious metals trade, and Trump's dissatisfaction with the Fed's interest rate policies has raised concerns [4] Group 3: Economic Context - The U.S. is facing an affordability crisis characterized by rising inflation, housing unaffordability for younger adults, and stagnant wage growth [4] - The Trump administration's attempts to influence the Fed, including the removal of Governor Lisa Cook and the subpoena of Chair Jerome Powell, have raised questions about the Fed's independence [5][7] Group 4: Implications of Interest Rate Policies - Lowering interest rates could improve affordability but may also risk reaccelerating inflation or leading to stagflation if not justified economically [6] - The controversy surrounding the subpoena of Powell highlighted the administration's pressure on the Fed, which Powell defended by stating that interest rates should be set based on public service rather than presidential preferences [8]

Group 1: Treasury Yields and Economic Indicators - The yield on the 10-year Treasury note was 4.26% as of January 30, 2026, while the 2-year note was at 3.52% and the 30-year note at 4.87% [1] - An inverted yield curve occurs when longer-term Treasury yields are lower than shorter-term yields, with the 10-2 spread being a reliable leading indicator for recessions, typically turning negative before recessions [2] - The average lead time to a recession based on the first negative spread date is approximately 48 weeks, while using the last positive spread date yields an average lead time of 18.5 weeks [4][6] Group 2: Mortgage Rates and Federal Funds Rate - The Federal Funds Rate (FFR) influences borrowing costs for banks, which in turn affects mortgage rates; however, recent trends show mortgage rates declining even as the Fed began a rate-cutting cycle in September 2024 [7] - The latest Freddie Mac Weekly Primary Mortgage Market Survey reported the 30-year fixed mortgage rate at 6.10%, marking one of the lowest levels since October 2024 [7] Group 3: Treasury ETFs - ETFs associated with Treasuries include Vanguard 0-3 Month Treasury Bill ETF (VBIL), Vanguard Intermediate-Term Treasury ETF (VGIT), and Vanguard Long-Term Treasury ETF (VGLT) [9]

Core Viewpoint - The Federal Open Market Committee (FOMC) decided to maintain the Fed funds rate at 3.5%-3.75%, with minimal market reaction, as the S&P 500 closed nearly flat, down 0.01% [1]. Group 1: Economic Assessment by Jerome Powell - Powell indicated that the risks of inflation and unemployment have diminished, although they still persist [4]. - The Fed Chair noted that the labor market is stabilizing, with the unemployment rate around 4.4% in recent months [4]. - Powell suggested that the impact of tariffs has largely been absorbed, although they continue to keep goods inflation above the Fed's 2% target, while services inflation is decreasing [5]. Group 2: Labor Market Insights - Powell expressed optimism regarding the labor market, attributing weak job growth to immigration restrictions affecting both labor supply and demand [6]. - Consumer spending remains strong according to data, despite reports of weak consumer confidence [6]. Group 3: Implications for Investors - Generally, falling interest rates are favorable for stock market investors as they prefer stocks over bonds and benefit from easier borrowing conditions for companies [7]. - However, recessionary conditions often lead to rate cuts, which can negatively impact stock prices [7].

Core Viewpoint - The Justice Department is investigating Fed Chair Jerome Powell, which is perceived as an attempt by the Trump administration to undermine the Federal Reserve's independence, with potential implications for monetary policy and the stock market [9]. Group 1: Investigation and Political Pressure - The Department of Justice served grand jury subpoenas to the Fed, threatening criminal indictments related to Powell's testimony, which Powell claims is a pretext to pressure policymakers into lowering interest rates [1]. - President Trump has openly expressed his desire for lower interest rates and has threatened to sue Powell for incompetence, indicating a push for the Fed to align with his political agenda [2][7]. - Trump attempted to remove Fed Governor Lisa Cook over alleged misconduct, which the Supreme Court ruled against, highlighting the legal limitations on removing Fed officials [3]. Group 2: Economic Context and Implications - The severe tariffs imposed by the Trump administration are expected to slow economic growth, and the federal debt has exceeded $38 trillion, making lower interest rates appealing to offset economic weakness and reduce government debt servicing costs [5]. - If the perception of the Fed's independence is compromised, Treasury yields could rise sharply, leading to a potential decline in the stock market [9][10]. - Historically, the S&P 500 has performed poorly when the 10-year Treasury bond yield exceeds 4.5%, with the current yield near 4.2% [14]. Group 3: Market Reactions and Investor Sentiment - The stock market showed slight gains despite the investigation news, indicating some resilience among investors [8]. - Criticism from Wall Street and former officials suggests concern over the implications of political interference in monetary policy, which could lead to increased market volatility and a decline in stock values [6][9]. - The potential for politically motivated monetary policy decisions could lead to unnecessary rate cuts, stimulating short-term growth but worsening inflation in the long run [12].

Group 1: Treasury Yields and Economic Indicators - The yield on the 10-year Treasury note was 4.18% as of January 9, 2025, while the 2-year note was at 3.54% and the 30-year note at 4.82% [1] - An inverted yield curve, where longer-term Treasury yields are lower than shorter-term yields, is a reliable leading indicator for recessions, with the 10-2 spread turning negative before recessions [2][3] - The average lead time to a recession based on the first negative spread date is approximately 48 weeks, while using the last positive spread date yields an average lead time of 18.5 weeks [4][6] Group 2: Mortgage Rates and Federal Funds Rate - The Federal Funds Rate (FFR) influences borrowing costs for banks, which typically leads to higher mortgage rates when the FFR increases; however, recent trends show mortgage rates declining despite the Fed's rate-cutting cycle starting in September 2024 [7] - The latest Freddie Mac Weekly Primary Mortgage Market Survey reported the 30-year fixed mortgage rate at 6.16%, marking one of its lowest levels since October 2024 [7] Group 3: Treasury ETFs - ETFs associated with Treasuries include Vanguard 0-3 Month Treasury Bill ETF (VBIL), Vanguard Intermediate-Term Treasury ETF (VGIT), and Vanguard Long-Term Treasury ETF (VGLT) [9]

Core Viewpoint - Federal Reserve officials are divided on the extent of interest rate cuts for 2026, with some advocating for steady rates until more data is available on inflation and employment [1] Group 1: Interest Rate Cuts - Fed Governor Stephen Miran is advocating for aggressive interest rate cuts, suggesting a reduction of at least 150 basis points this year to support the labor market [2][3] - Miran describes current monetary policy as restrictive, indicating that underlying inflation is around 2.3%, which allows for further cuts [2] - The Federal Funds Rate currently stands at 3.50% to 3.75%, with a total of 75 basis points cut in 2025 [8] Group 2: Economic Context - There are approximately one million Americans unemployed who could potentially find jobs without triggering unwanted inflation, according to Miran [5] - Fed officials estimate that the long-run neutral rate is between 2.5% and 3%, but can rise to approximately 4.5% to 5% when factoring in inflation [9] - The neutral rate is defined as the interest rate that maintains full employment while keeping inflation stable around the Fed's 2% target [10]