Why are LT rates rising? Most people say it is the long overdue reckoning. After resisting inflation, the Fed, most of all insane debt levels for years, the chickens have finally come home to roost for longer-dated Treasury notes and bonds. And that would mean the market was wrong about all those factors up until now. What IS happening on the curve?

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Negative downgrades to the world. Negative rates among major bonds already. Negative prices for consumers - here in the United States. The deflationary signals keep picking up. More to the point, all of this adds up to what markets like swaps have been saying for years. And that's the bad news. 

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World Bank 
https://www.worldbank.org/en/publication/global-economic-prospects

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Central bankers are being forced to reckon with their inflation biases which are not standing up to reality. Deflationary consequences are breaking out worldwide, either in the form of increasingly layoff-riddled labor markets or outright price deflation; sometimes both. The global race to the bottom for interest rates is spreading as acknowledgement of economic facts rather than Economics fantasy. 

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RBI went full-blown shock and awe. Yet another major global central bank previously fixated on "inflation" abruptly and aggressively joining the race to the bottom. For India, it wasn't  heavy rate cuts this time. Indian Officials said they want to shore up confidence; OK, so how bad is confidence if they fell "shock and awe" is necessary to shore it up?

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BBC India central bank delivers sharp rate cut as growth and inflation fall
https://www.bbc.com/news/articles/c62vdq6g945o

Times of India
https://timesofindia.indiatimes.com/business/india-business/bank-loans-to-nbfcs-slows-sharply/articleshow/121557368.cms

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ST rates have dropped sharply in the past few weeks, the past few days, in particular. The 4w Treasury bill now yields less than IOR, repo, even the Fed's RRP "floor." That's not all: the 3m10s spread has reinverted again. At the same time another major central bank just hit the panic button, going with a 50-bps cut only a few months after getting started. Where is this all heading? Not in Jay's direction.

Eurodollar University's conversation w/Steve Van Metre

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The payroll estimates for May were a total mess. The headline was weak, revisions make it totally unreliable anyway, and it only gets worse from there. A lot worse. The labor market is breaking down and it's getting uncomfortable and dangerous.

Eight times now. The ECB is trying to say it might be one now, yet no one is listening least of all the economy. What everyone really wants to know is, when is the Fed going to follow along? In addition to all these other central banks acting, the latest reports from the Fed itself show that rejoining the global rate race might be a lot closer than everyone thinks. 

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ECB Press Conference Statement 
https://www.ecb.europa.eu/press/press_conference/monetary-policy-statement/2025/html/ecb.is250605~f00a36ef2b.en.html

Bloomberg US Initial Jobless Claims Rise to Highest Level Since October
https://www.bloomberg.com/news/articles/2025-06-05/us-initial-jobless-claims-rise-to-highest-level-since-october

Fed Beige Book May 2025
https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20250604.pdf

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For a week when the labor market and its data are in the bright, blaring spotlight, it did NOT get off to a good start. Not only ADP, also ISM. Both together showed the economy continued losing momentum and vitality in May - even with tariff delays and a stock market rebound. Both ended p with some of the worst numbers for each in years. 

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ADP May 2025
https://adpemploymentreport.com/

Bloomberg US Hiring Cools to Slowest Pace in Two Years, ADP Data Show
https://www.bloomberg.com/news/articles/2025-06-04/us-hiring-falls-to-slowest-pace-in-two-years-adp-data-show

Bloomberg US Services Activity Contracts for First Time in Nearly a Yearhttps://www.bloomberg.com/news/articles/2025-06-04/us-services-activity-contracts-for-first-time-in-nearly-a-year

CNBC Trump says ‘Too Late’ Powell must lower interest rates after weak ADP jobs report
https://www.cnbc.com/2025/06/04/trump-powell-adp-jobs.html

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Why are swap spreads today as negative as they had been in the worst parts of April? Why is Swiss franc nearly as strong? Consumer prices undershooting and even turning negative offer a bigtime clue. As does the latest from Chinese and American factories. It’s not one big thing like April, it’s all the little things which keep coming up and piling on. 

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Bloomberg Swiss Inflation Turns Negative for First Time in Four Years
https://www.bloomberg.com/news/articles/2025-06-03/swiss-inflation-turns-negative-for-first-time-in-four-years

Bloomberg Euro-Zone Inflation Slows Below 2%, Backing More ECB Cuts
https://www.bloomberg.com/news/articles/2025-06-03/euro-zone-inflation-slows-below-2-backing-more-ecb-rate-cuts

Bloomberg RBA’s Hunter Sees US Tariffs Dragging on Australian Growth, Jobs
https://www.bloomberg.com/news/articles/2025-06-03/rba-s-hunter-sees-us-tariffs-dragging-on-australian-growth-jobs

OECD Economic Outlook, Volume 2025 Issue 1
https://www.oecd.org/en/publications/oecd-economic-outlook-volume-2025-issue-1_83363382-en.html

CNBC U.S. growth forecast cut sharply by OECD as Trump tariffs sour global outlook
https://www.cnbc.com/2025/06/03/us-growth-forecast-cut-further-by-oecd-as-trump-tariffs-sour-outlook.html

Bloomberg China’s Private Factory Gauge Plunges to Weakest Since 2022
https://www.bloomberg.com/news/articles/2025-06-03/china-private-factory-gauge-unexpectedly-shrinks-after-us-truce

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Several more countries around the world are reporting contractions in GDP even before getting to trade wars and any tariff impacts. The latest cluster around Scandinavia and have European banks overall behaving in very curious ways. So much so, the typically hands-off ECB is writing letters to them and threatening on-site visits to get some answers before the economy really takes its turn. 

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Bloomberg Sweden’s Surprise Economic Contraction Boosts Rate Cut Odds
https://www.bloomberg.com/news/articles/2025-05-30/swedish-economy-unexpectedly-shrinks-weighed-down-by-investment

Bloomberg ECB Steps Up Scrutiny of Banks’ Exposure to Private Markets
https://www.bloomberg.com/news/articles/2025-05-30/ecb-intensifies-scrutiny-of-banks-exposure-to-private-markets

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