Introduces topic: Treasury yields falling on geopolitical tensions, asks Jim Bianco to explain the 2025 rally in 10-year yields despite the 'Salam America' story.
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Jim Bianco
In 2025, US 10-year yield was the only long-term yield globally to decline. Attributes this anomaly not to economics but to political pressure from the President demanding lower rates.
Clarifies: Is there an implicit 'Treasury put' from the administration making people reluctant to sell 10-year bonds?
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Jim Bianco
Confirms the specificity points to political influence. Argues this can't last forever; 2026 economics will dominate. Strong growth (4.3% GDP) and inflation in upper 2% will produce higher 10-year yields in 2026.
Asks about the global bond market center of gravity shifting from China to Japan.
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Jim Bianco
Confirms shift to Japan is a net negative for US Treasuries as rising Japanese rates incentivize selling US bonds. Focus returns to US Fed policy and growth. Notes deep Fed dissent (9-3 vote) and suggests strong growth could mean no rate cuts in 2026.
Asks if 2026 presents risks or opportunities given recent foreign policy developments.
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Jim Bianco
Risks are primarily to inflation. Venezuela situation is short-term bullish for crude oil as China seeks alternative supplies. Sees inflation staying high 2s to low 3s, meaning current Fed funds and 10-year yields might be too low.
Asks what makes him most nervous about inflation, given tariffs haven't shown impact yet.
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Jim Bianco
Tariff inflation impact is delayed. Announced rate is ~17-18%, but collected rate is only ~10% and rising. Expects this number to keep rising into 2026, with inflation impact likely mid-2026.
Asks about unintended consequences of presidential pressure on rates, noting it has galvanized Fed voters, changing dynamics from previous leadership.
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Jim Bianco
Fed is shifting from chairman-dominated unanimous votes to independent voting like BoE/BoJ. Even if Trump appoints a dovish chair, they may not have votes for 1% funds rate if economy is strong and inflation sticky.
Asks if this Fed independence is a pillar for his call of little Fed action this year.
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Jim Bianco
Yes. Many expect 2-3 cuts with a new dovish chair, but independent voting may prevent it.