Bonds Break

Thirty-year U.S. Treasury bonds made a new low this week of $112.31, a low price not seen since November 2007. The 10-year, five-year and two-year Treasury notes were also lower on the week, although not as aggressively. The yield curve remains inverted and has been since 2022, but the 30-year yield did some catching up this week. Current yields for Treasury instruments as of Sept. 29 are as follows:

Treasury Year Current Yield

Two-year 5.023 percent

Five-year 4.567 percent

10-year 4.524 percent

30-year 4.671 percent

An inverted yield curve, when short-term yields return higher than long-term, has been a prediction in the past of upcoming recessions, and recession predictions have been on the radar for the last year. A recession is most commonly identified by a fall in GDP in two successive quarters, and by that metric we are not in a recession, but there are signs of distress.

Inflation has come down from the peaks of 2022, but it has not been completely tamed. Oil prices have increased 30 percent since June, which will make it nearly impossible for some of the essentials like food and transportation to be curtailed. More troubling is that home prices have not retreated significantly in price, even with 30-year mortgage rates nearing eight percent. A log jam of current homeowners with rates already locked in at 3.5 percent or less is keeping the volume of transactions down, but if new developments are to occur in a manner that matches historical averages, one would have to imagine that prices will need to come down in order for that to happen, unless wage growth accelerates, which would lead to more inflation.

Cattle Futures Cough

Cattle prices for both feeders and fats have been in a bull market since coming off the lows in 2020. In that time there have been corrective dips, but they have not been large or long enough to constitute concern over a market that has continued to face tightening supplies and steady demand. In the last two weeks nearby feeder cattle contracts have decreased five percent in price. There has not been a fundamental shift in the supply story, but a five-percent decrease is enough to raise the question of whether consumer demand is simply clearing its throat, or if they are catching a cold.

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