from ZeroHedge:
Submitted by Peter Tchir of Academy Securities
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.
TRUTH LIVES on at https://sgtreport.tv/
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.
I’m not sure the Treasury Secretary should ever refer to any part of the US yield curve as illiquid. But Bessent did. Maybe he is remembering the “good old days” when nothing happened in August. I don’t think this August was sleepy, nor particularly illiquid.
Having said that, the Federal Reserve owns over 50% of all bonds maturing between 10 and 15 years from now. That seems a long way from “free” markets. The Fed’s holdings of longer-dated bonds are quite high (nearing 20%). It might be illiquid and partially “artificial,” but not in the way that Bessent implied.
