What is US Treasury?

The iShares 20+ Year Treasury Bond ETF has produced a negative total return over the past 11 years, an historically unprecedented stretch for long-term government bonds.

“The iShares 20-year plus Treasury bond long-term government bonds now have a negative return over the past Nowhere for 11 years.”

Hayes explains that the Fed keeps short-term rates below inflation so Treasury can issue short-dated bills cheaply, then executes a modern Operation Twist by buying back long-end bonds, effectively suppressing yields without admitting QE.

“He will make sure that the short end is cheap relative to inflation, relative to growth so that the Treasury can issue bonds at the short end and perform a sort of operation twist and buy them back on the long end.”

The US fiscal doom loop explained. higher interest expense forces more bond issuance, which pushes yields higher, which raises interest expense further, requiring yet more issuance.

“We are in this thing where we are issuing more to then kind of fix the problem that then we need to kind of issue more and it's becoming this loop and we are I don't think everybody is fully appreciating that this loop puts this pressure on the again this kind of goes back to my long end supply thing.”

Gromen frames Warsh's dilemma as a forced choice. defending the dollar (higher rates) versus defending the bond market (suppressing yields), with true Fed independence the casualty either way.

“The Fed won't be independent. They'll be effectively more married with the Treasury.”

Arthur Hayes on the Fed expanding its balance sheet via FIMA as an admission that money printing is resuming.

“The Fed expands its balance sheet to create these dollars to hand it to the Japanese so they don't have to actually long sell these treasuries. like, oh, this is basically an admission that the game is up. They're going to start printing money.”

Bob Sheehan on the fiscal doom loop being underappreciated by markets.

“We are in this thing where we are issuing more to then kind of fix the problem that then we need to kind of issue more and it's becoming this loop and we are I don't think everybody is fully appreciating that this loop puts this pressure on the again this kind of goes back to my long end supply thing.”

Russell Clark's price target for the 10-year US Treasury yield is 10% within the year.

“That gives you an interest rate around 10%. And that's still my target for the year treasury is at 10% yield.”

Hayes identifies 5% as the 10-year Treasury yield level at which the Fed and Treasury engage in soft yield curve control, i.e. covert money printing.

“It seems like the 5% level when it looks like the yields are surging towards that level, they engage in some sort of money printing exercise in a form of what we call soft yield curve control.”