The 30-year Treasury just hit a level it has not seen since 2007.
That was the year the first iPhone came out. The bond market is telling the Fed a new story.
The bull case for stocks at the start of the year was simple. The Fed would cut rates. Money would get cheaper. Stocks would float higher.
That story flipped fast. Last week's inflation prints ran hot. Oil prices surged on the U.S.-Iran fight. Buyers started dumping long bonds. Those are the bonds hit hardest when prices rise.
The repricing was loud. The 30-year landed at 5.189%. The 10-year, which sets most mortgage and car loan rates, hit 4.683%.
The 2-year, which moves on Fed bets, climbed to 4.135%. Jim Lacamp at Morgan Stanley Wealth Management put it blunt on CNBC: rate cuts were the bull case for the year. Now the bet is a hike.
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Long bond yields are climbing almost everywhere.
Germany's 30-year sits at 3.684%. The U.K.'s 30-year is at 5.773%. Japan's 30-year hit a record this week, helped along by its own political and budget jitters.
Jefferies chief economist Mohit Kumar says the global move is driven by three things. The first is higher energy costs. The second is big government deficits. The third is country-specific political noise, which Kumar cited in the U.K.
He does not expect oil to fall back to pre-war prices. Even with a Middle East deal, his call is 25-30% higher prices in six months. Brent crude traded near $110 on Tuesday. WTI was near $108.
Bank of America's latest fund manager survey lines up with that view. 62% of those polled now expect the 30-year U.S. yield to hit 6%. That is a level it has not touched since late 1999.
A 6% read would be about 85 basis points above today's print. That is a big move. Only 20% of those polled are still calling for a 4% yield.
The split shows how fast the mood has shifted. Six months ago, most pros were calling for cuts. Now the same pros are pricing in higher long rates.
Yields this high are not just a bond story. The 10-year sets what shoppers pay on mortgages, car loans, and credit cards.
Stocks have been under pressure as yields have climbed. Housing, autos, and consumer credit have taken the worst hits. Bank stocks have been mixed. They earn more on loans when rates are higher. But they also worry about loan defaults if growth slows.
The Fed will meet again with a market that is calling its bluff. If hot inflation prints keep landing, the talk moves from "when do they cut?" to "when do they hike?" That is a very different setup for stocks.
The bull case for stocks this year was supposed to start with cheaper money. Right now, money is getting more costly each day.
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