Newsletter · · Ashutosh Agarwal

The 30-Year Treasury Yield Tops 5 Percent as Bonds Call the Fed's Bluff - The Long End & Fiscal Supply - Week of July 14, 2026

Rates and fiscal-supply newsletter for the week of July 8 to 14, 2026. The war and oil came back, newly released FOMC minutes showed nine officials now pencil in a hike this year under new chair Kevin Warsh, and the long end broke to fresh cycle highs, with the 30-year crossing 5.07% as the bond market played chicken with the Fed.

The Long End & Fiscal Supply

Week of July 8–14, 2026: The 30-Year Treasury Yield Tops 5 Percent as Bonds Call the Fed's Bluff

The war came back, oil came back, and the new Fed chair decided to sound like Paul Volcker. Put those three together and the long end of the curve did exactly what the bears have been warning about: it ripped higher. The 10-year is knocking on 4.6% and the 30-year has already printed above 5%. This was supposed to be the summer the "peak hawk" trade cracked and yields drifted lower on a cooling economy. Instead, the bond market spent the week playing chicken with the Federal Reserve, and, so far, winning.

TL;DR

  • The long end broke to fresh cycle highs. The 10-year Treasury yield sits around 4.5–4.6% and the 30-year has crossed 5.07%, roughly the levels last seen when oil was near $100, even though oil has only clawed back to about $75. That gap is the tell: yields are running ahead of the oil recovery, which means the market is pricing in more than just energy.
  • The Fed pivoted hawkish, hard. Newly released FOMC minutes show that under new chair Kevin Warsh, nine of the roughly thirteen policymakers now see a rate hike this year, up from zero just three months ago under Powell. One member went from no hikes to three in a single meeting.
  • The debate finally has two real sides. The fiscal bears (fresh Treasury data: over $1 trillion a year in interest, tariff refunds now outrunning collections) are louder than ever. But for the first time in weeks there's a genuine bull case with evidence behind it: a respected strategist arguing the deficit is actually shrinking and demographics point to sub-3% yields, plus hard flow data showing real-money investors quietly buying the 30-year.

What's new

1. The monthly Treasury data landed, and the interest bill is the story. On CNBC's Power Lunch (July 13), reporter Megan Casella walked through the June Monthly Treasury Statement: the fiscal-year-to-date deficit is now nearly $1.4 trillion, about 2% worse than last year, with both spending and receipts at record highs. Net interest on the debt was $104 billion in June alone, just off May's all-time record of $107 billion, comfortably more than $1 trillion a year now going to nothing but interest. The kicker: the government sent out $49 billion in tariff refunds last month (a result of the Supreme Court overturning the IEEPA tariffs) while collecting just $24 billion in new customs duties, the first month refunds outpaced collections. Why it matters: this is the raw fuel behind the supply story. More deficit means more issuance, and a bigger interest bill means the math only gets worse as yields rise.

2. Rick Santelli: 5% on the 10-year is "in jeopardy", and it's the war that did it. Also on Power Lunch, veteran bond-watcher Rick Santelli noted that yields are "up 70 basis points since the war broke out," that the year's high-yield close of 4.67% is now "definitely in jeopardy," and that a 5% 10-year is "possible" though "still not my base case." His most sobering point: the 10-year had a low-yield close under 4% as recently as February 27, one day before the war restarted. Why it matters: Santelli is naming the exact resistance level the whole desk is watching, and he's putting the blame squarely on the war-and-oil channel rather than on fiscal supply alone.

3. The FOMC flipped from zero hikes to nine, under a hawkish new chair. On The Peter Schiff Show (July 9), Peter Schiff dissected the freshly released FOMC minutes, the first meeting with Kevin Warsh in the chair (Powell still attending, just no longer running it). Back in March, "not a single FOMC member was expecting a rate hike this year." Ninety days later, "nine of them see a rate hike this year," and one member swung from zero hikes to three between now and year-end. Schiff calls it "theatrics", a new chair in his honeymoon window using tough talk to establish independence while President Trump stays politely quiet. He also flagged the concrete long-end damage: the 10-year at 4.58% and the 30-year at 5.07%. Why it matters: whether it's real resolve or a performance, a Fed openly debating hikes is a body-blow to anyone hoping the long end rallies on rate cuts.

4. James Lavish: the bond traders are "calling the bluff." On What Bitcoin Did (July 8), fund manager James Lavish laid out the fiscal-dominance case in plain terms. His centerpiece: when Powell cut rates by 100 basis points right before the last election, the 10-year yield went up 100 basis points, because "the bond traders, they didn't swallow it. They called the bluff." The lesson, he argues, is that you can cut the short-term rate all you want but the long end demands a real return in a world of relentless issuance, "we are in fiscal dominance and we have an issue here of having to issue more and more and more debt." He also walked through the Fed's quiet balance-sheet games: buying T-bills to top up bank reserves and the Treasury General Account, and rolling maturing mortgage bonds back into Treasuries so that "the mortgage-backs are coming off and the treasuries continue to rise." Why it matters: this is the mechanical version of the bear thesis, cutting rates doesn't fix the long end, and the Fed may already be doing a soft, disguised version of buying bonds.

5. Jim Paulsen makes the bull case nobody wants to hear: the deficit is shrinking. On Excess Returns (July 11), longtime strategist Jim Paulsen pushed back on the entire panic. His striking claim: the net deficit-spending-to-GDP ratio over the trailing 12 months has actually contracted by about two percentage points, from roughly 7% to 5% over the last ~15 months. He argues the war re-tightened policy (yields up ~70bp from sub-4% lows, the dollar up 5–6%, real money-supply growth back near zero), which will slow the economy with a three-month lag. On yields specifically, he thinks the doom crowd has it backwards: a long-run moving average of inflation tracks the 10-year yield remarkably well, and if inflation settles back near 2%, that framework implies a 10-year under 3%. Layer on deteriorating US demographics, labor-force growth under 1%, heading toward 0.5%, and he sees "a lack of inflation, a weak growth problem" over the next five years, not a yield spiral. Why it matters: this is the most serious, data-backed bull-duration argument to hit the podcasts in weeks, and it directly contradicts the fiscal-supply narrative using the government's own deficit trend.

The debate

For the first time in a while, both sides showed up with evidence. Here's the steel-man of each.

The bears: the long end is re-rating structurally, and the Fed just poured fuel on it.

  • The hard fiscal picture is ugly and getting uglier: >$1 trillion/year in interest, a ~$1.4 trillion year-to-date deficit, and tariff revenue now negative after refunds (Power Lunch).
  • Porter Collins and Vincent Daniel, the ex-Citadel investors of Big Short fame, told Kontrarian Korner (July 7) they're "card-carrying believers in the debasement theme," expressed through gold. Their logic: "it's really hard to understand how you can run chronic 4% to 6% fiscal deficits… again and again and again," and at 125% debt-to-GDP "it's hard… to find austerity." They only turn "really scared and super bearish" on risk assets "when the Fed has no choice but to truly tighten rates", because that's when "the tide's actually going out."
  • Peter Schiff (The Peter Schiff Show) notes bond yields are already at cycle highs with oil only at $75, implying that if oil retakes $100, "the bond market is going to be much higher than it was before," with "substantial negative consequences" for housing and an equity market "just whistling past this interest rate graveyard."
  • Rick Rule, on Palisades Gold Radio (July 11), put a number on the real-yield problem: the 10-year "yields 4.6% in a currency that I would argue is depreciating in terms of purchasing power by 8% to 10% compounded", so "you buy a US 10-year Treasury, you lose 4% a year compounded for 10 years." What would make him sell his gold? A balanced budget, a plan to pay down $40 trillion of debt, entitlement reform, and a positive real rate, which he figures would require a 10% 10-year, a 12% mortgage rate, and an 11% prime rate. Probability, he says, "functionally nil."
  • The plumbing risk is external, too. On the RiskReversal Pod (July 13), Guy Adami flagged Japan as the market's ignored "sword of Damocles": the yen at 162, past the ~160 level where the Bank of Japan historically intervenes, and a JGB market "deteriorating at a historic pace" while "nobody seems to care." If Japan, still the largest foreign holder of Treasuries, has to sell bonds to defend its currency, US long rates go higher.

The bulls: this is a war-and-oil scare, not a solvency crisis, and the fundamentals point down.

  • Jim Paulsen's shrinking-deficit and demographics case (Excess Returns) is the anchor: sub-3% yields as the multi-year destination, not 5%-plus.
  • Liz Thomas of SoFi, on the RiskReversal Pod, argues yields are rising for the wrong reason, the Middle East and oil nerves, not an overheating economy: "you don't hike rates into a slowing economy, particularly an economy that's being slowed by geopolitical problems that we have created." She's firmly in the "no hikes this year" camp; co-host Guy Adami thinks the Fed can "sit on their hands until sometime early next year, if not next summer." She also right-sized the Japan fear: Japan holds a big Treasury pile but it's "only like 13%" of the total, "not 50%," and much of the 2024 carry-trade risk already unwound.
  • LPL Research's midyear outlook (LPL Market Signals, July 7) is the boring-but-constructive base case: a 4.00%–4.50% trading range on the 10-year for the rest of 2026, with a 3-handle only on "a pretty big economic deterioration." Their pitch: "keep calm and carry on" and clip a 5–6% high-quality coupon.
  • And the most under-appreciated data point of the week is a flow, not an opinion (more below).

Where does the tape land? The bears own the narrative and the headlines; the bulls own the fundamentals and, increasingly, the flows. The swing factor is oil: if the war fades and crude rolls back over, Paulsen and Thomas look right. If oil pushes back toward $100, Schiff's "much higher" long end becomes the base case.

Trades in play

  • TIPS over nominals. On Animal Spirits (July 13), F/m Investments' Alex Morris called TIPS (inflation-protected Treasuries) "a great deal now," noting they tend to beat nominal bonds "most of the time" once you account for realized inflation. His view is that reported inflation (he cited a 4.2% print) is understated and sticky, fertilizer/oil feeding into food, wage pressure, and a memory-chip shortage pushing up device prices.
  • Long the 30-year for a secular rate-down trade. Also from Animal Spirits: the operator flow signal. Morris said his firm has seen "a lot of action on the 30-year… folks who just want duration and are playing the fact there's a bid on bonds and they think rates will come down in the back end of the year." Crucially, up until "about six weeks ago" these were pop-in-pop-out traders near 5%; now he's seeing longer-term holders, "a year to multi-year trade", diversifying away from equities into long duration. That's genuine buy-side conviction on the bull side, not just punditry.
  • Gold as the debasement hedge. The gold bulls are using the pullback (Rick Rule pegged spot near $4,100, down from earlier highs) to add. Collins & Daniel are "loading into it again," Rule calls gold "stupidly under-owned" (0.5% of US savings assets vs a 2% long-run average, a 4x gap), and on BTC Sessions (July 7) Lawrence Lepard insisted "the debasement trade is not dead… it's just getting warmed up," expecting Bitcoin back to $120,000–$130,000 by year-end.

Read-throughs

  • Mortgage bonds (MBS): LPL Research told LPL Market Signals it has moved from overweight to underweight mortgage-backed securities, purely on valuation, spreads are "as tight as they are." Meanwhile James Lavish (What Bitcoin Did) describes the Fed quietly letting its MBS roll off while plowing the proceeds back into Treasuries, a stealth shift in the central bank's book.
  • Credit spreads are the thing to watch, not the yield level. On Power Lunch, strategist Jonathan Golub argued the market can handle even a 5% 10-year "as long as the bond market is saying this debt is all money good", the real headache is if tight high-yield spreads start widening on repayment fears.
  • Long-duration / AI equities: Peter Schiff's warning is aimed straight at the AI capex boom, companies "borrowing so much money to build out the AI infrastructure" whose payback sits far in the future, making them acutely sensitive to a higher discount rate.
  • The dollar: notably muted. Schiff highlighted that despite the war re-escalation, the dollar index is "barely above 101", a small bid, not a flight-to-safety surge.
  • Japan / cross-sovereign: the yen at 162 and a wobbling JGB market are the key external transmission channel (see The debate). Guy Adami's read: if the market were pricing Japan correctly, "rates would be higher than they've been" and the VIX (near 16.5) is "completely mispriced."
  • Gold: cooled to ~$4,100 but the structural bulls are treating the dip as an entry, not an exit.

What changed vs last week

  • The whole frame flipped. Last week's read was "peak hawk cracks", a cooling labor market and a round-tripped oil price pointing toward a dovish reversal. This week the war and oil came back, the new Fed chair went openly hawkish, and the FOMC swung from zero hikes to nine members penciling one in. The long end responded by backing up to fresh cycle highs. The Q3–Q4 "steepener/supply" story that earlier podcasts framed as a later problem is arriving early, through the war-inflation-plus-hawkish-Fed door rather than pure supply.
  • The 5-handle on the long bond is here. The 30-year at 5.07% is a concrete escalation from the "10Y backed up to ~4.56%" chatter of prior weeks.
  • We finally have operators and flows, not just pundits. For two straight weeks the coverage was entirely strategists and commentators. This week added CNBC's hard Treasury data, and, more importantly, a real ETF-flow read from F/m Investments showing longer-term money stepping into the 30-year. That's the first tangible evidence for the bull-duration side.
  • Gold narrative cooled but conviction hardened. Two weeks ago the story was Goldman's $4,900 target and a silver squeeze. This week gold sits near $4,100 with the froth washed out, and the debasement bulls (Collins, Daniel, Lepard, Rule) are using the pullback to add rather than retreat.