These Fed governors and FOMC members spouting off about “pauses” and “no hurry” to increase short rates are actually extremely bearish for bonds. Bonds only hope was that Warsh would be the second coming of Volcker. Given the comments of the last couple of days by Williams et al, it seems that the 12-0 vote at the last FOMC meeting was an outlier. Inflation is a growing problem and it’s not just the recent oil “supply shock. It’s been around for almost 2 decades and it’s a result of too much money creation, globally. If central banks don’t address it, note and bond yields are not just going a little higher, they’re going a LOT higher.

Surprise, surprise. These guys are winning, Scottie.

It’s been a lot of years since I traded bonds and managed bond portfolios for a living. Whatever, Bessent and his Treasury Department appear to make no sense to me. Accepting that the guy has a massive ego, he’s announced that he/they were going to arrest what is turning into a surge in Treasury yields by increasing the size of the “liquidity providing” buy-backs, turning them into “market supporting” buy-baacks. For the second longer term security buyback program in a row, he’s bragged that that they were going to triple the size of the operation. Two weeks ago, they announced that they would buy up to $6 billion par value of older, off the run issues. They bought approx $5.2 billion, spending just $3.65 billion. Today, they bought back just $4.078 billion PV of the planned $6 billion, spending only $2.419 billion because most of what they bought were at steep discounts. The weighted average coupon rate on the purchases was 2.432% So in the two buy-back operations they’ve bought approx $9.3 billion PV but spent only about $6 billion. To put this in perspective, the Treasury is issuing about $83 billion PER MONTH of new Treasury securities in the 10, 20 and 30 year sectors, combined. One would have thought that having worked under Soros and Druckenmiller early in his career, Bessent would have learned the term “go big or go home”. I’ve heard that the reason the Treasury didn’t buy the full, planned amounts is that they considered the offerings too expensive. But if you’re plan is to ”move” the market, surely a basis point or two, here and there, would make little difference In the grand scheme of things. Just buy the notes/bonds and get on with it. Bessent and his team come out looking very weak, and unprofessional. Again.

Slowly at first, then all of a sudden. @StealthQE4

Warsh is the real deal. How long is it going to take markets to figure it out? The 12-0 shows it’s his Fed now. He/they are going to get inflation back to 2% but it’s going to take time and IMO going to require more aggressive action than we’ve seen today. Short and long rates are likely going higher and equity markets a lot lower.

“Another part of the problem is the structural stickiness of inflation for years. The Fed tried to combat inflation as best it could (again, destroying demand with rising rates) in 2022.” I’m sorry, but that’s nonsense. The Fed hasn’t been restrictive post Covid. They’ve accommodated the inflation we’ve experienced

Surprised tthat bonds have held their morning price gains. But it is early. Press conference in 18 minutes. It should be interesting with the 12-0 vote. Wonder if there was any discussion about 50 beeps and whether we’d hear about it.

India expert. Wow.

Whatever happened to Scott (“I am the House”) Bessent’s sanctioning of a major bank today? I just asked @Grok. Turns out it is Russia’s VTB Bank Public Joint Stock Company. Who? Major bank? No wonder the bond market evicted him from “the House” on Friday.

There it is. 3. Then 4. Then 5. When 6%

Treasury repurchases. Treasury Secretary Bessent upped the buy back program from $2 billion, to $4 billion and then this week to $6 billion ten to 30 year maturities in the September program. I didn’t study the announcement notices closely but he was referring to ”par value” amounts, not the dollars to be spent. In today’s operation, approximately $10.5 billion notes and bonds were offered to the Treasury but they only accepted $5.187 billion par value. The weighted average coupon of these purchases was 3.385%, with 10 year and 30 year on the runs trading at approx 4.9% and 5.33%, respectively. That means that many of the securities were trading at a huge discount to par. In fact the total cost of their purchases today was about $3.65 billion. Versus the $6 billion many of us expected to be purchased. Given that the Treasury is auctioning approx $83 billion a month in new 10, 20 and 30 year securities monthly, these buy backs are even more of an odd lot than I previously believed.

Does Scottie Bessent know yet that he’s been evicted from The House? 😎

Re the Treasury “doubling” 10-30 year bond repurchases, some perspective. According to Santelli’s numbers yesterday, the Treasury has averaged a total of $82 billion PER MONTH of 10, 20 and 30 year note and bond auctions this year. In the next 7 scheduled buy backs of 10 year and longer Treasuries (Sept 9 through November 3) the purchases will be doubled from $14 billion to $28 billion. That averages approx an extra $7 billion per month . Today’s market action proves again that you can fool some of the people all of the time.

Now this is going to make for an interesting, likely huge, severance package. I’d encourage his lawyers to take their time negotiating. bbc.com/sport/football/artic…

This is stunning! Talk about the pot calling the kettle black.

@hwccarval

A different perspective on Warsh today. I think he’s off to a good start.

So. Is a rate hike tomorrow bullish or bearish for bonds?

An announcement pre-announcement? @TruthGundlach @DiMartinoBooth