To: Anyone still long duration
From: The Yield Curve
Date: May 30, 2026
Priority: You should have read this six months ago
Let me be direct with you.
I am a 30-year Treasury bond. My yield is sitting at roughly 5.1%. The last time I was here, Bear Stearns existed. The iPhone had just been announced. "Quantitative easing" was a term that appeared only in academic journals and the fever dreams of heterodox economists. You did not think I could come back. You were wrong, and I am sending this memo because the equity market across the hallway is throwing a party and nobody has told them what building they're in.
Here is the situation as I understand it.
The United States government currently carries debt north of $39 trillion. The deficit is projected at 5.8% of GDP this year. Moody's stripped the Aaa rating in May 2025, completing the hat trick — all three major agencies have now downgraded American sovereign debt at some point in the past fifteen years. The response from Washington was roughly what you'd expect: a debt ceiling raised to $41.1 trillion in something called the "One Big Beautiful Bill Act," signed on July 4, 2025, a date that was presumably chosen for the irony. The response from markets was a few days of politely nervous trading followed by nine weeks of record highs.
The debt compounds. The interest payments compound faster. Moody's estimates the deficit widens toward 9% of GDP by 2035 as entitlement spending rises and revenue stays flat. The self-reinforcing arithmetic is not complicated: bigger debt means higher interest expense, which means bigger deficits, which means more borrowing, which means upward pressure on yields, which means heavier interest burden on the next tranche of debt. This is not a forecast. It is a description of the current trajectory, already in motion.
And yet. The S&P 500 closed at record highs Friday. Again.
On the matter of Bitcoin ($BTC), which is having a difficult spring:
Bitcoin's advocates have spent years constructing an elegant argument. The fiscal trajectory is unsustainable. Debasement is structural. Hard-money assets will win eventually because fiat systems carrying this load cannot hold. The long arc of the argument is not obviously wrong.
The problem is the short arc. When I — the 30-year Treasury — yield 5.1%, the opportunity cost of sitting in a non-yielding asset becomes very concrete, very fast. Bitcoin ETFs bled roughly $700 million in weekly outflows when yields last spiked hard in mid-May. Spot volumes on Binance collapsed from around $50 million in net flow to $6.5 million. Coinbase went from $30 million to $5.7 million. The institutional bid, which everyone celebrated as Bitcoin's maturation into legitimate asset class status, turned out to have a rate sensitivity that looks almost identical to a leveraged tech growth stock.
CME FedWatch was pricing over 44% odds of a Fed hike by December, as of mid-May. The same market that entered 2026 expecting two cuts before year-end. Warsh wants to ease. The bond market is pricing the opposite, and the bond market has a better historical win rate in this particular argument.
The long-thesis Bitcoin crowd is not wrong about the destination. They may simply be wrong about the sequence. The fiscal doom loop that makes BTC's monetary thesis compelling is also the fiscal doom loop that sends yields to 5%, which is the exact environment that punishes the speculative capital needed to actually push BTC higher near-term. The irony is load-bearing.
There is one small signal worth watching: tokenized Treasuries on-chain hit a record $15 billion in total value locked as of mid-May, up roughly 70% year-to-date. Capital is not leaving crypto entirely. It is parking itself in the chain-native equivalent of what I am offering — dollar-denominated yield, DeFi composability, liquidity optionality. That is a pragmatic adaptation. Whether it is a prelude to a return to speculative excess or a permanent reclassification of what crypto capital does, nobody knows yet.
A brief interlude on rice:
Asia rice prices surged 20% in May, driven by the Iran war's disruption to shipping lanes and adverse weather across producing regions. Emerging market food inflation is not a footnote. It is a leading indicator of social stress, central bank policy divergence, and capital outflows that eventually loop back into dollar strength, which loops back into yield dynamics, which loops back into everything discussed above. The Bloomberg homepage carried it as a sidebar Friday. It should have been a headline.
Back to the memo:
The equity market's position is internally consistent, if you accept its premises. The premises are: AI capex continues uninterrupted. Corporate margins — at a record 13.4% for the S&P 500 in Q1 2026, with IT at a genuinely extraordinary 29.1% — hold or expand. The Iran situation resolves within the ceasefire window. Real consumer income, which has now fallen for three consecutive months in inflation-adjusted terms, does not matter because the consumer who matters most to the AI infrastructure trade is a sovereign wealth fund, not a grocery shopper.
Those premises are not insane. Some of them might even be right.
But sovereign credit is deteriorating. The long bond is at a 19-year high. The Fed's preferred inflation gauge just printed 3.8% — its worst reading since May 2023 — and the Cleveland Fed's nowcast suggests May will be worse. Real disposable income is falling. And the market is on its ninth consecutive week of gains.
At some point these two things — the structural deterioration of the fiscal and inflation picture, and the continued levitation of equity multiples — have to have a conversation. That conversation has not happened yet. When it does, it will probably happen very fast and feel completely obvious in retrospect.
In the meantime, I yield 5.1%. I have been trying to get your attention for months.
— The 30-Year Treasury Bond
All figures sourced from government data releases, market close data, and institutional research, May 15–30, 2026. Not investment advice.
