1/6

Wall Street only cares about weak growth and wants cuts.

Main Street cares about higher prices.

The Fed is aligned with Main Street.
🧵
--
Polymarket betting is as good a gauge as any to measure the consensus opinion.

Now, 70% expect that a recession will occur in 2025. 2/6

So explain this ...

Why is there only a 9% chance of a cut next week?

1/7

Yesterday, I made the case that tariff-driven inflation expectations are soaring, driving the bond market, and paralyzing the Fed from cutting despite fears of a recession.



In the 🧵I will address some retorts.

https://x.com/biancoresearch/status/1911132982494347319

2/7

Yesterday I noted the soaring surveys of inflation expectations and included this chart.

1/16

What Happened to Bonds Last Week?

🧵

Last week, the 30-year yield rose 46 basis points last week to end at 4.87%.

As this chart shows, this was its biggest weekly rise since April 1987 (38 years ago!). 2/16

Why Did This Happen?

Let's start with what it was not. It was not data that suggested the economy was strong or recent inflation was high.

Here is a tick chart of the last 3-days of the 10-year yield.

1/6

Bonds are getting crushed again today. Now it looks like selling is coming from foreigners, especially Europe.

China is believed to hold several hundred billion of US Treasuries in legal entities in Belgium and Luxembourg.
🧵 2/6

The 10-year continues to get crushed today ... just traded 4.57%.

Higher than Tuesday's peak of 4.51%

*US 10-YEAR YIELD HITS HIGHEST SINCE FEBRUARY AS SELLOFF RESUMES

1/4

How stressed are markets? By this metric, the most in 17 years.
---
SPY = The S&P 500 Index Trust. This was the first ETF created in 1993 and is one of the largest at $575 billion.
----
The middle panel is SPY's Net Asset Value (NAV). The price closed at a 90-basis-point premium to the underlying value of the assets.

The last time anything like this happened was 2008. To emphasize, not even in the crazy days of 2020 did its divergence get this big. 2/4

VOO = Vanguard S&P 500, $566 billion in assets

At the same time VOO, which is Vanguard's version of SPY, went out at one of its biggest discounts in years (middle panel).

Something has broken tonight in the bond market. We are seeing a disorderly liquidation.

If I had to GUESS, the basis trade is in full unwind.

Since Friday's close to now ... the 30-year yield is up 56 bps, in three trading days.

The last time this yield rose this much in 3 days (close to close) was January 7, 1982, when the yield was 14%.

This kind of historic move is caused by a forced liquidation, not human managers make decisions about the outlook for rates at midnight ET. It keeps going, the 30-year yield is now 5.00%!

As chart shows, since Sunday Night, 54 hours ago, the 30-year is up 67 basis points. Cannot find a move like this in my database.

The only overlay is the 30-year Gily blowing up during the Liz Truss moment" in September 2022. That was 130 bos in 5 days. We are now 67 bps 2 1/2 days.

1/n

Polymarket betting for an emergency rate cut is 26%. This looks consistent with April fed fund futures. 2/n

Fed fund futures now have spiked to a 77% probability of a rate cut on May 7.

1/14

67% of the US Federal debt outstanding can be tied to military spending.

Getting Europe/Canada and the rest of NATO to take up more of this spending can take a huge weight off US government finances.

Europe/Canada appear to be willing to do exactly this.

🧵 2/14

European leaders have gotten the message from Washington about doing more for their own defense and for Ukraine, too.
nytimes.com/2025/03/26/wor…

1/6

Uncertainty measures, sentiment swings, and doubts about American Exceptionalism have all been overdone. They set up a sentiment low in markets.

Now, markets are bouncing back.

🧵 2/6

The Policy Uncertainty Index is from the 10 largest newspapers' policy stories that contain words that denote uncertainty.

March 11 this index reached its highest level in over 40 years, higher than 9/11, the Iraq War, the Financial Crisis, and the Covid-19 shutdown.

1/13

This post from POTUS yesterday CAN BE significant for shipping costs and inflation.

🧵

@mercoglianos @johnkonrad

https://twitter.com/PressSec/status/1900980769993969822

2/13

Background

In November 2023, the Houthis seized the cargo ship Galaxy Leader.

The Houthis are a Shia Military/Political Group in Yemen designated as a Foreign Terrorist Org by the Trump Admin in Jan 2025.

Here is the famous image of them boarding it with a helicopter.

1/8

Something different

Is Trump Popular? It's a complicated question.

@NateSilver538 Substack, Silver Bulletin, has some good data. They average every Presidential Approval Rating back to 1946. I use this data.



@2waytvappnatesilver.net 2/8

Trump 1.0 (red) and Trump 2.0 (orange) and the number of days into his presidency. Today, March 16, is day 55.

1/7

Bar chart of the 10-year yield.

As I write, it reached 4.35%. This is the highest yield since February 25. 2/7

No risk-off rally from bonds throughout most of the stock market decline.

We only saw flashes of a risk-off rally earlier this week when stocks were under extreme pressure, but those instances lasted only a few hours.

1/4

Everyone needs to calm down about the Atlanta Fed GDPnow flipping to negative (chart).

It was driven by one statistic, merchandise trade imports, which can snap back as early as next month and take GDPnow back up.

The world is not ending. 2/4

Here is the Merchandise trade deficit.

I labeled the last three months to show how much it blew out (and March 2022).

1/7

Two major problems need to be addressed, and yes, I agree they cannot be ignored anymore (think @HoweGeneration fourth turning).

The first is the debt situation, as @nfergus detailed:

https://x.com/biancoresearch/status/1893724021834887593

2/7

The US cannot continue this level of deficit/debt. Increasing taxes and spending cuts will not correct this without hurting the economy.

2024 deficits were 6.58% of GDP. This happens in major crises (civil war, WW2, etc.). What is the major crisis now? Too much debt?

1/16

A thread on The Mar-A-Lago Accord (MALA).

tl:dr

Take it seriously, not literally

The status quo cannot last. If we do nothing, it ends badly. What is the alternative?

Most of it has either already happened, or is underway. We weren't aware of the name. 2/16

Powell on Dec 4, 2024 - “The U.S. federal budget is on an unsustainable path. The debt is not at an unsustainable level, but the path is unsustainable, and we know that we have to change that"

thehill.com/business/50225…

1/5

I have not posted a spot $BTC ETF update in a while, so here is one.

These ETFs started trading a year ago (Jan 11, 2024). Their total assets are $114 billion. (Note that they started at $29B on day 1 due to the $GBTC conversion.)

Three funds make up the vast majority. 2/5

The net NEW money invested in all Spot BTC ETFs was $36.69B (bottom panel).

This excludes the $29B of $GBTC conversion on day 1.

1/5

*US DEC. ISM MANUFACTURING INDEX RISES TO 49.3; EST. 48.2

ISM beat

And as the chart shows, this is the second-highest reading since October 2022 (26 months).

(best sure to see the last post in this thread) 2/5

Prices Paid 52.5 versus the estimate of 51.8

It is staying "sticky" above 50 (meaning more rising than falling prices)

Remind me again ... why is the Fed cutting rates?

1/3

The repost below expresses a common belief that risk assets are effective inflation hedges.

History suggests they are not.

This chart shows that the inflation of the 1960s and 1970s wiped out 64% of the after-inflation stock gains by 1982 (meaning inflation beat stocks by 64%). And all inflation-adjusted gains of the previous 27+ years (back to 1954) were gone (meaning inflation beat stocks over the previous 27 years).

It took until 1992, 28 years later, for stocks to finally start beating cumulative inflation since 1966. 2/3

Too many vastly underestimate the devastating impact of inflation.

Since the 2021 peak, when the Fed called inflation"transitory," stocks have only beaten inflation by just 15% (with dividends).

So a 10% to 12% correct and a little bit more inflation and four years of relative purchasing power is gone (meaning you are no better off than four years ago).

1/6

🧵on yields and yield curve
---
The 30-year yield made a new 2024 close high yesterday.

Now, the highest yield since November 2023. 2/6

The 10-year yield is just eight basis points away from a new 2024 high.

Two trading days left this year.

1/3

What is TLT Signaling?

TLT is the iShares 20-Treasury ETF, one of today's largest and most influential bond ETFs.

I've been arguing that the bond market rise in yields as the Fed cutting rates has been a rejection of the easing cycle. The bond market is saying the Fed has the wrong policy.

Monetary easing is not necessary given the strength of the US economy (See Atlanta Fed GDPnow) and the coming "Trump Stimulus. Fed easing is raising inflation expectations and driving yields higher.

Here is a chart of TLT's price (black) and cumulative flows (red).

From the day the Fed started hiking (March 16, 2022) to the November 7, 2024, FOMC meeting (labeled), cumulative inflows were steady, totaling over $55 billion.

A reasonable interpretation is that bond investors agreed with the Fed's policy from March 2022 to November 2024, even if it was hiking, as it was fighting inflation.

However, since the Fed cut again in November, bond investors have reversed and fled the bond market. Almost $10 billion has left TLT. 2/3

The bottom panel is a rolling 30-day flow into TLT. The last 30 days have seen a cumulative outflow of $8.69B, easily the largest 30-day outflow in TLT's history.

Again, this outflow started with the November 7 Fed cut, which I interpret as the market screaming "no" at the Fed about its move.

1/6

Good Q, I will answer why.

The market is signaling the Fed is not serious about inflation.

10-year yields during rate cut cycles since 1981 (the 100-year inflation and yield high).

2024 (black) is the biggest yield rise in a cutting cycle in at least 40 years.

https://twitter.com/AnnaEconomist/status/1869838707454554342

2/6

However, the 2024 yield move (black) looks similar to the yield moves during pre-1981 rate-cutting cycles.

In the 1960s and 1970s, the market worried about inflation.

When the Fed cut, the market screamed "no," and long-term yields rose—like 2024 (black).