Higher gas prices, higher interest rates, and TrumpWorld flailing

As war in the Middle East goes past the 6-month mark with more bombs falling in September, the oil markets finally have admitted reality. Shorter supplies and uncertainties of future availabilities have caused oil prices to spike from less than $69 a barrel on the 4th of July to more than $97 after the close of trading in the week of Labor Day.

Gas prices being downstream of oil prices, it's no surprise that the average US gas price went back over $4 a gallon since the start of August and has not gone below it.

Up until today, Wisconsin had been protected from the jump in gas prices that much of the nation has dealt with over the last month. AAA tells us that regular gas prices went up by 14 cents a gallon between August 9 and September 8, but went down by 4 cents a gallon in our state.

But today, I noticed my local Kwik Trip posting at $3.99 a gallon, and sure enough, the average price of a gallon of gas statewide went up 16 cents today while the national price only went up by 7.

This now means average gas prices for both the US and Wisconsin are up by more than $1 a gallon vs September 2025.

The bond market also noticed that gas prices, other costs, and the US's deficits and debts aren’t going down any time soon. And bond yields have resembled the oil charts over the last 2 ½ months, with both the benchmark 10- and 30-year yields rising by more than 40 points without any change in interest rates from the Federal Reserve.

10-year note

30-year bond

Also today, the Treasury auctioned off $39 billion in 10-year notes to pay for more debt, and the median yield of those notes went from 4.63% in August to nearly 4.77% today. That followed $58 billion in 3-year notes that were auctioned off yesterday, which ended up with a median yield of 4.43% vs 4.24% for the same term and amount in August.

And what’s on the docket for auction tomorrow? It’s the 30-year bond. Uh oh….

It looks like the Trump Administration is getting a bit shook by these developments.

The Treasury Department on Wednesday said it will buy back up to $6 billion of government debt in an operation aimed at keeping bond markets functioning.

The much-anticipated announcement triples the normal buyback operation and follows an announcement Aug. 19 from Treasury Secretary Scott Bessent that the department would at least double the normal amount for already-issued securities….

“Moving the sizes up to $6 billion would amount to tripling the size of the buybacks, which would be a meaningful escalation but would not be wildly out of line with the spirit of the ‘at least double’ language.,” Wrightson ICAP analysts wrote earlier this week.

“Quadrupling or even quintupling the size to the $8 billion to $10 billion range is not out of the question, but would represent a second major shift in the Treasury’s debt strategy in just two weeks,” they added. “It would be an admission that the Treasury hadn’t thought through its hasty August 19 announcement in the first place.”

The actual buybacks will happen Thursday in a 20-minute operation that will conclude at 2 p.m. ET.

From what I can glean off the Treasury Department’s FAQ page on buybacks and the connected statute that buyback operations are under, this is done by

us[ing] money received from the sale of an obligation and other money in the general fund of the Treasury Department in making such purchases, redemptions, or refunds.

It’s the equivalent of spending more money on anything else, except it’s a direct payment to the banks and other bond holders that choose to take the cash instead of holding onto the US’s bonds.

We’ll see how many bondholders take up the US on this offer tomorrow, and what our government has to give up in order to make those exchanges. But I have a hard time believing these billions in Treasury dollars being sent out would lower our fiscal deficit or inflation, so beyond a short-term attempt to boost demand (and lower rates) for 10-year and 30-year bonds, this move won't solve the underlying economic problems. And likely means even more funds have to be made up for in the near future.

Oh, but don’t worry, because Bessent claims the US economy will grow by 3% at the same time that we cut spending, which will allow us to "grow our way out of" debt as an economic problem! How are we going to double our post-inflation growth while cutting demand and having higher interest rates restrict borrowing? DON'T ASK QUESTIONS, JUST BELIEVE IT!

The desperation from TrumpWorld is obvious and not fooling anyone. Even the coked-up finance bros are seeing through it.