Who is on each side · Part 15
Can the AI trade survive a 10-year Treasury above 5% and an oil shock at the same time?
21 voices who disagree about Oil Is the Headline. The Real Yield Is the Bill.. Each voice is attributed and paraphrased, dated where the date is known, with a link where one exists.
The DeepStack callSplit
Oil reaches the AI trade through the Fed and the real yield while inflation expectations stay put. The multiple shrinks; the trade survives.
Our Call takes neither side alone.
12 voices
The boom pays the rate
Term premia have increased only 29 basis points since late June while implied policy-rate expectations have risen 51 basis points, showing policy-rate expectations account for most of the yield rise.
Falling term premia signal the market is moving toward the next stage of the cycle, Turbulence, which has historically been challenging for risk assets but favourable for government bonds as investors scramble for safe assets.
Conditions appear more likely too hot than too cold, which is the opposite signal from what would be implied if rates were too high, since rates that were too high would curtail activity and push inflation below target.
The interest rate that helps balance the technology and spending boom is not the same rate that keeps a smaller, weaker, or more indebted company happy, so if higher rates are needed to balance things overall, the weaker tails of the market can…
The large single-month jump in wireless telephone services prices does not change the underlying inflation story, since the same commentators who dismissed this reading as unrepresentative did not apply the same logic in reverse when wireless plan…
Matthew C. Klein has been making for years the point that prices most sensitive to domestic demand and least exposed to mismeasurement or other idiosyncrasies have consistently been rising 1-2pp faster than in the years immediately before the…
He attributes rising global and US Treasury bond yields predominantly to a global growth impulse, especially strength in the industrial side of economies worldwide, which is pushing inflation up and leading central banks to be expected to respond.
He states he is genuinely surprised that the stability of breakevens hasn't given way to more doubt about the Fed's ability to maintain stable inflation after years of missing its target.
The main reason for higher inflation is probably the more expensive oil, and a higher interest rate will not cure that; the Fed just wants to ensure inflation doesn't get out of hand.
Interest rate hikes are not currently a problem for the economy or investing, because if the economy and company profits grow faster than the interest rate, value is created, and the estimated Q3 GDP growth of 5.1% plus inflation gives nominal…
Artisan PartnersSecond-quarter 2026 letter
Risk assets performed well, aided by economic strength and AI enthusiasm, while Treasury yields rose due to elevated inflation readings that led to a repricing of monetary policy expectations, and credit markets generated solid returns driven by…
Artisan PartnersSecond-quarter 2026 letter
Treasury yields rose due to elevated inflation readings, which led to a repricing of monetary policy expectations.
14 voices
The two shocks compound
The term premium measures the extra yield investors demand for holding a long-dated bond beyond what expectations for Fed policy alone would justify, making it a key market-based gauge of fiscal sustainability and Fed credibility.
The combination of record diesel crack spreads and rising Treasury yields suggests the bond market is pricing in a broader inflation shock.
The Fed can no longer ignore the shocks; inflation has been above the Fed's two percent target for more than five years due to the pandemic, tariffs, the war, and higher oil prices, though inflation is still heading down, and with the jobs market…
There is a worry that inflation risk is building as people start building higher inflation expectations into wage negotiations and prices, which could lock inflation into the system.
The common theme across Bessent trying to talk rates down, Japan quietly stepping back as a buyer of US debt, and investors demanding a story instead of a spreadsheet is that markets are running on narrative and liquidity rather than fundamentals…
Only two things matter for the market day to day: oil and the Ten Year yield; when they rise, the market falls.
TSCS argues the front end cannot cap the long end: a hike is only about 4/10 of a percent of receipts and mostly lands as income with people who spend it, Treasury buybacks manage volatility rather than level, and the buyers who used to close the…
TSCS argues governments and central banks do not want long yields higher and will go a long way to stop it, which means that if they succeed real yields fall and today's 2.65% over inflation won't be on offer for long, and if the way they succeed…
Interest rates are rising due to inflation and increased competition with Treasuries from more debt issuance (hyperscaler debt, Japan, or elsewhere), and higher rates can be a catalyst for the AI buildout financing chain to come apart.
Beyond the lack of trust, rates are rising so much because of massive price-insensitive demand from hyperscalers, whose projected borrowing is around seven hundred fifty million against roughly two billion issued by the Treasury, approaching thirty…
If the Fed (Warsh) and Treasury (Bessent) can work together in a symbiotic, coordinated manner -- even amid squabbles elsewhere in government -- that is good enough to be seen by investors and foreign governments as the adult in the room, and he…
Harris Associates OakmarkThird-quarter 2026 letter
Heavy new bond issuance from technology hyperscalers investing in AI infrastructure is pressuring bond prices and increasing yields.
Mia Silverio concludes that given persistent inflation (above the Fed's 2% target for 5.5 years, the longest continuous stretch in 40 years), investors should invest more aggressively in stocks and avoid holding cash in checking accounts.
Rising interest rates (the 10-year Treasury yield hit 5.3% in Q3, its highest since 2007, as the Fed raised rates for the first time since 2023) are pressuring stock valuations because investors who can earn 5.3% on a risk-free Treasury demand…
13 voices
Oil stays out of the core
Job growth is weak and housing is soft, and Jim Paulson makes a strong case that the Fed hiked based on rear-view mirror data; DeepValue Capital is not calling for a recession but is not ignoring the risk either.
DeepValue Capital argues rising mortgage rates are already pressuring housing, the largest component (40%) of core CPI, creating big downward pressure on core CPI, while job growth has been weak enough historically to always be associated with…
Kris reports that Bill Ackman raised the thought that higher interest rates may not reduce inflation this time because demand for AI and energy is not affected by higher rates, and Kris says there is something to be said for this.
Core muted; energy a tail risk.
Oil and Iran are driving the inflation narrative, but underlying inflation breadth is muted.
The recent rise in the US 10-year yield has been driven by the real term premium rather than by inflation expectations or rate expectations.
He will not say inflation bulls are deranged and grants that inflation is always a very complex item to forecast with hundreds of variables, but says he sees nothing telling him a pernicious inflationary environment is coming.
If real-time rents and home prices were plugged into the CPI it would be close to zero and core would be well below 2%, and he thinks that will come through with lags because shelter matters far more than energy in the CPI.
Smead Capital ManagementSecond-quarter 2026 letter
Despite recent price volatility, structural supply constraints and geopolitical risk have raised the through-cycle oil price to around $80, which will allow APA Corp's oil holdings, which break even near $40, to generate significant free cash flow…
Oil prices are around $70 a barrel amid fears of demand destruction, but strong crack spreads suggest demand remains robust, and the manager believes the market is misreading the situation similarly to past cycles, expecting higher oil prices…
Aurelion Research is bearish on crude oil and expects WTI around $80 before the end of 2026, arguing China's structurally lower oil imports, more oil moving through Hormuz than headline data shows, and falling crack spreads will let the risk…
Blue Tower Asset Management LLC
Blue Tower Asset Management LLC uses a Société Générale note of June 8th to argue the price response has been mild by historical standards: a 14% loss of global crude supply from the Hormuz closure lifted prices about 30%, against the 1973 embargo…
Blue Tower Asset Management LLC
With the ceasefire and June memorandum of understanding declared over and full-scale fighting resumed, Brent has risen over 15% in the last week, and once global inventory buffers including the drawn-down US strategic petroleum reserve are…
7 voices
Voices that cross sides
The probabilities of yields rising or falling by a similar magnitude appear increasingly balanced, but history suggests the real economy becomes vulnerable as long-term rates approach the 5.5% area, so the next major move in yields may be lower…
Long-term Treasury yields are rising because the US economy is very strong: nominal GDP growth has accelerated, supported by a persistent fiscal deficit of around 6% of GDP and a large wave of AI-related capital expenditure.
Rates are rising for reasons beyond a strong economy: sticky inflation is lifting yields in the front end, record hyperscaler debt issuance is pressuring the belly, and fiscal worries are pushing up the long end.
Because diesel is embedded in the cost of goods broadly, a rise in diesel prices does not stay confined to the energy line of the CPI but migrates with a lag into core goods and services prices, which is the kind of pass-through the Fed cannot…
Nominal growth outruns the rate; the oil inflation is one hikes won't cure.
Current long-term Treasury yields are still low relative to reasonable expectations of inflation and growth, and are only obviously too high if inflation and growth are both set to slow sharply from current levels.
Producer price index (PPI) data show relentlessly stable inflation for core goods and services sold by U.S. businesses to consumers, with prices still rising about 1-2 percentage points faster than in the years immediately preceding the pandemic.
Notes
Not a disagreement.
Where two voices only seem to differ, or where the thread runs back to an earlier Part.
The thread
Part 7 asked who sets the long end; Part 10 asked whether the market is cheap. Part 15 puts the barrel and the yield in one sum.
Where they cross
Who answers whom.
The specific points where one voice meets another: the same evidence read two ways, or the same mechanism with a different sign.
Torsten Slok contradicts Michael Howell, on the mechanism
Michael Howell contradicts TSCS, on the mechanism
TSCS contradicts Torsten Slok, on the evidence
Michael Howell qualifies Matthew C. Klein, on the evidence
Michael Howell qualifies TSCS, on the evidence
Torsten Slok qualifies Michael Howell, on the mechanism
Mia Silverio qualifies Michael Howell, on the mechanism
Matthew C. Klein contradicts Michael Howell, on the evidence
Steve Eisman contradicts Matthew C. Klein, on the evidence
Michael Howell contradicts Michael Burry, on the mechanism
Steve Eisman qualifies Michael Howell, on the mechanism
Torsten Slok contradicts Michael Howell, on the evidence
Michael Howell contradicts Torsten Slok, on the mechanism
Torsten Slok qualifies Michael Howell, on the evidence
Artisan Partners qualifies Michael Burry, on the mechanism
Torsten Slok qualifies Kris, on a condition
Torsten Slok qualifies TSCS, on the mechanism
Michael Howell qualifies Artisan Partners, on the mechanism
TSCS contradicts Michael Howell, on the mechanism
Torsten Slok contradicts Michael Howell, on premise
Matthew C. Klein qualifies Artisan Partners, on a condition
Michael Howell qualifies Torsten Slok, on the evidence
Torsten Slok contradicts Artisan Partners, on the mechanism
Torsten Slok contradicts Steve Eisman, on premise
What would settle it
The dated tests.
The same tests the story set, on the Docket; results land on the Results page.
The 10-year: whether FRED's daily series closes at 5.50% or higher on any business day from October 16 through December 31, 2026, after a 5.31% high on October 5.
Part 15: Oil Is the Headline. The Real Yield Is the Bill. Pending
The barrel: whether the EIA's January outlook puts Brent's fourth-quarter 2026 average above the $105 a barrel it forecast on October 6, 2026.
Part 15: Oil Is the Headline. The Real Yield Is the Bill. Pending
Expectations: whether FRED's 5-year, 5-year forward inflation rate averages above 2.60% in March 2027, from 2.32% on October 9, 2026.
Part 15: Oil Is the Headline. The Real Yield Is the Bill. Pending
The trade: whether the Thrift Savings Plan's C Fund, an S&P 500 index fund, closes 10% or more below its highest close since October 16, 2026, on any day through March 31, 2027.
Part 15: Oil Is the Headline. The Real Yield Is the Bill. Pending
Analysis and opinion, not investment advice. Voices are paraphrased from public writing and attributed by name; DeepStack shows no score, ranking or accuracy for any person.