This morning yields are once again rising, with the Treasury 30 year hitting highs of 4.856%, a level it hasn't touched since 2007.
The move sure seems to support a notion Rick Santelli laid out yesterday on Fast Money that bond vigilantes are back in full force. Santelli even predicted that 10 year yields could touch as high as 13%.
"In the grand scheme of things I think rates are going higher," Santelli says.
"We have a lot of potential room to the upside," he says, drawing a chart of bond technicals. "Worst case scenario, where are Treasury rates going to go? 10 year I'd say in the next seven years you should be able to see 13.5% or 14%."
"If you want to know where inflation is taking markets and why, just look at government spending. Vigilantes have new horses and they are riding and I really do think that is the answer. We are spending too much, we are not learning to cut back."
"I think we're out of control as we approach a $2 trillion deficit and this is the market's way to get Washington's attention," Santelli adds.
[ZH: Food for thought if, as Santelli warns, we are entering a new cycle...]
When Melissa Lee asks about whether or not the Fed would then engage in yield curve control (because that is, of course, the first line of thinking on a CNBC desk), Santelli responds: "You can squeeze a water balloon seven ways from Sunday but eventually it pops out somewhere. They are running out of little tricks to pull out of their bag."
"Quantitative easing removed many signals from the market that now it's trying to put back in place. And they can do as they wish. If they keep tinkering with this, the problem is there are too many large economies in the same boat. And who's going to end up buying this paper?"
Anchor Tim Seymour then asks about the BOJ losing control of the bond market (an idea he openly mocked on-air in 2016). He calls the BOJ "the biggest wild card" and suggests that yield curve control could be over. Santelli responds: "Bank of Japan could actually pull the plug that drains the water on everybody's bathtub."
Here's the full video:
Said one astute viewer...
Gotta love how @CNBC allows him to talk about this so long as he frames it with yields "burning to the upside" and not frame it as most people would, bonds are crashing in price.— piker (@somniummortus) October 2, 2023