May 2024 Newsletter: The Bond Market Is the “Dumb Money” Now

Notably, Stephen Miran and Nouriel Roubini recently published a paper about “Activist Treasury Issuance” which is their term that refers to the Treasury Department taking unusual actions to offset the Fed’s tightness. Both Miran and Roubini are economics PhDs and worked in various capacities with the Treasury Department in the past.

In the paper, th

... See more

Afin d’obtenir du cash (pour faire face aux retraits de fonds de leurs clients eux-mêmes effrayés par les effets économiques de la pandémie), nombre de ces organisations n’avaient d’autre choix, sauf à essuyer des pertes, que de vendre en masse les titres les plus liquides qu’elles avaient en portefeuille [35] : les obligations d’État. Ces « ventes

... See more

When looking at U.S. markets, I think there’s a little bit from both of those areas that can be helpful. During periods of fiscal dominance, the general trends are that 1) governments often try to restrict the flow of capital in subtle or overt ways, 2) asset prices are often not as nominally bearish as you might expect since the denominator is wea

... See more

Item #1: Fiscal Deficits

U.S. fiscal deficits were huge in 2020 and 2021, but contracted in 2022 as most of the emergency programs dwindled.

However, by 2023, fiscal deficits began rising again , mainly due to increased interest expense. This is where fiscal dominance became rather sustained: the Fed’s interest rate hikes, which were meant to slow

... See more