<instructions>Your goal is to analyze the following comment and estimate how highly it will be upvoted by the Hacker News community.</instructions><comment><author>kypro</author><text>It makes more sense when you consider that the market has never believed long-term inflation was a serious issue because frankly the narrative around structurally higher inflation has never made much sense given demographics, technology and debt levels. For the most part where the uncertainty has existed has been in the path of the Fed.&lt;p&gt;For the last several months (since Jackson Hole) markets haven&amp;#x27;t been sure how quickly inflation would come down and therefore how high the Fed might risk taking rates. But today we have much more certainty. We now know the Fed really can&amp;#x27;t raise rates much more near-term given the risks and longer-term the stimulus and supply bottlenecks which created the majority of the inflationary pressures will ease.&lt;p&gt;Another thing you need to remember is that inflation easing is actually deflationary because real yields are calculated by nominal yields minus inflation. So as inflation comes down you&amp;#x27;re actually getting paid more to lock your cash up in bonds which continues to tighten financial conditions.&lt;p&gt;The risk of a larger financial crisis is very low given this isn&amp;#x27;t a credit event, but a duration event. As long as the Fed doesn&amp;#x27;t raise rates further we can rule out a financial crisis and so long as you don&amp;#x27;t believe there is a structural inflationary problem in the economy rates should trend downwards over the coming months.</text><parent_chain><item><author>nostrademons</author><text>Also of note: this decline only continues as long as the Fed actually cuts rates.  If they don&amp;#x27;t, these long-term bond yields make no sense (why would you lend money for 10 years at 3.5% when you can lend money for 3650 successive 1-day terms at 4.75%?)&lt;p&gt;The logic behind this seems a bit circular to me.  Market participants accept lower long-term bond rates because they expect the Fed to cut rates in the future.  They expect the Fed to cut rates because if they don&amp;#x27;t, there will be a financial crisis.  There will be a financial crisis because long-term bond rates are high and banks are underwater on their bonds, except that bond rates are declining because the Fed is going to cut rates, because...uh, why is there going to be a financial crisis again?  What reason does the Fed have for dropping rates?  It&amp;#x27;s very much an &amp;quot;appeal to consequences&amp;quot; fallacy - some bad outcome is not going to happen because that would be bad.  The world doesn&amp;#x27;t work that way.&lt;p&gt;IMHO the market is wrong, and the Fed is not going to cut rates.  They&amp;#x27;ve gotten too accustomed to being bailed out, and the Fed is on to them, and so they&amp;#x27;re not going to do that again, at least not in the form that the market expects.</text></item><item><author>arbuge</author><text>Of note: those losses are actually coming down as we speak.&lt;p&gt;With the Fed now expected by the bond market to pause rate hikes and start cutting rates soon, long term bond yields (as well as shorter term ones) have been coming down, increasing the value of those holdings.&lt;p&gt;You may have noticed this decline if you were shopping for CDs over the last few weeks. On brokerage platforms, top rates for 1 year CDs have gone down from a high of around 5.4% to 5% now.</text></item></parent_chain></comment><story><title>US banks have $620B of unrealized losses on their books</title><url>https://www.bloomberg.com/graphics/2023-svb-exposed-risks-banks/</url></story>
<instructions>Your goal is to analyze the following comment and estimate how highly it will be upvoted by the Hacker News community.</instructions><comment><author>prottog</author><text>&amp;gt; (why would you lend money for 10 years at 3.5% when you can lend money for 3650 successive 1-day terms at 4.75%?)&lt;p&gt;That&amp;#x27;s the thing, you can&amp;#x27;t know that. Rates could go up, down, sideways, or in circles over the next 10 years. A 10-year bond locks it in to a predictable rate and payment schedule.</text><parent_chain><item><author>nostrademons</author><text>Also of note: this decline only continues as long as the Fed actually cuts rates.  If they don&amp;#x27;t, these long-term bond yields make no sense (why would you lend money for 10 years at 3.5% when you can lend money for 3650 successive 1-day terms at 4.75%?)&lt;p&gt;The logic behind this seems a bit circular to me.  Market participants accept lower long-term bond rates because they expect the Fed to cut rates in the future.  They expect the Fed to cut rates because if they don&amp;#x27;t, there will be a financial crisis.  There will be a financial crisis because long-term bond rates are high and banks are underwater on their bonds, except that bond rates are declining because the Fed is going to cut rates, because...uh, why is there going to be a financial crisis again?  What reason does the Fed have for dropping rates?  It&amp;#x27;s very much an &amp;quot;appeal to consequences&amp;quot; fallacy - some bad outcome is not going to happen because that would be bad.  The world doesn&amp;#x27;t work that way.&lt;p&gt;IMHO the market is wrong, and the Fed is not going to cut rates.  They&amp;#x27;ve gotten too accustomed to being bailed out, and the Fed is on to them, and so they&amp;#x27;re not going to do that again, at least not in the form that the market expects.</text></item><item><author>arbuge</author><text>Of note: those losses are actually coming down as we speak.&lt;p&gt;With the Fed now expected by the bond market to pause rate hikes and start cutting rates soon, long term bond yields (as well as shorter term ones) have been coming down, increasing the value of those holdings.&lt;p&gt;You may have noticed this decline if you were shopping for CDs over the last few weeks. On brokerage platforms, top rates for 1 year CDs have gone down from a high of around 5.4% to 5% now.</text></item></parent_chain></comment><story><title>US banks have $620B of unrealized losses on their books</title><url>https://www.bloomberg.com/graphics/2023-svb-exposed-risks-banks/</url></story>