Treasury Sec Bessent has been making headlines over the past 24 hours with his decision to double liquidity-support buyback operations for 10- to 30-year Treasuries. Even though this only kicks in in September, the announcement was enough to knee-jerk the long end lower and hit our M2M on our long US 2s30s steepener trade.
The move is a clear sign that there’s discomfort among the powers that be about 30-year yields hitting their highest level since 2007, and the strain of total public debt surpassing $40 trillion for the first time.
Although we take the arguments around the signalling this sends (is this Bessent’s take on Draghi’s ‘whatever it takes'?), we’re happy to hold the steepener trade and see this initial move fading. It further increases our conviction in being long XAU/USD along with other implications in the FX & Rates space.