The Fed is selling its bonds, and regulators are making it harder for banks to buy longer term bonds.  “We are in a very different era,” says Larry Summers.   “You’re looking at 4.75 on the 10-year.” 

Mr. Summers, who has been one of the most accurate economists since Covid, thinks inflation will run minimally at 2.5%.  Additionally, the CBO thinks the deficit will be 7% of GDP by the end of the decade.  With term premiums traditionally at about 75 – 100 basis points, real rates conservatively at 1.5% and inflation conservatively at 2.5%, he says you’re looking at 4.75% on the 10-year.  This is his conservative case on each of the three variables.  Also, this isn’t the aftermath of the financial crisis.  We’re not seeing globalization.  We are seeing the opposite, in fact, and the growing empowerment of labor.