Treasuries have been rallying hard lately.
Which obviously means we've completely fixed our fiscal problems and stopped running trillion-dollar deficits.
Just kidding. We haven't fixed anything.
Bond markets don't care about fundamentals until suddenly they do. Right now they're pricing in slower growth, Fed cuts, and flight-to-safety flows. The rally reflects recession fears and positioning — not some miraculous improvement in Washington's spending habits.
The deficit is still massive. The debt ceiling fight is still coming. We're still borrowing to pay interest on money we already borrowed.
Bond yields can stay low for a while when growth expectations collapse. But the underlying fiscal reality hasn't changed at all.
Don't confuse short-term market moves with long-term solvency. Treasury rallies during risk-off episodes are normal. They don't mean the problem went away.
Which obviously means we've completely fixed our fiscal problems and stopped running trillion-dollar deficits.
Just kidding. We haven't fixed anything.
Bond markets don't care about fundamentals until suddenly they do. Right now they're pricing in slower growth, Fed cuts, and flight-to-safety flows. The rally reflects recession fears and positioning — not some miraculous improvement in Washington's spending habits.
The deficit is still massive. The debt ceiling fight is still coming. We're still borrowing to pay interest on money we already borrowed.
Bond yields can stay low for a while when growth expectations collapse. But the underlying fiscal reality hasn't changed at all.
Don't confuse short-term market moves with long-term solvency. Treasury rallies during risk-off episodes are normal. They don't mean the problem went away.