Episode 101: The Government Will Pay You 5% to Lend It Money?!

The federal government now, the 10-year treasury yield, so folks who, when you buy a 10-year treasury, you're lending money to the federal government.

And these 10-year treasuries have been out of favor.

And so when they're out of favor, what happens is these treasuries sell for less money.

And when these treasuries sell for less money, then what happens is the yield is higher.

So right now, Matt, if I go buy a 10-year treasury, and that's a 10-year kind of commitment, it's going to yield me 5%.

And why might the federal government need to be paying 5% to borrow money right now?

Well, just because of the risk they're taking on more so.

Just with where things are sitting at again, we're seeing rates go up.

Where's the federal debt, Matt?

The federal debt's at $40 trillion.

Yeah, so that might make the federal government a bad risk.

Right.

So then the yields have to be higher.

So that means the treasuries are going to sell for less money.

That's what pushes the yields higher.

So when normally, here's what's supposed to happen.

Usually when the treasury yields go higher, this is the first time in 19 years that the treasury yield's been 5%.

It's been almost two decades.

So when the when the Treasury yield, when you can let money the government be paid back, five percent interest is really what's happening here.

The federal government has to pay you five percent interest to borrow money from you.

When that happens, a lot of that typically hurts the stock market.

And so folks say, well, I can make a guaranteed five percent guaranteed by the full faith and credit of the U.S. government, make five percent on a 10 year Treasury.

Maybe I don't want to risk money in the market.

But Matt, what's been going on in the market right now? What's pushing the market higher?

Pushing the market higher, we're seeing a lot of different things.

The federal government now, the 10-year treasury yield, so folks who, when you buy a 10-year treasury, you're lending money to the federal government.

And these 10-year treasuries have been out of favor.

And so when they're out of favor, what happens is these treasuries sell for less money.

And when these treasuries sell for less money, then what happens is the yield is higher.

So right now, Matt, if I go buy a 10-year treasury, and that's a 10-year kind of commitment, it's going to yield me 5%.

And why might the federal government need to be paying 5% to borrow money right now?

Well, just because of the risk they're taking on more so.

Just with where things are sitting at again, we're seeing rates go up.

Where's the federal debt, Matt?

The federal debt's at $40 trillion.

Yeah, so that might make the federal government a bad risk.

Right.

So then the yields have to be higher.

So that means the treasuries are going to sell for less money.

That's what pushes the yields higher.

So when normally, here's what's supposed to happen.

Usually when the treasury yields go higher, this is the first time in 19 years that the treasury yield's been 5%.

It's been almost two decades.

So when the when the Treasury yield, when you can let money the government be paid back, five percent interest is really what's happening here.

The federal government has to pay you five percent interest to borrow money from you.

When that happens, a lot of that typically hurts the stock market.

And so folks say, well, I can make a guaranteed five percent guaranteed by the full faith and credit of the U.S. government, make five percent on a 10 year Treasury.

Maybe I don't want to risk money in the market.

But Matt, what's been going on in the market right now? What's pushing the market higher?

Pushing the market higher, we're seeing a lot of different things.