Ramstad: Inside Piper Sandler’s bond desk, a small-town firefighter shapes the world

Jeremy Goebel woke up Monday at 5 a.m. as usual, absorbed the latest news — on tariffs President Donald Trump threatened against the nation’s three largest trading partners — and then went to his computer.

By 5:30, he’d written a several-hundred word summary of the situation for the bond traders and sales representatives at the Minneapolis-based investment bank Piper Sandler.

As the head of U.S. government bond trading for Piper, he recommended they tell their clients to stay calm.

“The interesting thing about tariffs is you could talk to two intelligent people, and they will make very convincing arguments about why rates are going to go up because of it and why rates are going to go down,” Goebel told me Tuesday afternoon.

“Because I read all this stuff, my job is to say, ‘Calm down. It’s very unlikely these things will be actually implemented as stated,‘” he added. “And that’s exactly what happened.”

It’s an expertise and comfort Goebel has built since shortly after graduating from St. John’s University 26 years ago. When he first joined Piper, there were five positions open in equities trading and one in bonds — and he didn’t want that one.

“Because the average person doesn’t know anything about bonds, right? And they gave it to me, and I remember being so disappointed. I was crushed. And it was my first job. So what am I going to say?” Goebel said. “It turned out to be the best thing that ever happened to me.”

“The bond market makes the world go around. Your streets, fire trucks, cop cars,” he said, referring to things that cities issue bonds to finance.

“The thing I love about what I do is, everything is connected, from currencies to turning your water on at home,” Goebel said.

For most people saving for retirement, the bond market plays second fiddle to the stock market. Bonds to them are a hedge against a plunge in stocks. When stock prices go down, bond prices usually go up.

For people making economic policy — no matter if they are in a city hall, state capitol, Congress, White House or the Federal Reserve — the bond market is something far more powerful. It is jury, judge and executioner of everything they do.

In a well-known assessment of that power, Bill Clinton’s strategist James Carville late in Clinton’s presidency said he no longer wanted to be reincarnated as a world leader or successful athlete. “Now I would want to come back as the bond market. You can intimidate everybody,” Carville said.

Too much inflation, however, leads people to stop buying things, which results in the economy slowing down or tumbling into recession.

Usually bond yields, or rates, match the direction of the Federal Reserve’s interest-rate setters. But when the Fed in September started to lower interest rates, the bond market didn’t follow suit.

Bond investors took the view lower rates were a mistake and the U.S. economy will encounter inflation again soon, needing higher rates to cool it off. Longer-term bond rates like 10-year Treasuries started to rise and pushed other long-term capital, particularly mortgages, to become more expensive.

“My explanation there is, the Fed funds rate affects banks a lot and their ability to borrow,” Goebel said. “The 10-year Treasury is telling us a very different story. The 10-year reacts more to the economy or inflation.

“Now that’s not normal” for Fed rates and bond rates to disconnect as much as they did, he added. “What it’s telling you is the economy is going to take off, the economy is going to inflate, or the economy is going to be stronger.”

This nation’s debt now exceeds $36 trillion, and about $9 trillion of it matures this year and will have to be resold at new rates to bond purchasers. In addition, the government will likely need to issue another $1.9 trillion in bonds to cover this year’s deficit, depending on how Trump and the Republican Congress settle the budget.

That’s a huge amount of money to sell, and it’s sure to raise the cost, meaning interest rates.

Goebel said he’s not sure how the Treasury Department will decide to restructure the existing and new debt. There are broader forces that could help.

“You either inflate your way out and the dollar is just worth less, so suddenly your debt doesn’t seem so bad. Or you grow your way out. Or some combination thereof,” Goebel said. “That’s not easy to do.”

As trading neared an end Tuesday, Goebel tried to assess why the 10-year Treasury yield fell for much of the afternoon. The tariff controversy from the day before wasn’t on his list.