Marketplace - Trump’s bid to take down the 10-year yield

Episode Date: February 7, 2025

Treasury Secretary Scott Bessent says President Trump’s strategies of “energy dominance, deregulation and non-inflationary growth,” will bring down bond yields even if the Federal Reserve doesn’t cut interest rates. Will it work? Experts are skeptical. Also in this episode: Disney tries “skinny” streaming bundles, the women behind one of LA’s few lesbian bars talk strategy for reopening after the fires and small businesses show us how they’re increasing productivity.

Interest rates, but not the Federal Reserve kind. From American public media, this is Marketplace. In Los Angeles, I'm Kyle Rizdall. It is Thursday today, the 6th of February. Good as always to have you along everybody. We begin today by flipping through the well-used folder that we keep around here labeled, Sure, You Can Try to Fight the Market. Our protagonist at this time is Treasury Secretary Scott Bessent who told reporters this week the Trump administration isn't really so much focused on the Federal Reserve and how and whether it's going to cut interest rates, but rather the White House is just going to work on bringing bond yields

down, specifically the yield on the 10-year Treasury note. Marketplace's Sabri Benishaw gets us going with why the administration might want to bring bond yields down and how that might go. It makes sense that the president would want 10-year yields to come down. Plenty of people would love that. So a lot of consumers feel what happens in 10-year rates. Brian Rayling is head of global fixed income strategy at Wells Fargo Investment Institute. The rate of return on U.S. 10-year bonds influences interest rates all over

the economy. Credit cards, car loans, mortgages. So if the 10-year yield goes lower, then mortgage rates are going to go lower. So, you know, people are going to be able to better reform homes. So how might one bring down the yield on 10-year bonds. Here's what Treasury Secretary Scott Besant told Bloomberg today. With the president's policies of energy dominance, deregulation, and non-inflationary growth, I think that the 10-year is going to naturally come down. When he says energy dominance there, Besant is referring to the administration's desire for the U.S. to produce more oil, bring down energy prices and lower inflation. Inflation, it just so happens, can drive up treasury yields. So bringing inflation down can bring yields down. We wouldn't see that for quite a number of years. Ken Kutner

is professor of economics at Williams College. You can reduce the oil price, but then once it stabilizes then inflation is kind of back where it started. So, drill baby drill might not actually bring yields down. There is another way to do it. Again, Brian Rayling. Shrink the deficit or the amount we have to borrow. If the government isn't as desperate to borrow money, it won't have to offer as high a return on bonds to get people to lend to it.

Then yes, you're likely going to see the 10-year yield fall lower because we don't have to issue as many 10-year bonds to fund the debt and the deficit. Besant has said cutting government spending could do this, but shrinking the deficit is also a heavy lift for an administration planning tax cuts that could cost several trillion dollars, even with an Elon Musk-led department of government efficiency. Guy LaBarre is chief fixed income strategist with Janny Montgomery Scott. I am skeptical that that cost cuts will be large enough to make a material difference

in the size of the budget deficit. He says the administration has good intentions with a dose of wishful thinking. In New York, I'm Sabri Benishur for Marketplace. Wall Street today, a little of this, a little of that. We'll have the details when we do the numbers. One of the brighter spots in this economy over the past couple of years has been worker productivity, how much stuff we're making compared to how much time we spend doing it. We learned this morning productivity in the fourth quarter of last year was up 1.2 percent, that's annualized of course.

It is the ninth straight quarter of growth. Economists keep a real close eye on productivity because growing it, having a more productive economy, is a more prosperous economy. Incomes go up and along with them, standards of living. Higher productivity can also help keep a lid on inflation. So market place is Justin Ho. Looked at a few of the factors

that have been pushing productivity up of late, and he started at a machine shop in Simi Valley, California. The shop I'm standing in is a training center run by the Simi Institute for careers in technology. Liz Valdez is a student here. She's setting up a tool called a vertical mill so she can shape a piece of metal. This is a piece of aluminum right here, which is a lot more malleable than like steel. Valdez used to wait tables, but last summer she quit and became a full-time student

at the machine shop. A big reason she signed up for this class, she says, is because a job in manufacturing will pay much more than she was making waiting tables, especially if she's fully trained and certified before she even starts. The more you do it, the more you practice, it becomes easier. And you kind of, I'm so glad that I can, you know, kind of trip and fall here and not over

there. Hiring someone who can hit the ground running improves productivity because it can help a business boost output without sacrificing much time, says Egar Linskow, the class instructor. Typically most employers, if they're in the position of hiring, they need someone to come in and do work and not take one of their already skilled machinists out of the production line to train new people. Companies can also improve productivity by investing in technology. We placed on order a new state-of-the-art piece of equipment that will be arriving here in Q1.

That's Wayne Woodard, CEO of Argonaut Manufacturing Services, a company in Carlsbad, California that manufactures drugs and diagnostic tests for health care companies. The equipment he bought is an automated filling line that packages drugs into vials, syringes, and cartridges. That's the final stage in that manufacturing process for delivering those products into the market. Woodard says all of this has traditionally been done by hand. Automating it helps take human error out of the equation,

which means fewer mistakes and more product. It also speeds things up and requires fewer workers to begin with, which could lead to fewer jobs. So you're down to sort of three or four folks on a line, maybe a little bit more, depends on how big the line is, where before you might have had, you know, 10, 12 humans doing that kind of work. Not every business can improve productivity with a machine. Matt Hetrick runs an accounting firm called Harmony Group.

He says the only way he can make his business more productive is to make his staff better at their jobs. And that requires years of experience. If you're a tax CPA, for example, your first tax season is the first time you've seen how different forms work, how these conceptual ideas actually play out for a client. You simply can't teach that in a book. You have to learn how to do it. So Hetrick says his strategy for boosting productivity is to retain the staff he has, so workers stick with the company and have time to develop. Hetrick says he gives every employee a clear plan to move up within the company. He also hosts regular training sessions and weekly office hours.

And he lets all of his staff work from home. We find that that's amazing for retention because what we're saying to our staff is, hey, you come here, we're going to treat you like professionals. We're not going to micromanage you. Yes, you're working from home, but yes, you are a professional who's on a growth path. As a result, Hedrick says accountants who've stuck with the company are able to take on more clients, which means the business can pull in more revenue. He says that's helping his firm stay afloat, especially since right now he feels like charging his clients more is not an option.

We don't have pricing power to drive pricing up. So we have to be more productive to sell the same service at approximately the same price. And he says higher productivity also helps him pay his workers higher wages. I'm Justin Ho for Marketplace. Just about two years ago, I had a chat with Mara Herpkersman and Emily Billiges about their then new restaurant slash wine bar called the Ruby Fruit. It was the first lesbian bar to open in Los Angeles since 2017. And I asked Mara back then how that was possible.

It is pretty well known that women have a harder time getting capital in business. True for you? Yes and no. I mean, we're not fully funded yet. So I can definitely speak to being a new business owner that it's difficult to get funding, at least from banks and things, because you need to have assets and other capital, which doesn't make any sense because we're just getting started. So we're still trying to kind of put some pieces together as far as that goes They bootstrapped the place open with a single $25,000 loan from a friend so no reserves to tide them over and about a month ago right after the fire started

They posted on Instagram that they were closing their doors not permanently. They hoped more of a pause Anyway, I took a swing by last week. Hi. Welcome back. Hi. Good to see you. How are you? How have you been? Good.

Good to see you. What's new? Oh, you know. Well, we'll get there. Nothing. Hang on. That's why we're here. What a stupid question to start with.

The place looks pretty much the same. Bright pink walls, books and wine bottles on some shelves. There were people working in the kitchen temporarily renting it out to make meals for first responders. So, so how did you come to the decision to pause? The way I read the post on social was the fires were a thing that happened and it was a bad thing that happened, but it had been sort of a series of events. Yeah. You know, when you lose a week of sales, which we did because of the fires, there was no money coming in.

And for us, because we have no reserves, I mean, when no money comes in, you don't have any money. And things started, I mean, to back it up of what you're referring to, like things started to get tricky for us, like right when the kind of Hollywood strikes were an issue in LA. And that was the first moment that we really kind of were starting to see issues. And that was 23-ish, right? Exactly. Like the fall 2023. Yeah. So six months after you guys opened, give or take, right?

Correct. And we had, you know, our first year, we were really fortunate and we kind of rode the wave of like opening excitement. And the money that we made our first year we were able to pay off the business, which was very graciously funded by the previous owners. But paying that off coincided with the strikes happening and this like slowdown of what we saw slowdown in restaurants all over Los Angeles. This wasn't a ruby fruit problem. This was like a Los Angeles restaurant economy problem. Before any of this happened, well between

the strikes and the fires, how are you guys doing? I mean I don't come down here a lot but when I drive by on Sunset during y'all's business hours it seems pretty crowded. Yeah I mean overall it was like really great. We have a really amazing community following and we are really fortunate to have like a very dedicated clientele. But again, I think it's hard to overstate just how dependent we are on every single dollar that every single person who comes in here spends. And some days our sales are truly down to the dollar in order to break even.

Which to me translates into margins, right? Yeah. Yeah. Exactly. Labor is expensive as it should be because people should get paid what they're worth, of course. But the cost of food, the cost of rent, the cost of utilities, all these things are really expensive right now. People feel it you know when they go to the grocery

store it's no different for us. This is none of my business and I should you should never take business advice from me. Why aren't you selling cocktails? We would love to get a full liquor license and that has been cost prohibitive for us. How much is a liquor license? Well first of all, you can't just go and buy one. There's a certain amount that are available. And so you have to find one and between the fees and how much they cost, they can easily

run you $150,000. If you're lucky. Seriously? Correct. And that doesn't even... This is why Kai's not in business. Correct. Well, and not in the restaurant business specifically.

Yeah, specifically. Because everyone will tell you, don't open a restaurant. Well, and not in the restaurant business specifically. Yeah, specifically. Because everyone will tell you, don't open a restaurant. And they're right. Don't do it. But also, that doesn't even cover how the bar needs to be modified in order to accommodate the possibility of serving cocktails. So what's the plan? What are you going to do? Because the place is still here. The lights are still on. the lights are still on. You've paused, but how are you gonna how are you gonna get somewhere? Well, I think the first thing to note is that we have obligations, right? We have a lease.

But we we hope to reopen. We hope that this is a step for us to take a minute and sort of regroup and assess what was going really well and what we needed to fix In order to move forward. Okay, so let's interrogate that for a second. Yeah, what was going really well. You had a community Yes Yep Community engagement and I think this speaks to the next part of like what we need to address in order to move forward The space and the community and the needs of all of that became, I think, so much larger than we thought.

If you look around, there's about 30 seats here. Okay, give or take, yep. So there's that, there's physical space, but then there's also this sort of need when a thing you built immediately sort of outgrows what you can offer. That's such a good problem to have. It is, but now the biggest piece of this puzzle is money. Is that we started, this is marketplace after all. We started with nothing and in order to grow,

we need more money behind us. And so we are right now looking for an investor or some sort of financial backing to help us bring this larger project now to fruition. You're not necessarily only looking for investment and interest from your community, right? I'm overstating, but you'll take money from anybody? I think it's important to note that the ruby fruit cannot ride on the backs of a marginalized community and it is necessary that we offer seats at the table to folks outside of our community so that they can support a queer space.

What's your biggest worry? That you won't be able to do it, I guess? Oh my gosh. That's a great question. I have like 4,000 worries that pop up to the surface that I don't even want to get into sort of the state of things, you know, in this country right now and globally. I think my biggest worry is that we will not be able to put all of these pieces together, in part in my use of a very tired old cliche, but it's like this chicken or the egg thing,

where I don't know what part needs to happen first, or does that need to happen first? Order-free. This needs to happen, all at once. Right, right. And I think my biggest worry is the time constraints, because we are really on very limited timeframe here and we ultimately probably only have till the end of March.

That's like tomorrow. Yeah. You're right. Yeah. So that's the thing that worries me the most. I know that we can garner support from our community. I know that we can somehow find this money, but I'm worried that we can't do all of these things in time.

Here's a very practical question How are you doing it? Are you just leveraging your contacts and saying do you know anybody with a quarter million dollars? I mean we have a lot of folks who have reached out to us to offer support And so we are reaching out to our community and asking for help in ways that we have not asked for before I think Emily and I have been a little bit stubborn and sort of, we can handle this ourselves. And that is simply just not true any longer. And so we need help. And that's what we're doing right now is reaching out for help. Thanks you guys. Thank you, Kai.

Thank you, Kai. Coming up. I was instead all the way in the back and sort of looking out over everyone's head. Sometimes the best seat in the house is not up front. But first, let's do the numbers. Dow Industrial is down 125 today, 3 tenths percent, 44,747. The NASDAQ added 99 points, about a half percent nineteen thousand seven ninety one the SP 500 found 22 points to the good just shy of four tenths percent six thousand and eighty three you can call this one doing a GE if you know you know

Honeywell said it plans to spin off its aerospace and automation divisions as separate companies it also said it expects profits for this fiscal year to come in below Wall Street's estimates. Said Street was unimpressed. Honeywell descended 5.2% today. Supermicrocomputer added 7.5% on the day after announcing its new AI server systems are available. The chips they're in come from NVIDIA, accumulated 3.1% on the day. Bonds fell yield on the 10-year treasure note. Rose, hello, Secretary Bessent. That's the bond market paging you 4.43% on the 10-year. You're listening to Marketplace.

Hey everybody, it's Kai. We've got an exciting offer for you. Now through Valentine's Day, you can show off your love for Marketplace, I'm Kai Rizdal. The Walt Disney Company has high hopes for a new model of paid TV that looks a whole lot like the old model of paid TV, just less. CEO Bob Iger said this week that a new set of skinny bundle apps could help bring ESPN to bigger audiences as the subscriber count of the standalone ESPN streaming app is down

and as pay TV subscribers are generally continuing to cut the cord. Marketplace's Megan McCarty Carino has the skinny. This idea has been around since ye olden days of cable TV. A smaller cable package that's cheaper. But in the past, Ross Benesch, senior analyst at eMarketer, says high value content like sports was pretty much never on the menu. You couldn't just get ESPN and nothing else from Disney

if you were a pay TV operator. But there is more flexibility on that now. Last month, Comcast and DirecTV announced new services that bring together most of the top sports and news channels and nothing else. At 70 bucks a month, they're not exactly lightweight, but they're at least 10 bucks cheaper than comprehensive live TV services from YouTube or Hulu. That puts them in a sweet spot, says Elizabeth Parks at market researcher Parks Associates.

We're tracking consumers spending about $71 a month now, and that's actually a drop from a peak of $91 we saw a few quarters ago. The skinny bundle model could be repeated across different genres, says Vincent Petturo, a professor of media studies at Metropolitan State University Denver. We're going to have a skinny bundle of sci-fi, a skinny bundle of documentaries. I think what these companies have to find is the point where people will pay for what they want, but also convenience too. While going a la carte might have seemed like an answer

to the bloated buffet of cable TV packages, the smorgasbord of streamers also became overwhelming. It was too specific, too expensive, and it was too confusing. However, sports fans hoping to survive on a skinny bundle diet may be disappointed. Pro leagues like the NFL are increasingly selling game rights directly to streamers like Netflix or Amazon that aren't in any bundles.

I'm Megan McCarty Corino from Marketplace. You know those optical illusions where you might see a vase if you focus on an image one way, two faces if you look at it another? Point being, changing your perspective can sometimes change how you see the world. Naveen Kumar, The Washington Post's theater critic, learned that the hard way when a back injury forced him to watch a bunch of plays standing up. You know, I think I sat through one show where I was sort of writhing around in the seat

being like, I really can't do this. Then I started to figure out, like I asked the press reps on the shows, like, hey, can I stand up to see this show? Cause I could still think clearly and do my job as long as I could be standing up. Early on, when I asked to do this, one set of producers said, Oh, we're worried about your sight lines all the way in the back. Cause it was a really big theater and they thought, you know, I won't be able

to see the top half of the stage. So I said, Hey, why don't I stand over to the side? You know, I've been in this theater and you know, it's very big and there's a side wall and what if I hang out over there? So I'm over there and you know, just a few minutes into the show, like an usher comes over and is like, are you in the performance? And I was like, oh my gosh, no, what do I need to do? And you know, I realized that everyone could see me with my little notebook. So Usher asked me, can we move you to the back? And I was like, yeah, that's absolutely fine. I was instead all the way in the back

and sort of looking out over everyone's head. And it really changed my experience. If a show is supposed to be funny and the audience is like crickets, you can really see that when you're in the back. I think that's probably why directors pace around back there to get some perspective on the show. But you can also, the opposite is true, if the show is really funny or very affecting, like you can sort of feel that when you're looking over the audience from behind.

There's a musical, for example, on Broadway of the film Death Becomes Her. It's a big campy, colorful show, really big laughs, campy comedy. ["Dead Becomes Her"] Out to an outfit change. And that plays all the way to the back. You know, I could see people in the very last rows, like, you know, shaking in their seats

with laughter and that is sort of, it was pitched to the right frequency. And that was something that I was in a unique position to realize. Another thing I realized standing in the back was that it's where people who are most enthusiastic about being in the theater generally stand. You know, whether that's the director and this is their baby or people who just want to get in the theater, you know, the show is sold out. They're the biggest fans, you know, are willing to stand up. And I felt that energy, you energy, even just for myself.

I was standing in the back and I was like, I am really excited to be here. I love my job enough that I will figure out how to get in this room and do it. It really gave me renewed love for what I do. Navin Kumar, theater critic for The Washington Post. Tell us about your economy. What, just sitting, standing, whatever's your vibe?

Marketplace.org is where you can do that. This final note on the way out today, I want to set the stage for the January unemployment report that we're going to get tomorrow morning. The unemployment rate, of course, also the number of jobs added or lost last month. The numbers are going to be what the numbers are going to be, but what I want to make sure you're aware of is that the Bureau of Labor Statistics is also going to publish what are expected to be pretty sizable revisions to the total number of jobs added or lost over the past year, as well as the size of the American labor force. Cutting to the chase here and trying to get ahead

of the miss and disinformation that will surely spread wildly about this tomorrow, these will be totally normal, completely expected, and absolutely vital revisions that are made to ensure the accuracy of how we measure the American labor market. John Buckley, John Gordon, Noya Carr, Dianitha Parker, Amanda Peacher, and Stephanie Sieck are the marketplace labor market. John Buckley, John Gordon, Noya Carr, Dianitha Parker, Amanda Pietra, and Stephanie Sieck are the marketplace editing staff.

Amir Bibawe is the managing editor, and I'm Kyle Rizdal. We will see you tomorrow, everybody. This is APM.