The real action continues to be in the treasury market. The 30 year auction yesterday was not good, as structural demand (China, Japan and the FED) for long term paper was not present, and yields spiked up again along the curve. Before the auction, it was reported that the total interest cost of US treasury debt surpassed $1Tn for the first time ever, and it seems to be gaining momentum. If you look at the chart below, you’ll see that yields have gone up 7 months out of 11 during this year, and only episodes such as banks failures (SVB) on March, and the aftermath of the Hammas attacks on Israel have push yields lower during the year. As Stan Deuckenmiller said recently, the only treasurer in the US that didn’t issue long term bonds during #zirp was Janet Yellen, and now she’s trying to catch up in a market where there’s no appetite for long term paper, increasing the overall cost of debt significantly, at a time where the fiscal deficit of the U.S. is growing. Far from a sweet spot.
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