COMMENTARY
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The bond market has been trying to say something politely for several weeks now, and Friday morning it stopped being polite. The 30-year Treasury yield jumped to just under 5.1%, its highest since May 2025. The 10-year surged to 4.55%. The 2-year climbed above 4.06%. Across every maturity, the message was identical: the people who actually have to live with inflation data for a living are done pretending the equity market's optimism is warranted.
The data is not ambiguous. CPI came in at 3.8% this week, its highest since May 2023. PPI hit 6% annually, the hottest reading since late 2022. Import prices rose 4.2% year-over-year. Export costs surged 8.8%. Energy is driving most of it, and the Trump-Xi summit that was supposed to produce a mechanism for reopening the Strait of Hormuz produced a communique about how everyone agrees the Strait should probably be open. WTI climbed to $104.39. Brent hit $108.30. The diplomacy did not move oil. The oil moved inflation, inflation moved the bond market, and the bond market is now moving in ways that should concern anyone holding equities at all-time highs.
It is also worth noting this is not a uniquely American problem. German bunds jumped, with the 10-year yielding 3.127%. Japanese government bonds rose 7 basis points to 2.69%. UK gilts hit 4.56%. The global fixed income market is having the same conversation in multiple languages simultaneously, which suggests this isn't about Warsh or Trump or the Fed's communication strategy. It's about inflation that hasn't been solved and an energy crisis that hasn't been resolved, and bond markets around the world pricing that reality with considerably more honesty than equity markets have managed.
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Kevin Warsh took the Fed chair this morning with Trump demanding rate cuts in one ear and a 5.1% 30-year yield in the other. Those two things are not reconcilable with current data, and Warsh knows it even if the White House doesn't. Cutting rates into 6% PPI and $108 oil isn't monetary policy. It's a confession.
The equity market has shrugged off five consecutive sessions of bond market warnings and kept printing all-time highs. At some point that stops being confidence and starts being denial. The bond market has been around longer. It is not known for losing these arguments.
