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2018-10-18

Soon the casino gamblers will be shocked

With new borrowings of $1.2 trillion by the US Treasury and $600 billion of existing bond sales by the Fed during FY 2019, you have $1.8 trillion of homeless debt slamming hard upon the scales of supply and demand.

That this fiscal eruption is not even in today's Wall Street narrative and the QT is completely ignored tells you all you need to know. 

Soon the casino gamblers will be shocked, blathering that another purported comet from outer space caused interest rates to soar, notwithstanding disappointing "growth".

Moreover, once the bond market Armageddon gets cranking, it will way overshoot to the high side (above 4% or even 5% on the 10-year).

Thereupon, carry trade speculators will be forced to dump their bonds, triggering massive mutual fund redemptions and the violent unwinding of Wall Street hatched bespoke trades.

David Stockman 17 October 2018


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