贝森特启动国债回购，市场担忧收益率上升

Typically, Treasury's mantra is we want to be regular and predictable. So, if we're going to do liquidity buybacks, which they talked about for, you know, several quarters before they actually enacted them, um they they've always announced it at the quarterly refunding announcements. And yeah, they make little tweaks here and there of buying a little bit more 5-year versus 2-year, right? That kind of thing. Um but but, you know, announcing something like this in the middle of August is not something that I've recalled in my career and I I think it's just an acknowledgement that you know, the administration wants lower Treasury yields.

They want

Paul, it's simple as this. Did you call your congressman and say, "I'm boxed out of the housing market?"

I That's Well, kind of I I'm going to put my cynical Wall Street hat on and and say, "This just feels like, you know, President Trump probably getting a lot of phone calls from his real estate buddies at Mar-a-Lago saying, 'Hey, rates are too high, Mr. Bessing. Dude, go out there and do something, you know. What do you What do you need to do to get long rates down? Do it.'" Is there a political angle to this typically?

Well, I mean, there might be a little bit. I mean, it's certainly from I think President Trump's standpoint, you know, he's always said that he wants longer-term interest rates to be lower. You know, one of the one of the challenges is is that with that, you know, being regular and predictable and then trying to manage markets from the Treasury's perspective is one of the levers that they have is just choosing where they're going to issue debt.

And they've been issuing a lot of Treasury bills instead of increasing other parts of the yield curve even though there's a lot more maturities coming up. So, when during the Biden stimulus you know, 5 years ago, a lot of the debt that was issued then at that point to fund it is now coming due. So, they've had to increase T-bill issuance. Now they they they had the opportunity actually to reduce issuance in in the long end.

So, and we had I actually thought maybe there was like a 15% chance that they might do that in this past February because they had the opportunity to. You had somewhat better deficit. You had You didn't need quite as much [clears throat] uh funding as we thought, you know, the the prior 6 months, but they chose not to do that. So, instead, they're buying back debt instead of just issuing a little bit less, which you know, either way, um you're still taking some money as as some bonds out of the market.

Will it help? No, probably

Okay, but these are signals, and I've learned reading six books, and Ira, you've done it with 60 years of in the trenches experience. The market will test this policy, not only domestically, but globally. How will your sophisticated brethren test Secretary Besson, and for that matter, perhaps the president?

Well, I I think we've really reached these kind of levels for a variety of reasons. In fact, we put out a note this morning just highlighting how it's not one thing that's been driving yields higher, right? So, it's not only fiscal deficits, but that's part of it. It's not only uh higher yields globally, um but that's part of it, right? Like, if you look at Japanese yields, you know, they're at the highest level they've been at in decades.

And and so, now, there's there's other bonds uh that are competing with the US. Um you know, it's it it's AI issuance in the long end, you but not only that, right? So, so, you have a whole variety of things that are going on. You know, taking out an extra $2 billion in in, you know, variety of sectors every single month, it it's not going to help that much, really. Um it will help liquidity in the off-the-run space, right?

So, but but but that's more of a relative value thing.

why did the market I don't mean to interrupt, Ira, but why did the market react seismically if it doesn't matter at the margin?

Well, I think it because people think maybe there's more behind it. So, so, to your point, will the market test this, right? And and, um you know, if you have a liquidity event, and look, we're in the middle of August, right before the Federal Reserve minutes are coming out with no other data or anything around. Um you know, liquidity's not there. So, so, this was an opportunity maybe for some shorts to um to to get uh to get stopped out and just and just say, "Okay, look, I'm just going to take some chips off the table.

I'm going to buy back." I I doubt that there's going to be a lot of legs to this move, at least not without another catalyst, right? And that other catalyst may be something like a hint that they're are going to cut short an issuance or that it could be that the next couple of data points that we wind up getting are pretty weak and that winds up helping the market rally. But yeah yeah, I mean look, is this is this worth like basically two times what the daily move priced into the market is?

Probably, but it's not more than that, right? So, that's eight to 10 basis points kind of on on the 10-year yield.

Yeah, I just I beat my neighbor who trades the long bond at Morgan Stanley and I said, "Does this change your life?" And he says, "Not really. I'll see it Swan Tavern tonight for a beer."

Peter Bookvar just publishes wonderful the book report. And and Peter Bookvar says, "It's just a rearrangement of maturity schedules."

That makes sense.

So, Ira, do I expect the US Treasury to be in the market today? For a week? For a month?

So so they're not starting this till September. So again, it's like anticipating, right? So yeah yeah. Well, what happens is again, this is part of the whole quote unquote regular and predictable, right? So so that they they set out a schedule every the beginning of every month kind of right be right around the time that they announce the the issuance for for the the next couple of auction cycles. And then when they do that, they they'll announce the sizes and then what they're going to buy in each individual bucket.

They just did that last week, right? So now so they're waiting and and basically again, regular and predictable. So here's the predictable. We're now doing $4 billion of buybacks instead of $2 billion in these maturity buckets starting September 9th, right? And and that's when they'll they'll start to buy these slightly higher sizes.

Quickly, what's it mean for Chairman Warsh?

Uh probably very little. I mean, you know so it's interesting. You know we always miss this in the Fed's mandate. One of the Fed's mandates is to keep moderate long-term interest rates, but no one ever defines that, right? Congress doesn't define it and you know you know moderate versus you know nominal GDP where we are today, we could argue that we're kind of moderate, right? And and look you know Paul, Tom, you the three of us have been in the market long enough that we remember yields when they were here you know 30 years ago.

So so for me you know my first mortgage was 7%. Guess what? Mortgage rates when I bought a house recently, got a 7% mortgage. Seems completely normal, but compared to people who have only been around for the last 20 years thinking about interest rates, this does seem very high.