Allspring策略师：美债收益率受技术面主导，AI基建加剧融资竞争

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and saving us right now George uh boy just really can't say enough about his holistic view of bills notes and bonds with Margaret Patel at Allspring Margaret Patel yesterday was absolutely lights out on a resilient equity market. Can I still invest for coupon and dare I say total return in the bond market after yesterday's festivities?

So we think you can Tom. Um you know as as we like to say in in the world of bonds technicals can dominate fundamentals. Uh and they can in extreme and as well as for a long period of time. And right now you know the market is dominated by by technicals. You've talked about it all morning. Nothing's more exciting than a morning full of bond talk. And we talked about heavy heavy borrowing demands from the US, from the rest of the world, and from the AI buildout.

You're talking trillions and trillions of dollars of needed borrowing, right? But but what we saw yesterday was the Treasury tipped its hand. The US is an interest rate sensitive. It's a price sensitive borrower. And that's what the Treasury told us yesterday. And that's a meaningful signal. They don't want yields to go up

because it matters to the Treasury.

This is the real world. I'm researching last night like I do all the time. I got a beverage in my hand and I went British.

Okay.

I'm so out of whack with the numbers and George, you'll appreciate this that I think in billions. And if the numbers four trillion,

that's 40,000 billion.

Okay.

The British move the comma out. And so you think in billions because I think the language here, we've lost smart guys like George Boring and you and me, we've lost perspective thrown around the dreaded T-word.

I know it's getting used more and more. How high

do you think global rates can go here? I mean again the 10 year at 470, the 30-year at four and a five and a quarter, how high can these can they go, do you think? Well, I think the Treasury is trying to establish some demarcation lines, you know, with four, five and a quarter in the 30-year and four and 3/4 on the 10-year. Um, and we're in a bit of a battle, as you guys have mentioned already. Bond yields are starting to test those levels.

Uh, the Treasury has tremendous firepower to to maintain that. And that does seem to be, you know, kind of the threshold of of pain. And so, this is going to shake out. You've already talked about um Jackson Hall next week. We're going to have to hear to see listen to hear what uh what War says. uh we think that he's going to stick to his knitting and that clearly define the role of the Fed in the context of a more kind of muscular more assertive Treasury and we've got the task force 5 which is very much in play but talk about the role and the importance of monetary policy to try and anchor the front end and then let the Treasury do the heavy work as it relates to managing the technicals kind of around the yield curve.

So going back to your question, Tom, what what can bond investors do? The good news in here is you're being paid to be a lender. Y

it's tough if you're a borrower and the crowding out from the treasury and the AI complex, but if you have money to lend, you're actually being paid pretty well. you know, the break even yields, if you will. You know, if you can build a portfolio of about six and a half percent, which you can, you know, you probably have 160 175 basis points of cushion, meaning yields could go up that much and you're still making money.

That's one way to look at it. Real yields are strongly positive. It's another way to look at it. And third, you know, the default rate, the risk of permanent impairment tends to be low in a mildly inflationary environment. So that yield story, I know people have talked about it, we talk about it, allspring talks about it, but it's so powerful. And when you compound at these rates through time,

you expand your purchasing power, your portfolio grows, and you actually take down the volatility in your overall portfolio. That's the story around bonds,

the hyperscalers, the data center buildout and that crowd out for the treasury market. I don't think I've ever heard that before that that you you're getting crowded out of the treasury market because what I can lend to the US government, but I can also lend to Microsoft, the AAA company or whatever it is and get a better yield. Has that happened before in any scale? I don't remember.

Not at this scale. Not that I can remember. And we've been doing this for quite some time. uh certainly not I think in our professional careers but orders of magnitude if the Treasury is borrowing an extra $2 trillion a year cumulatively this is sort of a big guesstimate number but the AI sort of buildout is getting up to like 500 billion to a trillion of new borrowing needs

it's crowding out full faith in credit

it's competing with very much so

you didn't answer my you didn't answer my question and I got a follow-up question is it crowding out full faith in credit. I don't buy it.

I think it's crowding out all the other borrowers. So, collectively the treasury high quality. So, the treasury we can debate quality, but certainly still one of the higher quality borrowers in the system, you know, the sort of the AI complex, certainly the hyperscalers, the Nvidia of the world, all very very high quality borrowers. So, I can lend to to governments and and very strong

Michael Bar medicate me. Okay. So Japan and the people of Japan or someone larger like Bob Michael over at JP Morgan,

they're not buying full faith and credit because of the next issuance of an Amazon six tranch piece.

I think they're look they would prefer to lend to Amazon instead of the Treasury because I'll take the I'll get the extra 85 basis points and run with it and that's enough for me. See, so why do I need to lend to the treasury? If I can lend,

so just close the loop here, folks.

Then treasury full faith and credit price goes down and yield up

except when the Treasury steps in to keep those prices.

Did Mr. Besset misjudge the moment he's in?

No, I think it's very precisely timed. And as I mentioned, we think that the Treasury has tipped its hand showing that there is there's they're price sensitive and five and a quarter on the 30-year was enough to get the Fed move. Uh, sorry, to get the Treasury moving.

I thought, full disclosure, as an amateur, Paul, I thought it'd be a higher yield. Were they panicked?

Yeah. Well, I

I was surprised here.

You know, we saw with the tariffs a couple years ago, 450 on the 10-year was the trigger a lot of people called out and I don't know if that's still the case here. Here we are at 47 on the 10. I don't know. But the you know the the White House the administration is certainly sensitive to higher rates for a variety of reasons

and not not surprisingly. I mean everybody is. So

did you miss lunch yesterday?

It was it was a lively day.

It was a lively day. George George Bore at profanityfree allspreen. Thank you so much for joining