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 - ThreadSky

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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

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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

arishisays.bsky.social•103 days ago

That's not enough by itself, but as long as the reflation tail is under control, bonds look attractive to play slower hiring, especially vs swaps.

Holiday week, and Trump is back, so expect swings on headlines. Trade carefully.

8/8

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