Scott Bessent Said Interest Rates Have Fallen During Trump’s Second Term. Here’s Where He’s Right – and Where He’s Wrong.

When U.S. Treasury Secretary Scott Bessent claimed recently that interest rates have fallen since President Donald Trump's 2025 inauguration, there's some generalization there that needs to be unpacked.

Here's the yield curve on Jan. 20, 2025, Inauguration Day. And the curve as it existed on Aug. 31, 2026.

Short-term rates (overnight lending rates, T-bill rates) have indeed drifted lower. However, long-term yields, the ones that actually govern mortgage rates, corporate borrowing, and long-term economic growth? Those have climbed significantly higher. So this is sort of like the cost of milk going down, but the cost of energy going up. We spend more on energy than milk. By an even wider margin if you are lactose intolerant.

To understand why the administration's claim feels so disconnected from everyday financial reality, you have to look at how the yield curve has reshaped itself since early 2025.

We see above that the entire curve from two years out to the longest end, 30 years, has seen higher rates since Trump's second inauguration. That has not impacted the S&P 500 Index ($SPX), but it is gradually wearing down consumers and businesses which rely on low borrowing rates to continue rolling over their debt.

One reason I am not a fan of small-cap stocks is that roughly 40% of the companies in the Russell 2000 Index (IWM) are in the fight of their financial lives. A "debt cliff" is coming, whereby they need lower rates than we have now. Or their low-cost debt has to be replaced by high-cost debt. Which, in some cases, means the companies can't borrow. In some of those cases, no borrowing equates to no ongoing business.

That makes this chart below, that of the 10-year Treasury bond, a potential wrecking ball for some segments of the economy. It is nearing the 4.8% mark, the top of a range with around 3.3% as its low, which is going on four full years now. If that range breaks out to new highs, you won't need to read my articles to know about it. It will be everywhere.

If not when it rises above 4.8%, then when it hits the round and magic 5% level. It is worth noting that the 10-year has not stayed above 5% for more than a few months at any point this century. Let that sink in.