Aahan Menon – founder of Prometheus Research – shares his current macro outlook, including why he believes the massive upcoming wave of debt issuance is likely to be bearish for U.S. Treasury bonds (from the BlockWorks Forward Guidance podcast on August 30)…

00:00 Introduction 00:27 Progressing Through A Tightening Cycle 07:57 How To Measure Liquidity 15:51 A Wave Of U.S Treasury Issuance Is On The Horizon 24:09 Is The Fed Behind The Curve? 29:10 Inflation 38:25 Credit Is Contracting, Just Not Enough… Yet 43:17 When To Shift From Short Stocks & Bonds 50:44 Private vs Public Sector
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An explanation of the popular Treasury bond “basis trade,” and why regulators are sounding the alarm (from The Wall Street Journal on Sep 13)…

The basis trade, an innocuous-looking practice at the center of some of Wall Street’s historic blowups, is back.  A popular way for hedge funds to profit from bond trading while minimizing their exposure to swings in the market, the basis trade exploits the price difference between Treasurys and Treasury futures. The resurgence is attracting fresh
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This long-term chart of 30-year Treasury bonds suggests the 40-year bull market is over (from Jurrien Timmer via X on September 19)…

Today’s bond market hinges on three assumptions: a negative term premium, low inflation, and a stagnant neutral rate. Yet, from a chart perspective, it seems obvious that the secular bull market for bonds ended in 2020. That puts all the assumptions to the test.

Hedge fund manager Bill Ackman – who has never been shy about “talking his book” – recently explained why he remains bearish on U.S. Treasury bonds (from Bill Ackman via X on September 21)…

I believe that long-term rates, e.g, 30-year rates, will rise further from here. As such, we remain short bonds through the ownership of swaptions.  The world is a structurally different place than it was. The peace dividend is no more. The long-term deflationary effects of outsourcing production to China are no more. Workers and unions’
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The government is planning a U.S. Treasury “buyback” program to boost market liquidity (from Bloomberg on September 21)…

The resilience of the world’s biggest bond market is top priority as US debt officials prepare to start buying back government debt, according to Josh Frost, the Treasury Department’s assistant secretary for financial markets. “Buybacks can play an important role in helping to make the Treasury market more liquid and resilient,” Frost said Thursday in
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The recent “bear steepening” in the U.S. Treasury yield curve could be an ominous signal for the economy (from Alf via X on September 23)…

There is a rare and powerful trend occurring in bond markets. History shows that if left unchecked, it can cause serious damage to equity markets and the economy. A thread. Over the last 3 months, US bond markets are in an aggressive and prolonged period of bear steepening of the yield curve. The TMC VAMD
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The 10-year U.S. Treasury yield hit a new 16-year high above 4.5% this week (from Charlie Bilello via X on September 25)…

10-Year Treasury Yield moved up to 4.55% today, highest since Oct 2007.  Real 10-Year Yield (adjusted for expected inflation) of 2.18% is the highest since Jan 2009.  Good times for new bond investors, bad times for existing bond investors.

Torsten Slok, chief economist for alternative asset manager Apollo Global, believes the credit default cycle is now underway (from The Daily Spark on August 26)…

Since the Fed started hiking in March 2022, default rates have been moving higher, and every day there are companies that cannot get a new loan or refinance an existing loan. This is how monetary policy works. A higher cost of capital makes it harder for firms to get financing. With the strong uptrend in
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