Here goes my first thread on Bluesky - we have a new Treasury Secretary! Large rally in bonds to begin the week as the drama behind "who will sign the next batch of US Dollars" comes to an end. We will soon be carrying Scott Bessent's autograph in our pockets. 1/8 - ThreadSky

arishisays.bsky.social • 103 days ago

Here goes my first thread on Bluesky - we have a new Treasury Secretary!

Large rally in bonds to begin the week as the drama behind "who will sign the next batch of US Dollars" comes to an end. We will soon be carrying Scott Bessent's autograph in our pockets.

1/8

Comments

tilthard.bsky.social•103 days ago

Rishi, Thanks for the detailed analysis. I hear so much about Bessent. Do we know how his funds performed under his leadership?

arishisays.bsky.social•103 days ago

A lot of ink spilled on what his views are, what he's likely to do, etc. I'll write more about this in the coming days, but my (somewhat unpopular) view is that the Treasury Secretary doesn't actually control all that much when it comes to things most people care about.

2/8

arishisays.bsky.social•103 days ago

In fact, for the longest time, it was one of those positions which only bond nerds would talk about. But then came the legendary budget in the UK in October 2022, and Kwasi Kwarteng proved to the world, that there was indeed such a thing as a "responsible" Treasury Secretary.

3/8

arishisays.bsky.social•103 days ago

Therefore, every time a government changes now, there is a "Kwasi" premium that the long end needs to price. Bessent being a self proclaimed fiscal hawk led to an unwinding or that premium, hence the rally. Him not wanting to fight Powell also helps.

4/8

arishisays.bsky.social•103 days ago

I believe, if we manage to hold this bid in US rates this week, then we are set up for a reversal of the post SEP FOMC sell-off starting December. We'd need a soft payroll number and neutral rate estimates go back to 3.5%-3.75% allowing the Fed to cut 3-4 more times.

5/8

arishisays.bsky.social•103 days ago

A year later, it may seem like Bessent was the reason why 10s rallied 50bps in 6 weeks. But market implied neutral rate is high and ASWs are tight enough to trigger a rally on soft data, especially when the Treasury Secretary is talking about reducing deficits and deregulating banks.

6/8

arishisays.bsky.social•103 days ago

But like I said earlier, Bessent doesn't control much. Neither tariffs, nor deficits are up to him. The only thing he controls entirely is the WAM of US debt (more on this later) and perhaps things like lifting the Wells Fargo asset growth cap.

7/8

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