美债回购难解融资压力，利率或长期高企

The market reaction suggests that this is an important tactical move from the Treasury, a little bit unexpected. I wasn't surprised, what I think, that threat was out there for a while. Like, I think market participants knew that this administration would look to doing things that are unconventional. The general upward pressure that comes every time there's a voracious demand for capital. And that's what we have right now.

And I just don't think any of those are going to change, you know, short of a recession or a bubble bursting or some bad event like that. Higher interest rates to me are likely here to stay. Let's get some more on markets. Now we're joined by Amy Xie Patrick, Head of Income Strategies at Pendal Group, she manages about $70 billion in funds. Amy, great to see you as always. Great to see you too, Paul. And I do want to start with the bond buyback.

What's your key takeaway from that? Because bond markets liked it for now. How long is that going to last? You know, one bond market liked that, I looked at Australian government bond yields this morning and those swap yields small didn't really care too much. And I guess it makes sense right. Because that's U.S. treasuries is what the U.S. treasury is is targeting. And they're not going to buy back any other longer dated securities.

But as you said, you know, is it treating the symptom or is it treating the cause. And at the end of the day, the US Treasury has, you know, 2 billion worth of funding to do, per annum, at its current pace, it needs to roll over about 2 billion of debt every month, actually 6 billion every quarter. So, you know, you're just shifting the problem around. It actually reminds me a lot of all other sort of intervention that we've seen from other central banks, for example, you know, Japan intervention, intervening in the yen.

You know, it gives you a little bit of temporary stability in markets, but does it really stop it from going any further? Some commentary coming through here. Jack McIntyre, who we have in the show quite regularly, says they have to try something. He says, yeah, sentiment in the long end is as bearish as I have seen in a long time coming out of ING, as you can see also on your screens, the fact that it's being done now suggests an ulterior motive.

John Woods is here with us on set, Asia CIO and Head of Investment Solutions solutions at Lombard Odier. You guys are neutral on DDM sovereign bonds. Does this change your mind at all? What does this change, if at all? Well, this is new news, okay? This is something that we have to look at closely. Is it a one off? Is it part of a sustained series of interventions in the market? Obviously, this is a real yield and term premium story.

And whether intervention impacts that or changes that, is less certain. We, of course, had the US intervening in the yem a couple of weeks ago, that seemed to be more of a one off than a sustained concerted programme of intervention. So I think the market and people like us, asset allocators, will be looking very closely at what this, what this translates to, if it's a one off, I don't think it has any major impact at all.

It's a fundamental story, rather than an intervention story, possibly that that 5.3 was a knee jerk reaction, when the 30 year hit that level, maybe that was seen as some sort of a reaction, required, but my sense is that it's not going to change the meaningfully the trajectory, if it's a one off. Nut until we get to see more sense of how that term premium is going to be addressed. So what do you think ultimately could bring rates lower if it's not intervention like this, if it's a one off?

I mean, obviously there's so many things that are weighing on the long, whether it's this investment boom, the Fed uncertainty, oil prices and the like, ultimately what is the next catalyst you think to bring rates down? I don't know if rates are going to head down. I mean, I think that we could well be in a higher for longer environment. Bear in mind this is a real rates story rather than a nominal rate story. As recently as 2022, we were having negative real rates.

And now I think value is returning to the rates market. It's sort of, akin to what we saw before the GFC, where you saw real rates around 2 to 3%. And I think we're returning to that paradigm now. I actually think it's probably positive, ironically, not least for savers, but for just seeing a broad normalization of rates levels, away from the abnormality and emergency post GFC period.