Interest Rates on the Rise

 5/15/2026

Interest Rates on the Rise

 

The yield on the ten-year Treasury note has now risen to 4.57%. The yield on the thirty -ear note has risen to 5.11%. This exceeds the 5.08% yield recorded in October, 2023.  Why is this important?

The Federal Debt now exceeds the annual Gross Domestic Product. The interest on the national debt is more than the Defense Department annual Budget. One can choose to spend more or less on defense. Trump’s latest Defense number is $1.5 trillion. Maybe, but there is no choice about the cost of the debt which is already issued. As it matures it must be re-financed. This means the new rates will be higher. In fact, this can be seen as a break-out in rates to new highs. More of this will follow.

The ten-year note also sets the pace for mortgage bonds. A slowing housing market is liable to get slower as a result.

And then there is the oil price, now at $14.63. On and offshore storage has fallen some 250 million barrels since March.  Consumption can be cut but there is a limit. That is about 2.5 days of global use. The critical level is referred to as ‘tank bottoms’ in the oil field. J P Morgan Chase estimates that in this condition the industry will be at an operational stress level by early June. With no change in Hormuz traffic, the industry is at operational floor level by September.

The International Energy Association has released 164 million barrels into early May. Governments can release more but this does not increase supply as these reserves once gone, are just that.

US stocks of diesel are falling below 100 million barrels of diesel. This matches the low level of 2003.

This looming crisis of oil supply would seem to negate the possibility of lower interest rates.  Annual inflation now runs about 3.6%.

Which brings us to the stock market. Despite new highs in the SPX, there are more stocks down than up in that index. Both the SPX and the NASD 100 or JDX gapped down today.  The index now trades around 7,430. It would take a drop under the March low around 6,400 to establish a top in the market. The QQQ a proxy for the NDX trades at 61.71. Its March low was 39.

Trump has tried to talk the price of oil down, as mentioned here last week. But references to a quick end to the Iran war send the wrong message to Iran. Iran knows Trump is under the pressure of looming mid-term elections.  A vote on the Iran war was tied at 50-50 in the Senate just this week. A few Republicans voted with the Democrats to halt the conflict. Iran is surely watching

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