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Scott, My Friend, You May Have A Problem
There's a burgeoning problem in USD rates and specifically in Treasurys. This is quickly becoming ye
Good (if terrifying) update. The action in treasuries has me thinking my premise that the depression level event won’t happen for another 6-12 months might be wrong. Maybe a Fed intervention stabilizes things in the short term, maybe it’s straight down.
I still believe Trump gets impeached on Jan 7, 2027. The economy will be in ruins. Markets down at least 50% from the highs.
And look, you know, if you’re worried about only telling Trump things he i) can quickly understand, and more importantly ii) things he wants to hear, you’re not going to be able to communicate this sort of risk to him if you’re Bessent. That’s a problem. It’s the same problem Putin had in 2022 when he was (however briefly) actually losing in Ukraine: Everybody was too scared of him to tell him the truth.
And then it got worse. And also crazier.
https://www.msn.com/en-us/news/politics/charles-koch-backed-group-sues-trump-over-tariffs-alleging-power-grab/ar-AA1CyE1s
Oh, that’s rich!
For the lay people among us, what would Fed intervention look like under the circumstances? Is it primarily Operation Twist? Still seems to me that the likelihood of an emergency Fed cut is higher than what Polymarket is pricing, but I’m not sure what other tools the Fed has available. I’d hope they are smarter than the rest of us and recognize that fighting inflation is pointless if the whole world economy is on the verge of collapsing.
Standing repo facility, hard (complete) stop on QT or maybe another BTFP sort of deal.
Whatever they have, I hope they are ready to deploy because I get the sense that panic is setting in and tomorrow could get very ugly.
4.44% on the 10 already, Lizz Truss moment incoming..
Shades of 2020.
Basis trade much larger now.
Demand for Treasuries and USD less supported.
Some may actively want US and USD destabilized.
Forget about UST’s. You seen BaC high yield 10year adjusted spreads over treasuries the last three months? 2.6% over UST’s to 4.6% over UST’s in TWO MONTHS. That is CATACLYSMIC for America.
Yep. When the market is telling every company you never heard of: “So sorry, no more financing for you”, it’s a bad thing.
H – I’ve said in the past your highest value is that, for those of us just trying to get by in the darkness of the macro cave, you’re the guy with a flashlight pointing in the direction we need to look. Not even sure the metaphor holds anymore when we’re surrounded by disasters. Private credit? The market that’s grown from 200B to 2T since 2009 without ever being tested by a left tail? I think your “watch repo” response may cover it?
Thanks for making this impossible to ignore. It’s certainly looking more likely things won’t be great over the near term by the day.
A barbarous relic for barbarous times…
Perhaps things have changed, but aren’t bond purchases by US hedge funds often classified as foreign buying when they buy through their subsidiaries in the EU and Caribbean?
Oh, this is scary. We know you don’t give financial advice but if any of you could speculate…
Here are a few questions regarding “no where to hide” from one of your lay people fans:
Having a modest portfolio would we be better off in global bonds? in global stocks?
How is this going to affect the money market funds at big mutual fund companies? Break the buck?
Is money/cash safer in FDIC banks in the short term? Gold?
Yikes
Breathtaking rise in 10s. People will be jumping from roofs.