Day: May 19, 2026💾

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What I’m watching – the bond markets 🏦

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This week the global bond market is experiencing a severe deepening rout, driving government borrowing costs to multi-year highs. Investors are shifting out of fixed-income assets due to persistent energy-driven inflation fears, heavy corporate debt issuance, and a major leadership transition at the U.S. Federal Reserve. 

Soaring Treasury and Sovereign Yields 

Yields, which move inversely to bond prices, have surged significantly across the globe: 

  • The U.S. 30-Year Treasury yield has hit 5.20%, its highest level since 2007 on the eve of the global financial crisis.
  • The U.S. 10-Year Treasury note has reached 4.68%, a peak last seen in early 2025.
  • Global bond yields are climbing in tandem, with Japan’s 10-year government bond matching levels from the 1990s and the Group of Seven (G7) average 10-year borrowing rate approaching 4%. 

Key Drivers of Market Volatility

  • Geopolitical Strains and Oil Shocks: The ongoing conflict involving Iran has caused massive energy market disruptions. The closure of the Strait of Hormuz has sent Brent crude climbing past $105–$109 per barrel. Investors fear this spike will cause long-term, structural inflation.
  • Fed Leadership Transition: High uncertainty surrounds the future path of interest rates following the confirmation of Kevin Warsh as the new Federal Reserve Chair, replacing Jerome Powell.
  • Sticky Inflation Prints: U.S. economic data revealed a hotter-than-expected April Consumer Price Index (CPI) at 3.8% year-over-year. This has forced traders to price in a 50% chance of a rate hike by December, completely reversing previous expectations of rate cuts.
  • Changing Buyer Demographics: The market faces structural strain as price-sensitive hedge funds trading through custody hubs (like the UK, Belgium, and the Cayman Islands) replace historically steady, less price-sensitive foreign central banks. 

Impact on Corporate and Credit Markets

  • The AI Debt Avalanche: High-yield and investment-grade corporate bonds are seeing a massive influx of new issuance. Mega-cap “hyper-scalers” are tapping the market heavily to finance expensive artificial intelligence infrastructure, with projected sector issuance soaring up to $250 billion.
  • Resilient Spreads: Despite the bond sell-off, investment-grade credit spreads remain remarkably resilient, narrowing slightly due to strong corporate fundamentals and robust retail fund inflows.
  • Broader Economic Headwinds: Analysts warn that if the 10-year yield breaks past 5%, it risks inducing “demand destruction” that could trigger a global spending crunch, dragging down equities and spiking consumer mortgage rates. 
Map: Sunday Lake
Map: Point Rock State Forest - West Branch State Forest
SVGZ Graphic: Control of State Government - By Percentage of US Population

Molon Labe

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Map: Battery Diagram
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Is Local Government Pointless?

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There are something like 965 towns, cities, and villages in NY State, along with 64 counties. All of them have elected officials, and civil servants providing mostly state and federally mandated services.

Autumn

The question is why do we even have local government anymore?

Nobody questions that the services of counties and towns are important, but in many cases they duplicate what the state currently does. Few governing decisions are made locally anymore. Most local government decisions are made with significant state involvement or influence, in the form of state regulations, state permitting, or in many cases actual laws passed by the state.

Local governments have a lot less freedom to make decisions that many pretend. All are highly dependent on state to go along with them. Most so-called local decisions are essentially decided at the state level. Local governments like to pretend they have significant control and power, but the reality is as creatures of state, and due to economic competition by surrounding towns, they are essentially powerless to decide their futures.

Albany in July

Local government is an idiom of an earlier era before modern communication techology, and modern transportation. Local government is from an era of horse and buggies. Local government tends to be stocked with well-connected political families and patronage. Local government tends to be totally ineffective, in an era when regional and indeed nationwide planning is needed, when any local decision can have vast impacts far beyond it’s own borders.

In a modern technocratic era, local decision making makes little sense, and squanders important public resources.