Treasuries, Treaties, and Treatises
Let’s start with Treasuries. We laid out the approach we would take if we were Warsh last weekend in Warsh’s Mark Antony Moment (a play on coming to “bury” inflation, yet having quite the opposite effect, at least in terms of interest rate policy).
After Bessent’s “attempt” to drive bond yields lower, we analyzed the possibilities in Treasury, Treasuries, The Fed, and Iran. The primary focus was on bonds, though we had to toss in the “possibility” of Economic Armageddon for Iran.
On Monday we discussed the Fed on Fox Business, but they picked up our theme on Tuesday where Academy was the chyron on Varney & Co. Academy had the pleasure of spending the first half hour on Bloomberg TV on Thursday where we covered rates, Iran, energy, Global ProSec, and maybe even Situational Awareness (it all becomes a bit of a blur).
Please read Thursday’s report, in conjunction with last weekend’s report (or watch the video links) to get a sense of our outlook for Jackson Hole and what the Fed should (or needs to do) to support Bessent’s efforts.
Today, we will add some additional information to reinforce our take on the power of a Federal Reserve Operation Twist.
A Fed “Operation Twist” Is the “Real” Deal
As of today, according to Bloomberg, the U.S. government has $7.5 trillion of T-bills outstanding and $21.7 trillion of coupon debt outstanding.
Bessent is buying “at least $4 billion” per “operation.” These operations are almost weekly, and while the threat of “at least” is interesting, jumping from $2 billion to $4 billion wasn’t enough to move markets for long. This is NOT QE. Gold rose, and the dollar fell, in response to Bessent. Likely overdone as this is more about re-arranging the deck chairs, rather than creating “money,” which is what the “debasement” trade seemed to buy into.
