Making Sense of Sky-High Treasury Yields

Hey, What's News listeners. It's Sunday, September 27th. I'm Alex Osola for The Wall Street Journal. This is What's News Sunday, the show where we tackle the big questions about the biggest stories in the news. This week, we're serving up an episode of WSJ's Take on the Week, where host Miriam Gottfried and guest co-host Sam Goldfarb unpack the recent moves in the treasury market. Specifically, what drove the 10-year yield up to 5% and where things go from here. If you like what you hear, listen and subscribe to WSJ's Take on the Week, wherever you get your podcasts. Hey, everyone. It's Miriam. TELUS is out today, but I have a special guest joining me as co-host. I have my colleague, Sam Goldfarb, who's a markets reporter and covers U.S. treasury markets. And it's actually no accident that I invited Sam here to join me today. He is here because we are talking about the thing that's been the most important to me in the history of the U.S. and the history of the U.S. and the center of attention, the treasury market and the fact that the 10-year yield hit 5%. Sam, welcome to the show. Thanks for having me. So you may not think that the 10-year yield affects you that much, but you probably own 10-year treasuries through a bond fund or a mutual fund. You might own them directly. And if you are thinking about getting a mortgage, the 10-year is actually the thing that determines what mortgage rates are. And we wanted to find out how we got to 5% and where yields could go from here. So to talk about that, we have Megan Swiber. She is U.S. rate strategist at Bank of America. And in that role, she helps investors think basically about where yields could go from here and how to trade around that. Megan was a previous guest on Take on the Week, and we enjoyed that conversation so much that we decided to have her back. Welcome to the show, Megan. So happy to be back, Miriam. Really good to have you. So I'm going to just kick things off with the big question. We all know the headline, the 10-year yield hit 5%, and it was actually the highest level since 2007. Take us through the recent moves. How did we get here? So highest level since 2007, pre-global financial crisis, following the GFC, as we call it. Yields were in this very low range. And some of that was driven by Fed expectations. We had the Fed buying bonds through QE. We had the market really appreciating the fact that the Fed was going to be holding rates low. Now, QE is quantitative easing, right? Yes, yes, yes. Exactly, exactly. And we've broken out of that very low rate environment, of course, in recent years, namely coming out of the pandemic. And the big thing that shifted for investors was inflation and having to incorporate inflation expectations. And so we're going to talk a little bit about that. So let's get started. And a Fed that was hiking, not just because unemployment was low, but also because the Fed was needing to cool things down to tame the inflationary environment. So have rates just been kind of on an upward, directly upward trajectory? Have they been all over the place? So it has been a volatile several years, right? We had rates climbing as the market was pricing in higher expectations of a Fed that was going to need to hike aggressively to combat the inflation that we saw coming out of the pandemic. And then what the Fed ultimately did, they got to a policy rate above 5%, so above where 10-year rates are trading right now, and thought that they were seeing some signs of cooling in the labor market. And with that, they delivered subsequent cuts. And we did see rates, particularly at the front end of the curve, come back down. But what's been interesting, as the Fed had delivered on those cuts, 10-year rates stayed elevated versus what we've seen, again, coming out of the global financial crisis. And now we're seeing more of this upward pressure on rates again, as the Fed is hiking rates. And the big question is, what level are they going to have to hike to? And what really is anchoring the Fed on this path to hike right now is inflation. We do see the labor market in this tenuous balance, where it's a low-hire, low-fire environment. But we've seen unemployment decline over the past year. And if you look at real Fed funds rates, so where the Fed is setting policy, less inflation, that number has been declining. So it suggests to the Fed that they do need to hike to combat inflationary pressures. This is, of course, not just a U.S. theme, but it's a global theme. And a lot of that is driven this global pressure that we're seeing on inflation right now by commodity prices, namely this big upward move that we've seen in oil. But with the labor market really on this balance, and this is what we heard from Morsh at the Fed meeting, it allows the Fed to really just address the inflation elephant in the room. The Fed hasn't seen inflation come back to its 2% target in well over five years now. And it's the commitment that the market has made to the Fed as hearing from Morsh to address this inflationary pressure that really is driving yields up in the U.S. in particular. So I want to unpack that a little bit. But first, I have to ask, is 5% really that high? I mean, old people love to tell me about how their mortgage was 17%, 20% back in the day, and you young people know nothing about high rates. But here's the thing, Miriam, no one has a 17% mortgage rate right now. That is true. And what we have in the U.S. is this incredible thing which, comes back to the fact that home ownership was the American dream, and a lot of policy was implemented such that we have 30-year fixed rate mortgages in the U.S. And there's very little new buying or housing activity, housing turnover that we're seeing at these very elevated rates right now. So if you look at the mortgage market as a whole, people have and were able to lock in very low borrowing costs coming out of the pandemic. And so the fact that we have rates where they are right now, it's really slow. It's slowing that marginal buyer in the housing market right now. It's slowing when we think about this, right, housing construction, anyone's marginal costs for capital, deploying a new project, right. People are having to pay up for financing. We're seeing that in some industries, particularly this AI build out, there's this tremendous demand right now, even at these very elevated rate levels. So, you know, another aspect that we can think of is contributing to the upward pressure on the back end of the U.S. rates curve. It's the fact that we have a lot of this very heavy I.G. issuance that's competing with the investment grade debt, corporate bonds that are competing with treasuries. Because if investors are thinking, all right, well, we've got the 30-year yields above 5.2 percent, that's historically very elevated. I can go out and buy an investment grade bond from a very highly rated debitor that is 100 basis points over the 30-year trade. So there is now this competition, I'd say more so than what we've seen in recent history for investors in the bond market. And that's one of the contributors that we've seen to longer term rates, in particular, moving up relative to just what the market's pricing for Fed policy. I mean, people, there are people out there who do have memories of where rates were in the 1980s. But it is interesting to think that, you know, a 10-year yield at 5 percent is, you know, quite unusual. But it is interesting to think that, you know, quite unusual. We're never going to leave our house, right? Because this is now an asset on our balance sheet. You know, if you have free capital, you'll deploy it in the fixed income market, you'll buy bonds, you'll earn a higher yield relative to what we're paying right now for the cost of living in our home. And similarly, right, it's the fact that yields in the fixed income market are elevated. But we're also still seeing the equity market do very well. And this comes kind of back to this point about what is it really going to take to get inflation down. If we think that inflation right now is, you know, certainly in part driven by the uptick in oil prices, but even ex-oil, it's still in part a demand story. And if the Fed is really trying to think about the impact, the pass-through of higher interest rates to the real economy, because there's not this total pass-through to many consumers, right, because we have this fixed rate mortgage universe in the U.S., the pass-through is really more broadly through financial conditions. And the biggest volatility component in financial conditions is what equities are doing. So the question we're all trying to ask ourselves is, well, how high do rates have to get to actually cause a slowdown in demand that's going to be large enough to moderate the inflationary pressures that we haven't really been able to see the Fed address in years? And that's kind of the big question right now. What is it really going to take to slow the equity market down? No way, whoever the Fed is, share is going to be that they're going to be able to hike because a lot of this political pressure that's been placed on the Fed to cut rates. So interest rate expectations have moved drastically over the past year. And they were at that level, like the actual Fed funds rate, short term rate set by the Fed has been around like a little bit under four, right? Yes, yes, in terms of where the market was expecting the Fed was going to set policy expectations over, say, the next 10 years, as you noted, Sam. But what's changed, right, is we've got a Fed share that's clearly committing to combating the inflationary pressure that we've seen wants to say that, you know, this is this has been an issue for the past five plus years. I'm stepping in here to address this. He's hiked in September. And now the expectation is he'll continue to hike until there is some pass through that we see to lower inflation or at least inflation that's coming closer to what the Fed's target actually is. So, you know, Fed expectations are the dominant driver of the volatility that we've seen. In interest rates. And I would say oil is a big part of that, too, right? Yeah, we should talk about. Yes, yes, yes. But I just I want to just say, like, first and foremost, it's it's interest rate expectations. It's what the Fed is going going to do with policy over the next 10 years. There's also what we call a term premium component. And the way I think about term premium is really how much compensation do investors demand to buy Treasury securities? So basically, we've we sort of our most simple explanation was that the Treasury field reflects investors expectations for short term rates over the next decade. But the slightly more complicated version is that it's those expectations plus a little extra and the extra we call the term premium. Exactly. And there's a lot of like when I was at the Fed, you know, there's many models that the Fed uses to try to assess where a term premium is. Often a big part of that is just what the market's pricing for near term policy expectations regressed on the 10 year. Right. To get a sense of how much is the movement that we see. And I think that's a big part of that. Really, related to policy expectations versus how much of it is really about the marketplace. What's going on from a supply demand perspective? Sort of the black box, right? The term premium is where things get fun and interesting. And that's why when there was a period of time when yields were going up this year, when like interest rate expectations weren't necessarily going up. And I think that's when we had this like flurry of debate and discussion about like, what's going on? And I think that's when we had this like flurry of debate and discussion about like, what's going on with bond yields? And so you had more theories like, is it the deficit? Is it AI bonds? And I'm wondering if like, it seems like you're, you know, very much, you know, it's largely about like interest rate expectations person. But like, so that's at the top of your list of why yields have been going up. But maybe you could like, you know, rank them in order of what you think is the most plausible. So even over this period that you're talking about, Sam, a lot of it was still if you look at very purely what the market's pricing the Fed do over the next three years, versus the 30 year versus the 10 year, there's still a very high relationship there. But totally agree when you look at and we at B of A run our own fundamental fair value models, you look at Fed models for term premium, those have all suggested that long end is trading relatively cheap, meaning that yields are relatively high versus what fundamentals would imply. Because of course, there's an inverse relationship between price and yield in the bond market. So cheaper would be higher yields. Higher yields, lower prices. Exactly. Exactly. Exactly. There has been this pivot in terms of what the demand landscape for treasuries looks like. A big part of that is, I would say, coming back to the inflationary picture. When we think about why people buy treasuries, it's really for a portfolio allocation tool. It's really a diversification benefit that treasuries present in portfolio construction. When we think back to the 60/40 portfolio, you know, you can get a lot more return in theory, investing in equities, investing in EM, high yield. But you buy fixed income because when something goes wrong, we usually would expect the Fed to be cutting, rates to be rallying. And the utility that we've seen of treasuries in portfolio construction has really moderated a lot. And that's specifically true at the back end of the yield curve. When I was last on, this was this was shortly after, quote unquote, Liberation Day, right when we saw the tariffs announced. It was a big sell off that we saw in equities. And at the same time, we saw a large sell off at the long end of the U.S. rates curve. And usually these things are not correlated, right? Stocks and bonds are supposed to move in opposite directions. And that's why that's why it's such an important thing. When we think about the overall demand landscape for treasuries is what is the utility? Why are people buying treasuries at the end of the day? It's conviction that rates are going to be moving down, that they think that actually there's some duration return that they're going to get, that they've got conviction in what yields are going to do. Or it's because they play and haven't, you know, certainly in the past, played this important role in portfolio construction, providing a return that is uncorrelated versus versus equities. Okay, hold that thought. We're going to take a quick break. When we come back, we'll have more with Megan Swiper of Bank of America. Welcome back. I mean, Sam mentioned the war in Iran. And obviously, that's played a big role in fueling inflation, especially with oil prices and concerns about future concerns about future inflation, because we don't know when it's going to end, we thought it was going to be a short term conflict, it seems to be dragging on. What if the war just ended tomorrow? Like, would that change yields? So I think it I think it certainly would. Because when we when we consider expectations, and also some of this uncertainty element, part of the reason why we see longer term treasuries trading cheap right now, is because we don't know when it's going to end. And so it's coming back to the conflict that we have in Iran, the geopolitical uncertainty right now, the fact that in an environment where oil is going up, and we see similar to today, more pressure on equities, we're not seeing treasuries perform that important diversification benefit, they're selling off as well. So if we get back to a place where let's say, you know, the war is resolved, we don't have to worry about this anymore, we get a more free, free flow of oil. You know, we don't have to worry about the oil prices presenting to Europe right now. We certainly can see rates fall pretty meaningfully. But the question is still about US growth and about inflation that we're seeing in the US that is not coming from higher oil prices, super core inflation, super potentially coined by our own Sam Goldfarb. But, you know, regardless, like the data that we've been getting, and really what it's just suggesting to the market is that rates are not restrictive. Growth in the US is still quite strong on a nominal basis, and that the Fed's got more work to do because this data showed what exactly it so when we see PMI is that are coming in above 5050 is pretty much managers. Yes, yes. It's a sentiment survey. Okay. And it's all kind of relative to the prior month. But when we see this big, when we see the number that comes in much higher than expectations, it's just suggesting that sentiment is a lot stronger than what the market was expecting that, you know, companies are still seeing a lot of demand, they're still hiring. And these numbers are important to the Fed, you know, the a lot of them do a lot of these regional Feds do their own surveys to get a sense of what's going on their own local economy. But what it's suggesting is that, you know, the manufacturing sector of the US economy is still quite strong, despite a lot of the shocks that we're seeing right now from a commodity perspective. And one of the amazing things that we get to look at at B of A, we get, you know, a phenomenal consumer set of data, is that the consumer has been so strong, despite this, this gasoline shock that we're undergoing in the US right now. And we've seen that really, over the past several months, the consumer is still very much so spending money. Again, this is all nominal data that we're looking at rather than real or inflation adjusted data. But the consumer is okay to keep carrying on despite the shocks that we're continuing to see from from a gas. So that means the Fed has more room to go. Exactly. And it's kind of interesting, because I think when we write stories about yields rising, they tend to lean a little negative. And there are bad reasons why yields are rising, namely inflation concerns. But there is this kind of like positive side to right, which is basically the strength of the economy. Yes. And so it's not, it's not all bad. I guess a really good point. I you know, I like thinking about it. But I mean, speaking of scary things, you know, I couldn't help but think that some of this move in yields might have been fueled by the headlines that we all saw about the gross US debt reaching 40 trillion, the deficit is important. And, you know, the let's just get that let's just get that out of the way. What Treasury is doing right now is also very interesting. And I think the big story that we're seeing from Besson, and you know, you may have read about this or heard about this, but the the buyback program that the Treasury is doing right now, buying back bonds, yes, buying back bonds, which means that it's reducing the amount of supply of longer dated treasuries in the rates market. And when we think about just very simple supply and demand, you reduce this, the supply, the price should ultimately go up. But even as Besson has unveiled this higher amount on buybacks, prices have not gone down, yields have continued to go up at the back end of the yield curve. So it does suggest that Treasury is going to try other things, other means to get longer term rates down. When we look at the weighted average maturity of Treasury's issuance right now. Treasury's debt outstanding. it's quite long treasury instead of issuing more longer term bonds over the past couple years has instead been issuing more treasury bills when a lot shorter much shorter one year yes one year one year or less and there's tremendous retail demand for that right now you know many of us likely have treasury bills in our own portfolios right now if you have any money in a money market mutual fund that's buying bills at the end of the day so um there's a lot of demand for bills especially when rates are higher people don't want to take on duration risk which is of course accounting for a lot of the volatility that we've seen in u.s rates right right owning longer term bonds they're they're more sensitive to changes in interest rates exactly and if you own very front end of the curve you're really just picking up the yield and rolling it over and not taking on any of this duration so that's why there's been such good demand at the front end of the curve and treasury knows this so they're trying to come up with what the right mix is relative to demand so they've been issuing more and more bills the market's been totally okay with that because there's plenty of demand at the front end and now the big question is is treasury going to actually reduce the issuance that we see at the back end of the curve which is kind of crazy to think about in an environment where deficits are continuing to climb another important component of the fact that we see rates at these elevated levels is interest rate expenditures on all of this debt is going up and up and up and becoming a higher share of the deficit if you look at any of the cbo projections on this it will give you nightmares and this is just using baseline expectations for what interest rates are going to do rather than any of this upside risk that the market has to account for so so would you say like the deficit picture was just like a kind of background like constant pressure upward on yields um or did anything change you know recently that made people more concerned the change sam really is demand if i've got to account for do i want to buy do i want to buy a treasury security where i'm lending to the u.s government with a lot of deficit issues right now or do i want to lend to uh an ai company and get paid even more than than than than what i'm getting on a treasury bond there's been more demand going into that um and people are are demanding more compensation to own treasuries because of a lot of the volatility that we've seen in interest rates and again kind of coming back to this if i'm not buying a treasury security because i think rates are falling i'm buying it because it's a it's a it's a portfolio tool and it's not really playing that role either so people are demanding more compensation given all this uncertainty whether it be geopolitical whether it be what the fed is going to do at the next meeting i'll say there's been definitely a pivot that we've gotten from warsh over the past several months and coming out very hawkish on inflation at the june meeting uh you know sounding less in that sounding less hawkish for sure at the july fomc meeting and then really pivoting back to uh looking to fight inflation at jackson hole and then what we saw at the september fed meeting so there's been a lot of volatility in these expectations for what the fed's going to do we've talked a lot on this podcast about how you know people are trying to figure out how to read warsh and he's you know been very clear that he's not going to be giving us as much guidance um and not going to be giving the market as much guidance he talks a lot so maybe he's giving more guidance than he then he said he would but but i think that you know he there was no question that trump said i want a fed chair who's going to cut rates and so people thought oh maybe warsh won't raise rates maybe warsh won't deliver on that maybe warsh won't be somebody who fights inflation so was that uncertainty about warsh and his decision making part of what pushed up oh it absolutely was and you can see that following the july fomc meeting there was a notable what we call twist steepening of the yield curve where the market was pricing yes a steepening twist which means that front end rates were declining because the market was saying well wait a minute this guy maybe is not going to hike rates which is a problem because we see all of these inflationary pressures but longer term rates are moving up because of this huge element of uncertainty around what the fed was going to do the fact that it was being viewed as a policy error where a later fed chair would likely have to correct for that and a lot of a build-up of inflationary risks longer term because if you have a fed that's not going to address inflationary pressures today it will become a worse problem tomorrow uh but that's changed we think maybe yes and it has so and we can look at that from the market's response following the jackson hole and also the september fomc meeting where we saw the reverse we saw a twist flattening of the yield curve where front end rates were moving up to account for expectations that the fed was going to hike more aggressively and back into the yield curve actually moving down on uh just immediately following those events so do you think that story is done now has is that chapter over we think that there's more room for the curve to flatten so more room for the market to price higher fed policy expectations at the very front end of the curve but what we did hear from warsh at the september fomc meeting is that he doesn't think that rates are restrictive it really stood out to me that he that he characterized the hike as removing policy accommodation rather than restricting policy or tightening policy and he also very much so threw out any framework for thinking about neutral rate you know basically was you know we think about the taylor rule we think about using the summary of economic projections that the fed publishes to get a sense of where they think rates need to be in a neutral setting when inflation's at two percent when unemployment is is that as that long long run equilibrium levels he basically said forget about that right his focus really is on the market it really is on the overall um financial environment and whether or not that is slowing demand and again you look at equities you look at risk assets there's very little signal to the fed right now that anything is slowing down but if the fed is waiting for the market to send that signal what we probably will need to see is more upward pressure in front end rates and less upward pressure at the long end of the yield curve um we tend to see right as the stocks going down too and likely likely some correction in equities yes because if the fed's waiting for that to happen they're probably going to keep hiking until they get they get that signal back from the equity market which is not great news for stocks not great news for stocks but the idea is right or not great news for bonds i'm not sure no well it actually brings back memories of 2022 right exactly exactly and so when we have a fed that's really looking to combat inflationary pressure it tends to be a very notable curve flattener where front end rates are moving up longer term rates are still moving up but just not to the same degree as the front end of the yield curve and just coming back to like what has really changed over the past several fed meetings what's changed post jackson hole i think that the fed is in a really difficult um scenario right now where let's just kind of fast forward a few weeks let's go let's go kind of closer to october fed meeting if the market is pricing this expectation that the fed delivers a hike in october that we get the inflation data that that's generally supportive of a hike the labor data that's generally in support of a hike if we don't have warsh wanting to guide the market to one decisive conclusion ahead of the october fed meeting because he doesn't want to give forward guidance if the market's pricing a hike in october and the fed doesn't deliver a hike then the fed is easing financial conditions the fed the fed really risks also um this similar occurrence is what we saw following the july fomc meeting where they are losing control over longer term rates because the market's pricing this risk so really leaving a lot up to the market right now i want to pause right there and take a quick break when we come back we'll have more with megan swiber of bank of america i did want to make sure that we talked a little bit more about buybacks because like the fact that the treasury secretary saw yields rising and made the surprise announcement that he was going to buy more bonds um pretty clearly in an attempt to push them lower and that then yields like continue to go higher has made what would have been otherwise a pretty fun story for the wall street journal with yields rising to their highest levels since 2007. that would have been like a good enough story but the fact that we now have this character uh uh who's like trying to battle the bond market and not necessarily succeeding or or has he been succeeding what's your take on like the efficacy of these buybacks so when i was at the fed um i actually worked with the treasury to do these test buyback operations and they've been doing these buybacks for decades now a lot of debt management offices globally do these buybacks but historically buybacks were used when the u.s government was running a surplus and they'd go out and they say well we got this cash on hand so we might as well buy back these bonds that are trading pretty cheap we'll save the taxpayers some money so that that has been the historical use case of buybacks so where's the money coming from now so over the past several years we at b of a and you know several other market participants were advocating for the more active use of a buyback program to keep um off the run treasury securities where there's less liquidity where there's generally these are older user demand yes older mustier They don't really have a home. They don't really have a structural end user demand because they're old, they're off the run. They generally tend to trade with more of a liquidity discount. That's nothing new. But what we've seen in periods of time, because the Treasury market has gotten as big as it has, because there's many, many QSIPs, because Treasury reintroduced this 20-year point. QSIPs are like the unique identifiers for each bond. But basically, just to say, the bond markets, the U.S. Treasury market's enormous, right? Treasury can more actively manage its debt by doing these buybacks. And it's kind of like a weeding mechanism. So if they see something out of whack where there's not an end buyer, they can go to the primary dealers like Bank of America and say, let's get this security off your balance sheet. You give us a good price on it that's trading relatively cheap versus what we assess on our own fair value model. We'll take it off your balance sheet. We'll buy it at a discount. And it, in theory, saves the taxpayer some money because they're buying back these cheap securities that don't really have an end user home to begin with. But what Treasury's been doing to fund a lot of these buybacks when they buy back an old 20-year bond, an old 30-year bond, is instead of issuing at that same maturity point, they're really issuing more Treasury bills. So this is why Besson's called this more of like a buyback twist program. Right. So the big issue with why this is not really lowering bond yields is it's not QE in the sense that the market is getting guidance on where to set policy expectations. So I've written a lot about this, right? You can kind of try to quantify what the 10-year rate impact should be using some of these Fed QE rules of thumb for a unit of duration supply that Treasury is basically taking out. We should see yields coming down. But importantly, we're not getting this. We're not getting this guidance from the Fed that they're going to hold rates steady or bring rates down. It's the opposite, right? We have a Fed that's hiking rates. And importantly, from a Treasury perspective, they're only going to be buying these bonds if they're cheap. Unlike QE, where the Fed has a mandate of a specific amount that they're going to buy whatever price that they get for it, Treasury's going to be price sensitive. And they've shown that in terms of how the first larger buyback operation went. So far, that's what they've… That's what they've been sticking with. If they change it, they're not doing a buyback. They're doing, you know, a more direct form of QE, right? And I think it also changes the dynamic, too, Sam, because then Treasury would be paying up for these securities and not saving taxpayers money at the end of the day. So I have to ask, what does this all mean for investors? I mean, I write about wealth management and investing for individuals. And people tell me all the time that they no longer own bonds because bonds have done nothing for them. They have all their money in money market mutual funds. I wrote a story about how retail cash in money market mutual funds is at an all-time high. What would you say to those people? I think that for a lot of investors, fixed income does present opportunities, but those opportunities are more approachable at the front end of the yield curve in bills, in two-year Treasuries, two- to five-year part of the Treasury curve, where you're taking on less of this duration risk. And you're able to capture more of that, in theory, risk-free yield that we're seeing quite elevated at the front end of the yield curve right now. So I think that's one of the things that we need to be looking at, is to buy 30-year Treasuries, 20-year, 10-year Treasury securities that are trading relatively attractive levels versus what we see as fundamental fair value. You need to be looking at this from a longer-run approach, be more so positioning for risk that we end up in another global financial crisis or another pandemic when rates have to fall very meaningfully. And without that happening, without there being a very massive growth hit in the U.S., it's hard to really have confidence that those rates are coming down and will actually generate positive results. And what if you already own Treasuries? Your yield doesn't change, right? Meaning if you own 10-year Treasuries. And yields do what? And yields go up. So if you own 10-year and rates go up, you will incur losses on that position if you market to market. If you're a buy-and-hold investor and you hold that 10-year Treasury security over the next 10 years, you'll get your payment back. But if you're looking to reinvest that payment and rates are higher, you'll basically be losing money on that. Because you do get people saying, hey, higher yields are good, right? Right. I'm getting paid more for my… Right. Because some people really are buy-and-hold. And that's very much so true, especially if you have a lot of that money sitting in cash at the front end of the yield curve, you're investing in a money market mutual fund. If you're a big deposit base, like a lot of companies are, and you're seeing rates on cash move up, that is a positive thing for you. The real risk is if you have more of a duration allocation where you're owning more longer-term debt. And you're marking your portfolio to market, you'll see losses on that. Right. But some people consider themselves like buy-and-hold investors. And so they're like, 5% 10-year yield, that's good news. Now I can buy a new 10-year note and get more for it. Getting a higher yield, yeah. Although, I mean, that assumes that you will be able to hold it to maturity. I think sometimes people assume that they'll actually need to get that money sooner. And then they'll find that Treasuries actually can… And lose money, too. Do I have that correctly? Yes. So if you're looking to mark your portfolio to market effectively, you know, you invest money in a Fidelity account, right? You take a look at it. At the end of the day, if yields have gone up and you want to 10-year Treasury security, you'll see that portfolio return down. Yeah. Well, this has been a fascinating conversation. It sounds like we have maybe higher yields on the horizon. I think that's the upshot. And we'll have to have you back. If that proves to be the case. Thanks so much. 6%. 6%, yeah. We'll have you back when we reach 6%. That sounds great. All right. Thanks so much for joining us, Megan. Thank you.