Breaking News: 10-Year Treasury Yields Approach 2007 Highs
The current economic landscape presents a growing crisis, affecting everything from car purchases to mortgages and credit card expenses, and there are no signs of relief on the horizon. As costs continue to soar, the strain on the economy is palpable, and there’s growing concern that it could lead to a significant downturn.
One alarming factor in this economic equation is the ever-increasing debt burden on U.S. households. Bloomberg reports that debt payments are consuming a larger share of household incomes. In just three short years, the 10-year Treasury note yield has skyrocketed from a mere 0.30% to a staggering 4.37%. To put this into perspective, that’s an increase of over 400 basis points, or nearly 11 basis points each month for 36 consecutive months. Treasury yields have surged from their all-time lows to levels not seen since 2007 in a remarkably short span.
The significance of this development cannot be overstated. What’s driving this dramatic shift? It’s a combination of factors, including the actions of the Federal Reserve and record debt issuances by the U.S. Treasury. We are, in essence, witnessing history unfold before our eyes.
In another alarming statistic, total household debt has surged to a staggering $17.06 trillion as of Q2 2023, with credit card debt alone exceeding $1 trillion. The cost of purchasing a new car has also reached unprecedented heights. In 2019, it took 33 weeks of income to afford a new vehicle, a number that increased to 34 weeks in 2020. However, in 2023, it now takes a staggering 42 weeks, underlining the current state of new car affordability.
Adding to the financial strain, interest rates for new auto loans have climbed to an average of 7.4%, marking the highest levels in over 15 years, as reported by Edmunds. The financial markets have also witnessed more yield curve inversions since the pandemic, a trend not seen since the tumultuous days of 2008.
Amidst these economic challenges, the return of $100 oil, record-breaking debt accumulation, and plummeting housing affordability are further contributing to the complex economic landscape. Interestingly, we’ve now seen as many yield curve inversions as during the Dot-com bubble.
A peculiar aspect of this economic scenario is that if the Federal Reserve manages to avert a recession, it would mark the first time in history with more than ten yield curve inversions without an accompanying economic downturn. As we navigate through these challenging times, American consumers are feeling the financial strain this shopping season, with plans to spend 40% less than they did in 2022, underscoring the deep financial stress that has gripped the nation.
We have a situation that will dwarf the 2008 financial crisis.
— Non-Fungible News (@Not_So_Fungible) September 19, 2023
Debt payments are taking up a larger portion of US household incomes, per Bloomberg: pic.twitter.com/gCLoSoYRXb
— unusual_whales (@unusual_whales) September 20, 2023
The 10-year note yield went from 0.30% to to 4.37% in just 3 years.
That’s over 400 basis points or nearly 11 basis points per month for 36 months straight.
Treasury yields went from all time lows to their highest since 2007 within 3 years.
Many people do not understand how… pic.twitter.com/ya9kYOUGSd
— The Kobeissi Letter (@KobeissiLetter) September 20, 2023
Total Household Debt Reaches $17.06 Trillion in Q2 2023; Credit Card Debt Exceeds $1 Trillion
Ironically, excess government spending is costing citizens more than ever.
Getting the deficit under control is the 1st step toward improving affordability.
This should be our top priority alongside inflation.
Follow us @KobeissiLetter for real time analysis as this develops.
— The Kobeissi Letter (@KobeissiLetter) September 19, 2023
Weeks of income needed to purchase a new car:
2019: 33 weeks
2020: 34 weeks
2023: 42 weeks (!)The current state of new car affordability, in a nut-shell.
(via Cox Auto)
— CarDealershipGuy (@GuyDealership) September 19, 2023
Interest rates for new auto loans now average 7.4%, the highest they’ve been in over 15 years, per Edmunds.
— unusual_whales (@unusual_whales) September 20, 2023
Markets have now seen more yield curve inversions since the pandemic and 2008.
We have seen just as many yield curve inversions as the Dot-com bubble.
All while $100 oil is back, debt is rising at a historic pace and housing affordability is a record lows.
If the Fed avoids a… pic.twitter.com/UTKRfpbrlh
— Adam Kobeissi (@TKL_Adam) September 20, 2023