[E488] Howell notes Fed's expanded balance sheet is permanent due to post-GFC regulations requiring banks to hold more reserves, massive $30T US Treasury market, and reduced private sector capacity to absorb shocks.
[E487] Howell notes looming Debt Maturity Wall with $45 trillion in global refinancing needs by 2030 could trigger financial instability, forcing central banks to flood markets with liquidity during crises. Bitcoin recommended as core portfolio holding for hedging against monetary excess, with better buying opportunities ahead.
[E486] The debt wall cannot be ignored and must be funded in addition to this year's fiscal deficit. New liquidity transmission mechanism being built partly to address this.
[E474] Agrees credit/plumbing issues could cause sell-off. Doesn't deny BTC relative strength. Uneasy that Saylor and STRC might be only bid in market.
[E471] Confirms T-bond futures closed below 114 this week. Asks about expected lag between this trigger and upside in real money assets (gold/silver/commodities). Notes gold, silver, oil charts show probabilities pointing to downside right now.
[E470] Has always had problem with Raoul's nuclear print thesis - never accepted they'd do it without a trigger, and trigger would likely need to be mother of all selloffs. Feels like inflationary bust regime (per Charles Gave). Best allocation is cash, energy or precious metals.
[E469] This is base case. Building dry powder to buy liquidity sensitive stuff if all hell breaks loose and correlations go to 1. Cowen may be right about another crypto leg down before Oct, not for BTC reasons but because everything sells off.
[E468] MSA note argues key systemic risk is not oil but looming breakdown in long-dated Treasuries and major banks. T-Bond 114 is critical weekly close level. If breached, 'something dark is about to occur' and Fed will 'call in cavalry'. Market focused on tech/AI while stress builds in sovereign duration and large banks.
[E4383] MOVE UST Volatility Index hit 115, approaching the 120-130 level where US policymakers typically inject USD liquidity. However, doing so now with oil spiking and supply chains breaking would be 'EXTREMELY inflationary' and even worse for bonds. Gromen warns investors are 'just weeks away from a global credit and economic unwind that will likely be bigger than 2008 + COVID combined.'
[E4382] Gromen identifies 4.4% on 10-year UST yield as Trump's red line. Every time 10y yield hit 4.4% in last 6 days, Trump backed off Iran escalation — halted strikes March 23, proposed 15-point peace plan March 24, extended pause on attacking energy facilities to April 6 on March 26. Three extremely weak UST auctions this week (2y, 5y, 7y) were worst of their tenor in years.
[E4577] The 10-Year Treasury yield is breaking out of a flat-bottomed triangle pattern. Roque cites Robert Soros's dictum that 'the bond market never lies' — something always breaks when the 10-Year yield rises. This indicator is 'undefeated' like Rocky Marciano, implying the rising yield will trigger market stress.
[E4576] Roque identifies a potential 20-Year 'Brobdingnagian BASE' forming in the US 2-Year yield with approximately 500 basis points range. A breakout from this base would imply targets that 'NOBODY has priced into any forecast' — representing a non-consensus tail risk of structurally higher short-term rates.
[E4575] Roque argues the US 2-Year Treasury Yield is underpriced relative to oil and will become 'public enemy #1' as it moves higher. His target is 5%, corresponding to the 2006 and 2024 range tops, which he believes is not consensus. The yield has broken above its 40+ year downtrend, formed a Higher Low since the 2024 high, and weekly MACD is approaching positive territory — all signaling a new rate regime.
[E4578] Yields across the curve from 2-year to 30-year now exceed Fed Funds, with only 3-month and 6-month bills below Fed Funds. Roque concludes 'you can kiss rate cuts goodbye' — the market is pricing out Fed accommodation despite equity weakness.
[E4579] Roque believes the 2-Year Treasury Yield is underpriced relative to oil and will ultimately become 'public enemy #1' even though oil currently holds that title. The spread between crude oil and 2-Year yields suggests the bond market hasn't fully priced the inflationary/rate implications of the oil move.
[E4519] The US 2-Year Treasury Yield is building a potential 20-year 'Brobdingnagian BASE' with a ~500 basis point range. Roque targets 5% (the 2006 and 2024 top of range) as the next level, noting that a breakout from this multi-decade base would imply a target 'NOBODY has priced into any forecast.' Technical signals include a fugazi breakdown reversal, High Pole/High Flag patterns, and weekly MACD approaching positive territory.
[E4610] The 10-Year Treasury Yield is breaking out of a flat-bottomed triangle formation. Roque quotes Robert Soros: 'The bond market never lies.' He asserts that something always breaks when the 10-Year yield rises — calling it the 'Rocky Marciano of indicators' that remains undefeated.
[E4521] Only the 3-Month and 6-Month yields remain below Fed Funds. Roque concludes 'you can kiss rate cuts goodbye' as the entire yield curve from 2-years through 30-years has moved above the Fed Funds rate, signaling that rate cuts are fully priced out.
[E4520] Roque argues the 2-Year Treasury Yield is 'underpriced vis-à-vis oil' and will ultimately become 'public enemy #1' rather than oil. The 2-Year yield broke above a 40+-year downward-sloping trendline in spring 2022, establishing a new rate regime with a Higher High in 2024 and a Higher Low in early March 2026.
[E4489] The US 2-Year Yield has broken above a 40+-year downward-sloping trendline. The move from COVID lows into the 2024 high broke the pattern of Lower Highs and Lower Lows. The corrective phase from 2024 high to early March 2026 low created a Higher Low, reinforcing a new rate regime begun at the trendline break in spring 2022.
[E4487] Roque targets the US 2-Year Treasury Yield at 5%, corresponding to the top of its range since 2006/2024. He argues the yield is underpriced relative to oil and building a 'Potential 20-Year Brobdingnagian BASE' with ~500bp range. A breakout would imply a target 'NOBODY has priced into any forecast.' Technical indicators (High Pole & High Flag patterns, overbought MACD not correcting, weekly MACD near positive territory) all point higher.
[E4488] Only the 3-Month and 6-Month Treasury yields remain below Fed Funds, while 2s and 3s have moved above. Roque concludes 'You can kiss rate cuts goodbye.' The 10-Year Treasury Yield is breaking out of a flat-bottomed triangle formation, and historically 'something always breaks when the 10-Year Treasury Yield rises' — an undefeated indicator since 1960.
[E4428] Roque targets the 2-Year Treasury Yield at 5%, corresponding with the top of its range going back to 2006. The yield shows a fugazi breakdown in early March followed by sharp reversal, with High Pole & High Flag patterns implying higher levels. Weekly MACD is close to positive territory, and the yield has broken above a 40+-year downward-sloping trendline. Roque argues nobody has a breakout of the potential 20-Year Brobdingnagian BASE (500bp range) priced into any forecast.
[E4429] The 2-Year Treasury Yield is underpriced relative to oil, and Roque expects it to ultimately become 'public enemy #1' replacing oil. Only the 3-Month and 6-Month yields remain below Fed Funds, meaning rate cuts are effectively off the table. The move from COVID lows into the 2024 high broke the multi-decade downtrend of lower highs and lower lows, establishing a new rate regime since spring 2022.
[E4430] The 10-Year Treasury Yield is breaking out of a flat-bottomed triangle pattern. Robert Soros told Roque in 2012 that 'the bond market never lies' — something always breaks when the 10-Year yield rises. This indicator is described as 'the Rocky Marciano of indicators' — undefeated, like the only heavyweight champion to retire undefeated.
[E4431] Rate cuts are now impossible based on yield curve positioning. Only the 3-Month and 6-Month yields remain below Fed Funds — all other tenors (2s, 3s and beyond) have moved above. Roque states: 'You can kiss rate cuts goodbye.' This represents a significant shift from the prior expectation that Fed would cut.
[E4338] Alden argues the 'biggest bubble is up at the sovereign level: the federal debts and deficits.' Unlike private sector problems that end in defaults ('ice'), sovereign debt problems end in 'fire' — debasement and inflation. This frames fiscal dominance as the primary macro risk over private credit contagion.
[E5296] Is there a possibility that we have an unemployment rate going higher?
[E5287] In here when we had COVID in here when the rate hikes were happening and then obviously uh in here with SVB and then last year with liberation day this is CDX for IG right now we were sitting
[E5576] Tech sector credit spreads (OAS) at elevated levels while CDX high yield down. Tech sector OAS widening shows concentration risk. Next leg in 2026 likely pushing spreads higher as software companies face margin compression.
[E3968] Global debt refinancing demands will grow to US$45 trillion by 2030 — roughly twice the 2024 level. COVID emergency and low interest rates incentivised borrowers to term out debts into later years, creating a 'Debt Maturity Wall' bunching toward end of decade. This looms over already tight liquidity conditions and threatens financial stability.
[E3969] Supreme Court decision to outlaw certain tariffs has increased concerns about funding the US Treasury. This compounds the existing heavy burden of debt refinancing and upcoming AI-related capex surge. A dominant 70-80% of primary capital market transactions now involve debt refinancing, requiring balance sheet capacity (liquidity) that is becoming scarce.
[E3914] Yield curve behavior is more nuanced than commonly understood. Curve normalization can occur because growth is accelerating OR because the market is pricing deterioration and policy response — very different implications. Recession risk tends to rise during re-steepening phases rather than at peak inversion. The 2y/10y and 3m/10y spreads reflect ongoing restrictiveness, with the front end pricing deteriorating growth expectations while policy remains tighter in the present.
[E3899] The collateral multiplier, which is highly sensitive to bond market volatility, is benefiting from lower volatility. The MOVE index has trended lower since its April 2025 peak of 137.3 and remains close to 4-year lows at 68. Lower bond volatility reduces haircuts on collateral, boosting the multiplier and supporting liquidity expansion.
[E3802] Williams cites the structural problem: US federal debt mushroomed from $400B in 1971 to ~$37T today — 'something that would have been impossible under a gold standard.' New Treasury buyers must be found for mountain of issuance to fund current spending AND $168.5T in entitlements due by 2050 as Boomers retire. This puts pressure on the dollar and demands higher rates.
[E3803] Ambrose Evans-Pritchard warns Treasury Secretary Bessent is using 'activist Treasury issuance' to manage deficits — lifting short-term bills to 40-50% of monthly issuance (breaching 20% safety ceiling). This 'stealth QE' takes strain off bond market but creates greater rollover risk. IMF says general government deficit was 7.4% of GDP in 2024, with another 1pp added by tax cuts.
[E3682] BCA forecasts a 'bear steepening' of the US yield curve as inflation expectations ratchet higher. T-bonds will underperform cash and other major sovereign bonds. The report explicitly recommends long 30-Year Bunds versus 30-Year T-Bonds as a structural trade, reflecting bearish duration positioning on USTs.
[E3692] BCA's fixed income positioning includes long 30-Year Bunds vs T-Bonds (-0.3% since Dec 2025), long UK Gilts vs T-Bonds (-0.5% since April 2025), and long 30-Year T-Bond+Bono vs Bund+OAT (+26.3% since May 2019). The structural underweight on US duration relative to European sovereigns reflects the bear steepening thesis.
[E3572] Oliver argues there is currently no break in the Treasury bond complex, but this will come. An external dollar crisis from reduced international capital flows will translate into internal funding cost explosion. The Fed cannot clean up the resulting mess but will try, ultimately forcing QE acceleration.
[E3571] Oliver outlines a government bond death spiral as Phase 3 of the crisis: higher rates increase interest payments, worsen deficits, increase Treasury supply, pushing rates higher still. Resolution is binary — either government default or central bank buying 'any and all Treasuries,' destroying the currency. The $10 trillion in Treasury maturities over next 12 months intensifies the problem.
[E3458] 10-year yields have gone 'absolutely nowhere' for three years but that likely changes in 2026. In 2020-2021, rates began to rise as commodity prices moved higher, tightening financial conditions and eventually causing ISM to peak. Current conditions not yet signaling this — will show up in lead indicators before becoming cycle risk.
[E5453] The other two lines there are where I've been buying the last uh, year, partly for myself, partly in terms of setting up a strategic Bitcoin reserve for my children, which I've talked about with Anthony Pompiano many times.
[E5461] Too many people are brainwashed by non-rigorous and unquestioning actors dressed up as the business media, social media, investment strategists trying to sell you garbage at inflated prices.
[E3287] The fiscal regime remains 'unsustainable' and the Treasury is 'boxed in.' The monetary system is fractured with the Fed cornered. These conditions — along with Treasury buybacks stabilizing liquidity rails — are cited as supporting the longer-term structural case for Bitcoin. Treasury buybacks are specifically listed as a near-term catalyst for the base case recovery.
[E3110] Interest payments on US debt are rising exponentially and must be serviced through currency debasement. Even though COVID payments were dramatic, US liquidity must follow the rising interest payment trend because there is no alternative without a debt crisis. Yield Curve Control (as Japan has implemented) will eventually be adopted to cap rates below GDP growth.
[E3138] The authors expect Yield Curve Control to become the endgame solution, allowing debt problems to be solved if GDP remains above interest rates. Post-WWII US used YCC with 5% GDP growth and 2.5% rate cap, causing Fed balance sheet as percentage of GDP to collapse while equities rose 750% in ten years. They expect 15 years to sort out the current mess.
[E3161] The administration's strategy to address $36T+ national debt is to 'grow your way out' rather than inflate, default, or impose austerity. Every policy lever is aimed at this: deregulation to raise potential output, SLR reform to lower borrowing costs, AI investment for productivity, lower rates justified by structural disinflation. The math: if nominal GDP growth exceeds interest rate on debt, debt-to-GDP falls over time. This is arithmetic, not ideology.
[E2909] Bond futures have dramatically outperformed equities since the 1980s on a risk-adjusted basis due to both declining spot rates and positive roll yield from persistently upward-sloping yield curves. From 1982-2015, the US 10-year yield exceeded 3-month T-bill rate roughly 90% of the time. Monte Carlo simulations show that even with random interest rate paths, current backwardation levels cause futures to compound positively.
[E3060] Hartnett recommends buying 30-year Treasury as yield approaches 5%, framing bonds as 'Main St disinflation & Wall St deleveraging hedge.' Long bonds are the contrarian 'pain trade' for secular asset allocators in 2026 (as gold was in 2020). Key reversal trigger: 30Y yield >5.1% would confirm peak liquidity.
[E3029] Deutsche Bank recommends short 10Y UST with 4.45% target. Mild bearish view driven by further upside to term premia and decline in equilibrium rates likely to be unwound. Also recommends short bund trade with 3.10% target, with bearish bias supported by German fiscal stimulus. Higher equilibrium view in US due to strong growth, stabilizing labour market, increased government spending.
[E2719] USTs are now a risky asset on two fronts: seizure/freezing risk and inflation/repression risk. The US has weaponized USTs, USD, and the global trading system. Gromen argues the best trades occur when investors believe something is true that is already demonstrably false — nobody believes there's an alternative to USD assets, even as gold has already become one.
[E2669] Every identifies the structural bid for US assets (Treasuries) from the global financial architecture as a feature that reverse perestroika must reform. The US will need Fed help on rates for government while simultaneously restructuring the architecture that provides that structural bid. Dollar stablecoins are positioned as a tool to circumvent the Triffin Dilemma and maintain fiscal space during the transition.
[E2670] Success of reverse perestroika requires gaining 'de facto control of the Fed' for allocating capital at low rates in the national interest, potentially including 'bricks-and-mortar QE' and Yield Curve Control if markets react badly. The Fed must be ideologically aligned behind the NSS even if acting 'independently' — extending beyond rates to QE, YCC, capital controls, and swaplines.
[E2297] Renewed bond volatility is a key risk given political pressure on the Fed to cut rates. Treasury yields have risen modestly (10Y up 11bp, 30Y up 7bp over past week to 4.24% and 4.86%) following Greenland-related jitters, though they remain 38bp and 29bp below recent highs in May 2025. Wood hears US banks have used SLR relaxation to increase Treasury holdings.
[E2310] Historical analysis shows 2-year yields rose +65bps and 10-year yields rose +49bps in the 3 months following the last seven Fed Chair nominations since 1970 (Burns, Miller, Volcker, Greenspan, Bernanke, Yellen, Powell). However, MOVE index at 4-year lows suggests market is confident the new Fed Chair won't push 30-year yields above the 5% 'risk-off' level as QE/YCC measures are expected to 'fix' fixed income prices.
[E2309] The great bond bear market of the 2020s has seen 30-year US Treasury prices fall 50% and 30-year JGBs fall 45% peak-to-trough. Japanese 30-year yields hit 3.9%, highest since 1999. This bond destruction catalyzed the 'Anything But Bonds' bull in US tech, EU/Japan banks, and gold in H1 2020s. Hartnett expects small/mid caps and Emerging Markets to be new ABB beneficiaries in H2 2020s.
[E2246] Japan's sovereign yield curve 'detonated' as the catalyst for a global repricing event. SightBringer argues the foundational belief that central banks could suppress yields forever has collapsed — when markets stop believing sovereigns can suppress volatility, every asset priced off that belief loses its anchor. The yield curve 'no longer lies flat' and this changes every discount factor in every model.
[E9588] US unemployed exceeded job openings for first time since April 2021. Gromen notes that every time over the past 25+ years this occurred, US fiscal deficit/GDP rose 600-1200 basis points, flowing into insufficient Treasury demand. Court rulings may eliminate $300B in tariff revenues, further accelerating deficit deterioration and forcing Fed into aggressive easing or yield curve control.
[E7741] Treasury raised Q4 2022 net borrowing by 37% to $550B with Q1 2023 at $578B, pointing to annualized deficits of ~$2.7 trillion — near COVID crisis levels despite 3.5% unemployment. FFTT argues $1.33T gross issuance over next 5 months without Fed buying creates unsustainable dynamics and questions US solvency ex-Fed QE.
[E7728] FFTT argues US has entered 'fiscal dominance' at 120% debt/GDP where Fed rate hikes become counterproductive — higher rates increase government interest expense and deficits, ultimately feeding more inflation rather than reducing it. Banks hold $4.2T in Treasuries they may need to sell during stress, while Treasury needs to issue $1.5-2T in new debt plus refinance $9T existing. Long-term USTs at negative term premiums described as 'picking up nickels in front of a steamroller.'
[E7729] FFTT's core trade recommendation is to short TLT on banking stress days, as fiscal dominance means the Fed/Treasury will supply more USD liquidity rather than allow UST auctions to fail. Banking stress from commercial real estate (per Treasury Secretary Yellen's warning) could force Treasury sales, exacerbating supply/demand imbalance in the $9T+ refinancing pipeline.
[E7742] FFTT calculates US 'true interest expense' has reached ~100% of tax receipts at all-time highs, signaling fiscal dominance is inevitable. The Fed faces a binary choice: monetize deficits through renewed QE despite elevated inflation, or allow a catastrophic debt death spiral with spiking USD and rising UST yields.
[E7743] FFTT argues the US now resembles a twin-deficit emerging market with EM-level debt. When highly indebted twin-deficit countries enter recession, their sovereign debt typically sells off (rising rates) rather than rallying, breaking the historical inverse relationship between housing weakness and falling UST yields.
[E7771] Bond yields rising despite Fed rate cuts signals fiscal crisis pricing rather than normal monetary transmission. MOVE volatility index approaching crisis levels near 130. With US debt/GDP at 125% and 8% deficits, markets see Fed cuts as addressing fiscal sustainability rather than economic conditions, creating unprecedented bond market dysfunction.
[E7772] UST auction failures are flagged as a forward-looking catalyst. China's $254B capital outflow through Q2 2024 (largest since 2015-16) reduces foreign UST demand. US NIIP at -79% of GDP means foreign selling pressures on Treasuries during USD strength periods, compounding auction stress risks.
[E7783] Gromen identifies a 'Bessent Put' where Treasury/Fed intervenes when the MOVE Treasury volatility index exceeds 135, analogous to the prior 'Yellen Put.' The US government cannot afford sustained equity declines without triggering a debt spiral because 6-7% GDP deficits depend on tax receipts from rising stock markets. Potential SLR exemption could unlock $2 trillion in additional bank balance sheet capacity for Treasury purchases.
[E8499] BlackRock's Rick Rieder publicly stated 'the biggest risk in the next couple of years is that the US debt is too darn big.' US structural deficit now at 7% of GDP vs 4% in 2013, with T-bills issued at 5%+ rates compared to 0-1% previously, creating an acute financing crisis.
[E8500] Treasury buyback program likely involves issuing short-term debt to buy long-term bonds, adding net liquidity to the system. This is identified as a key forward catalyst for managing Treasury market stress alongside other liquidity injection mechanisms.
[E7798] US government cannot afford positive real rates with $28T in debt; a 3.65% rate increase would cost over $1T annually in additional interest expense. Government financing increasingly depends on Fed and tax shelter purchases rather than organic foreign demand, with foreign central banks buying only $120B of $11T UST issuance over 7 years.
[E7811] The fiscal trap dynamics described by Gromen imply the bond market is a critical risk point: if it questions the 'transitory' inflation narrative, rates could spike, collapsing asset bubbles and cratering tax receipts. This would force explicit debt monetization by the Fed, creating a reflexive loop between fiscal sustainability and bond market stability.
[E7819] US Treasury announced $1.85 trillion in net borrowing for 2H23, an unprecedented fiscal burden. Combined with ongoing Fed QT, this creates unsustainable market dynamics. Interest payments now consume 14% of tax revenues, a level that has historically triggered fiscal tightening. Retail investors own 71% of long-duration issuance at negative term premiums, creating massive vulnerability.
[E7820] Bill Ackman quoted projecting 30-year Treasury yield could reach 5.5% soon, calculated as 3% long-term inflation plus 0.5% real rate plus 2% term premium. Long-duration bonds described as 'heads you lose, tails you lose' — in recession, massive deficit increases drive yields higher on supply concerns; in no recession, yields rise on growth expectations.
[E5745] FFTT highlights $7T in Treasury refinancing needs in 2025 as a critical vulnerability. Tariff-driven USD strength could force foreigners to liquidate $8.5T in USTs to service USD-denominated debt, creating a bond market collapse scenario described as '2022/3Q23 on steroids.' Proposed $2T DOGE spending cuts deemed mathematically impossible without debt restructuring.
[E7842] Luke Gromen argues CBO 10-year projections are mathematically impossible: they assume 10-year Treasury yields remain 40bp below current levels for a decade despite $20 trillion more debt, no recessions, and fiscal deficits exceeding 6% of GDP by 2034. This forces either periodic QE/YCC or USD devaluation, with term premium normalization likely pushing 10-year yields toward 5%+.
[E7861] FFTT argues foreign UST buying is insufficient for deficit financing, forcing the Fed into a 'print or collapse' decision. Foreign official UST purchases have been declining since 2013, while central banks shift reserves from USTs to gold. The current debt system requires cheap oil to maintain debt markets, per 1997 analysis.
[E7870] Growing US fiscal deficits are crowding out the domestic banking system as foreign central banks and private investors reduce Treasury purchases. If Treasury yields rose to repo rate levels of 6-10%, interest expense on $22T debt would reach $1.3-2.2T annually (40-65% of tax receipts), triggering a debt death spiral. Quote from John Fath, BTG Pactual: 'If you're funding your overnight position at 6%, why would you buy a 10y UST at 2%?'
[E7884] Gromen highlights that broader negative interest rate implementation would cause massive disintermediation as investors flee negative-yielding bonds and bank accounts. He notes that at negative rates, 'Corporate America will be able to get paid to LBO the entire stock market (at an infinite valuation),' illustrating the absurdity and systemic instability of negative rate regimes.
[E7896] The structural end of petrodollar recycling means reduced foreign demand for US Treasuries, as BRICS nations redirect commodity trade surpluses into gold rather than USTs. Gromen notes Japan's 10-year JGB yields hitting decade highs, suggesting fiscal stress that may require coordinated global liquidity injection — a dynamic that could compound Treasury market stress.
[E7903] Gromen argues the Fed's Quasi-Fiscal Deficit (first since the Civil War) forces money printing to cover operating losses when funding costs exceed earning asset yields, creating permanent inflationary bias that structurally impairs long-term UST holders. Yellen's 'inflation-adjusted interest payments as % of GDP' metric is described as verbal sleight of hand committing to negative real rates through 2034.
[E7904] Gromen declares the traditional 60/40 portfolio is 'already dead' because the $130 trillion global bond market faces structural capital reallocation into equities, gold, and Bitcoin. T-Bills are treated as cash equivalents (per Bridgewater's Karen Karniol-Tambour), masking UST market dysfunction that will force continued policy accommodation.
[E5754] Gromen argues the US faces an incipient balance of payments crisis with foreign creditors no longer financing US deficits. The Fed has absorbed 90% of Treasury issuance since September 2019, with 71% of gross UST issuance at 6 months or less. The Fed balance sheet timeline to hit new all-time highs accelerated from June 2020 to January 14, 2020 — a 5-month compression in just 3 weeks, indicating rapidly worsening funding stress.
[E7919] Gromen argues the US has crossed a fiscal Rubicon with debt-to-GDP at 120% and deficits running 7-8% of GDP. Druckenmiller calculates fixing the situation requires either raising taxes 40% permanently or cutting spending 35% permanently. Traditional deficit reduction paradoxically worsens the deficit by reducing tax receipts, making the structural crisis self-reinforcing.
[E7920] GLD/TLT ratio breaking to new highs signals markets are discounting that rising real rates with current debt levels create sovereign insolvency risk, despite the strongest USD rise in decades. This suggests US debt has moved from deflationary to inflationary in its macro impact.
[E7921] UST market dysfunction episodes have been recurring and accelerating — in 2019 (repo crisis), 2020 (COVID), 2022 (UK gilt crisis spillover), and 2023 — each increasingly forcing Fed liquidity provision, indicating structural fragility in the Treasury market.
[E7935] US banks funding 25% of the federal deficit face regulatory limits on UST holdings expected to be reached by Q1 2020. Once banks must reduce purchases, the Fed would be forced to fill the financing gap with further balance sheet expansion, creating a structural buyer-of-last-resort dynamic in the Treasury market. The repo crisis was a symptom of these systemic pressures.
[E8933] Gromen argues the fiscal checkmate — US debt service plus entitlements equaling 100% of tax receipts — means any crisis forces monetization. Historical parallels at similar money velocity lows (1933, 1946) were 'horrible for bonds,' implying structural bear case for Treasuries even as the Fed is forced to intervene.
[E7950] Cayman Islands hedge funds hold $1.85T in Treasuries and absorbed 37% of net issuance of notes and bonds during QT, nearly equal to all other foreign investors combined. This creates dangerous dependency on highly-leveraged basis trades that must unwind during volatility, forcing rapid yield spikes and requiring Fed intervention.
[E7951] Treasury's $1T TGA buildup suggests coordinated liquidity management. Multiple structural forces converging make USTs inferior to hard assets — described as '4%-yielding bonds of finite face value, finite duration, and infinite issuance' versus gold/BTC as '0%-yielding bonds of infinite face value, infinite duration, and finite issuance.'
[E8273] With CPI above the entire US yield curve for the first time since 2008, markets are pricing rate cuts and the US enters negative real rates territory similar to 1942-1951. Gromen describes bonds as 'certificates of confiscation' under these conditions, suggesting structural deterioration in Treasury value.
[E7967] Gromen states 'the Fed and Treasury are not totally cornered yet…but we can see totally cornered from here.' Oil above $85/barrel triggers UST market dysfunction. Key catalysts include Fed reducing QT pace as preemptive USD liquidity and permanent SLR exemptions for UST holdings by banks — both signals of Treasury market stress requiring extraordinary intervention.
[E7981] Treasury Secretary Bessent admitted the US must grow nominal GDP at 6.6% to stabilize debt-to-GDP ratios. Historical analysis shows this level was only achieved during the 1965-85 high inflation period or major asset bubbles (dot-com, housing, everything bubble), implying the US faces a mathematical impossibility of debt stabilization without sustained high inflation or bubble creation.
[E7982] Japan's 10-year JGB yields hit their highest levels since 2000 as the Bank of Japan retreats from yield curve control. This undermines Japan's ability to finance US deficits through long-term Treasury purchases at negative real rates, reducing a key source of US debt demand and forcing the US to find alternative financing mechanisms.
[E7983] Fannie Mae and Freddie Mac privatization is being considered by the Trump administration, which could create $2-5 trillion in balance sheet capacity to buy MBS. Fed Chair Powell stated in 2021 that MBS and Treasury purchases 'affect financial conditions in very similar ways,' making this effectively stealth QE without Fed involvement.
[E9096] Government wage growth at 35-year highs running 2-3x higher than 10-year Treasury yields makes long-duration Treasuries structurally unattractive. Gromen states 'it seems unwise to own a 10y UST that yields far less than the y/y growth rate in the wages of US government workers,' drawing parallels to 1970s conditions.
[E9109] At 120% debt/GDP with 'true interest expense' exceeding 100% of tax receipts, the author warns any recession threatens a debt spiral. Federal outlays represent 25% of GDP, and DOGE cuts may paradoxically expand deficits by causing receipts to fall faster than spending cuts. Interest on the debt now exceeds defense spending according to Elon Musk.
[E9117] 10-year Treasury yields have risen 5.9% since Fed cuts began, the worst performance since 1966. With 125% debt-to-GDP, 7% deficit-to-GDP, and -79% NIIP, r > g is mathematically certain to trigger a debt death spiral. The Fed is cornered: tightening makes USD too strong triggering foreign UST selling, while loosening raises inflation expectations — both paths lead to higher long-term yields.
[E9118] Massive T-Bill issuance needs refinancing in 1H25 at longer durations, creating a key catalyst for further bond market stress. Foreigners hold $13T in USD-denominated debt, and the US cannot raise tax receipts above 20% of GDP historically, limiting fiscal options to address the debt spiral.
[E9149] Gromen anticipates a banking/Treasury crisis similar to the March 2023 bank failures that would require Fed liquidity injection. This is driven by the convergence of a late-cycle debt crisis with insufficient bond buyers and energy supply constraints that could force inflationary monetary responses.
[E9156] FFTT argues the US Treasury market has fundamentally shifted to trading like emerging market sovereign debt facing fiscal crisis. Since mid-2022, 10-year yields rise when financial conditions tighten and fall when they loosen, inverting the traditional safe-haven relationship. November 2023 saw the largest single-month easing in US financial conditions in four decades, specifically designed to save the UST market for the fifth time in four years (Sept 2019, Mar 2020, Sep 2022, Mar 2023, Oct 2023).
[E9157] The Treasury market now requires liquidity injections at increasingly frequent intervals to prevent dysfunction, with five interventions needed in just four years. Each successive dysfunction episode arrives faster than the previous one, suggesting a structural deterioration in UST market functioning rather than episodic stress.
[E9168] FFTT argues Bessent cannot successfully lower 10-year Treasury yields because the Fed hasn't sold a single 10+ year UST on net since 2010, indicating insufficient market depth. Attempting to 'scare capital out of stocks into USTs' would force hedge funds to de-leverage across portfolios, paradoxically sending yields higher rather than lower.
[E9169] FFTT warns the Fed may need to bail out hedge funds' approximately $1 trillion in basis trades, effectively creating soft yield curve control. This Treasury market dysfunction risk represents a critical structural vulnerability in the current rate environment.
[E9181] Gromen warns Trump's tariff strategy could trigger a 'Liz Truss-style UST market crisis' in his first 100 days if tariffs drive USD up and CNY down, spiking 10-year yields above 5%. This would create a vicious cycle of equity sell-offs and further USD strength. He declares 'the bubble has been and continues to be in the real value of long-term USTs.'
[E9182] US fiscal insolvency drives Treasury crisis risk: federal interest expense now exceeds defense spending for the first time in 75+ years, with the debt service ratio at 27% of receipts — 1.5x higher than China's troubling 19% ratio. Niall Ferguson warned this threshold represents risk to 'Great Power' status. True Interest Expense now exceeds 100% of receipts, forcing continued monetary accommodation.
[E9197] US True Interest Expense exceeds federal tax receipts at 125% debt-to-GDP, making rate hikes economically suicidal. If the Fed tightens, it accelerates the fiscal deficit into a sovereign debt death spiral. The Fed is trapped between crashing the economy to fight inflation or printing money into an accelerating inflationary spiral, with Gromen expecting it will ultimately choose printing, implying continued bond market stress.
[E9204] Gromen argues US faces potential $5.8-6.3 trillion in net UST issuance during a recession, combining deficit expansion, continuing QT, and foreign selling. Traditional buyers (Fed, Japan, China) are all reducing positions simultaneously, creating a structural funding crisis for Treasuries. Former NY Fed President Dudley acknowledged the Fed might need to intervene directly to support UST markets.
[E9205] FX-hedged 10-year UST yields for Japanese investors are approximately 250 bps below JGB yields, making it financially irrational to buy foreign bonds on a hedged basis. This has driven roughly $200 billion in foreign bond selling by Japanese institutions, representing a structural shift toward capital repatriation and loss of a critical marginal buyer of US Treasuries.
[E9222] US True Interest Expense (Social Security + Medicare + Medicaid + interest payments) reached 125% of federal receipts in November 2023 ($345B vs $275B receipts). Gromen argues that historically when this ratio exceeds 100%, it forces immediate USD liquidity provision by policymakers, effectively making UST market functioning the Fed's dominant mandate over inflation and employment.
[E9223] New SEC central clearing rules for UST market structure expected by June 2026 will create a form of soft yield curve control. Combined with Treasury buyback programs starting 2024, these structural reforms represent coordinated efforts to prevent Treasury market dysfunction amid deteriorating fiscal dynamics.
[E9244] If the US wants to decouple from China, the Fed will have to monetize not just US deficits for a very long time but also directly support US corporate bond markets and possibly equity markets. The repo crisis signals that the existing Treasury financing model is structurally broken without Fed balance sheet support.
[E9252] US Monthly Net TIC flows went negative for the first time since October 2020, indicating foreign selling of USD assets. Gromen interprets NY Fed President's comments about needing to 'shore up the UST market so it can better endure the next shock' as confirmation the Fed stands ready to supply whatever liquidity the Treasury market needs, ensuring continued monetary expansion.
[E9262] Treasury market dysfunction during equity crashes signals critical threat to dollar system foundation. When equities fall 15-20%, two key marginal Treasury buyers — US banks (constrained by leverage regulations) and leveraged hedge funds (forced to sell when volatility rises) — are no longer able to absorb supply, requiring even more aggressive Fed intervention.
[E9271] 10Y USTs on pace for third consecutive down year, which has never happened since 1928, indicating a fundamental regime shift where more government debt is no longer nominally deflationary. US debt at 120% GDP with deficits at 8% GDP creates unprecedented supply/demand imbalance. The 'common knowledge game' has arrived as major investors now openly discuss UST fiscal problems.
[E9272] PBOC intervention to support CNY constitutes the biggest unpriced duration supply risk in UST markets. Chinese authorities may need to sell USTs to defend the yuan while simultaneously needing to boost domestic consumption, creating forced selling pressure in an already supply-stressed Treasury market.
[E9282] Gromen argues USTs are so oversold there is no historical context within 47 years to compare, with the US government facing potential nominal default on USTs or entitlements without Fed liquidity injections. Entitlements plus interest costs could exceed tax receipts in recession: 5% Fed funds on $31T debt equals $1.5T interest (40% of recession tax receipts), while a 20% tax receipt decline plus 9% COLA would make entitlements 85-90% of receipts.
[E9283] Foreign private buyers purchased $556B in USTs YTD but this cannot offset Fed QT at $95B/month, recession-driven deficit increases, and critically negative FX-hedged yields for foreign institutional buyers. Energy importers like Japan must sell USTs to buy USD for energy purchases, creating a doom loop of currency weakness, larger trade deficits, and further UST sales in an illiquid market dominated by fickle hedge fund buyers.
[E9295] 2023 US federal deficit estimated at 52% of global GDP growth, nearly 70% higher than 2022's 32% level. Historically, when US deficits exceed 20% of global GDP growth, the Fed engages in QE. Bill Gross quoted: total credit approaching $85T requires ~$4T annual credit growth to steady GDP at $26T, which requires lower interest rates, not higher. Private sector balance sheet insufficient to finance US deficits without triggering a debt death spiral.
[E9305] US True Interest Expense has returned to 101% of tax receipts as of May 2023 — the acute crisis level last seen during COVID. Federal deficit projections deteriorated 30-50% in just three months. The US can no longer pay interest and entitlements from tax receipts alone, requiring money printing or severe fiscal adjustment. TBAC planning $5-10B monthly Treasury buyback program plus $120B annual cash management.
[E9322] Global 2-year yields were spiking as of October 2021, suggesting markets expected central banks to fight inflation. Gromen argues this hawkish expectation is unrealistic given US debt/GDP levels — the Fed cannot aggressively tighten without triggering a fiscal crisis, making any taper announcement performative rather than substantive.
[E9346] BOJ raised JGB yield ceilings and had to buy 16.2 trillion yen in JGBs to defend the new cap. ECB promised significant rate hikes, making FX-hedged 10-year UST yields 200-340 basis points below local bond yields. This incentivizes capital repatriation from US Treasuries just as US financing needs surge, threatening UST demand from the two largest foreign holders.
[E9333] Bloomberg's million-simulation analysis finds 88% probability that US debt-to-GDP is on an unsustainable path over the next decade, with only 12% chance of sustainability. BofA's Hartnett projects US interest payments hitting $1.6 trillion by year-end, making it the largest US government outlay. Treasury is funding massive deficits with very short-term debt despite inverted yield curve, suggesting long-term Treasury markets lack advertised liquidity depth.
[E9345] Gromen argues the end of negative nominal rates on global USD debt marks the beginning of a sovereign debt crisis, not a return to normalcy. With US debt/GDP at 125% and federal deficits projected at 72% of global GDP growth in 2023, the Fed faces a binary choice: resume massive QE or allow a debt death spiral. A mere 2.4% Fed balance sheet reduction in 2022 caused the worst combined stock/bond performance since 1871.
[E9360] Treasury liquidity has declined to March 2020 crisis levels with widening bid-ask spreads. Foreign central banks have dumped $300 billion in USTs while Fed conducts $95 billion monthly QT. Combined with potential recession-driven deficit expansion, this creates a severe supply/demand imbalance risking auction dysfunction.
[E9361] Biden's deal to pay rail workers is framed as the mirror image of Reagan firing air traffic controllers in 1981 — the latter marked the start of the 40-year bond bull market, while the former may mark its end by signaling a structural shift from capital back to labor.
[E9371] US 'True Interest Expense' (Social Security + Health + Net Interest + Medicare + Veterans' Benefits) reached 111% of US receipts fiscal YTD as of January 2025, meaning the US cannot pay its interest and interest-like off-balance-sheet obligations out of receipts. The deficit is up 40% year-over-year with $6.7 trillion in Treasury bonds needing refinancing in 2025.
[E9372] Gromen argues 2022 empirically proved that drastic federal spending cuts (outlays fell 30%+ YoY in Q2-Q3 2022) paradoxically drove 10-year UST yields higher rather than lower, because GDP slowing drove USD strength which forced foreign selling of Treasuries. This creates a debt death spiral at 125% debt/GDP.
[E9373] Yellen's stealth QE strategy of issuing short-term Treasury bills to offset Fed balance sheet reduction is exhausted, with the reverse repo facility dropping from $2.3 trillion to $178 billion, leaving no buffer against monetary tightening as Trump takes office and debt ceiling crisis expected January 14-23, 2025.
[E9387] UST market liquidity is not scaling with issuance. Fed QT running at $1T annually combined with $1.5T Treasury issuance requires non-Fed investors to absorb $2T annually. Former NY Fed trader Joseph Wang warns this supply/demand mismatch could force an 'air pocket' leading directly to Yield Curve Control. Author notes that unlike prior QT episodes where yields fell, this time they haven't — suggesting a 'macro rule change.'
[E9413] In a modest recession scenario with 10% COLA increase to US entitlements, annual entitlement payments would consume nearly 90% of US tax receipts, while interest expense would take another 45% of receipts. With debt/GDP at 125% and entitlements already at 64% of tax receipts, Volcker-style aggressive tightening is structurally impossible given US fiscal constraints.
[E9438] The Fed is now required to finance $3 trillion in Treasury needs, which Gromen calls the largest step toward centrally planned economy in US history. This mirrors post-WWII Fed-Treasury coordination that led to 21% inflation by 1951. Paul McCulley quoted: 'We print the damn money' on financing COVID response, signaling direct fiscal monetization.
[E9455] Gromen highlights that 71% of $11.5T UST issuance is at 6 months or less, creating massive refinancing risk. Fed officials are hinting at bank regulation changes to treat USTs as cash reserves, following the Argentina playbook of forced domestic financing. The US private sector 'cracked under stress' in repo markets when forced to absorb Treasury supply that foreigners no longer wanted.
[E9468] Multiple stress indicators suggest imminent Treasury market dysfunction: USD swaption volatility matching March 2020 crisis levels, need to sell $1.85 trillion in USTs by Christmas amid rising yields and foreign selling pressure. Western sovereign bonds (US, UK, German) now trade like EM debt with fiscal problems — yields rising during deflation rather than falling as in the prior 40-year regime.
[E9478] USD/JPY breaking 160 historically correlates with 10-year UST yields heading toward 5%. Gromen argues negative 10-year term premiums are irrational given structural inflation, reshoring costs, defense spending, and political uncertainty. Quote: 'Who in their right mind would lend money for 10 years to a US government led by either of these candidates with no implied premium priced in for inflation?'
[E9479] Ray Dalio's 'beautiful deleveraging' has 'failed catastrophically' — despite stock and housing bubbles AND nominal GDP growth exceeding 10-year yields, US debt/GDP has been rising since Q1 2023 back to 2021 levels, indicating real rates aren't negative enough to finance deficits. The fiscal situation requires assets like gold and BTC to 'super bubble' vs long-term USTs.
[E9495] Brad Setser quoted: 'It's not that the dollar is the dominant reserve currency, it's that Treasurys are the world's dominant reserve asset.' FFTT argues tariff-induced reduction in offshore USD supply would trigger Treasury market dysfunction, forcing Fed intervention, and that US debt/GDP dynamics require financial repression (g > r) making Treasury holders the implicit losers.
[E9508] Treasury Secretary Bessent's 'Gain of Function' policy advocates merging Fed-Treasury operations similar to WWII-era yield curve control to achieve significantly negative real rates and devalue US debt/GDP. This represents elected officials directly influencing capital allocation rather than independent Fed policy.
[E9509] Current US debt/GDP levels require either austerity (causing recession and political instability) or financial repression (devaluing debt through negative real rates). Historical precedent from 1946-53 and 1970s shows massive negative real rates were needed to reduce debt burdens, and FFTT argues similar conditions exist today.
[E9528] The Fed is effectively financing the US government in T-Bill markets through the banking system, with $11.3T gross Treasury issuance in FY19 and ~$6T in short-term debt requiring constant rollover. Without Fed repo support, Gromen argues interest rates would spike sharply as the government scrambles to borrow, echoing Weimar precedents.
[E9536] Gromen warns US True Interest Expense (entitlements + net interest) reached 120% of receipts in July 2024, meaning mandatory spending exceeds total revenue even at full employment with record revenue growth. US debt/GDP at 122%. This unprecedented 'emerging market fiscal position' will force the Fed to end QT, cut rates, and expand its balance sheet to prevent Treasury market dysfunction.
[E9537] Dan Oliver of Myrmikan Capital quoted: 'If no one else will buy the Treasury bonds, Congress will force the Fed to do so.' Gromen argues Fed balance sheet expansion is inevitable through mechanisms including bank SLR exemptions or swap lines, as the fiscal math makes austerity politically impossible without triggering depression-like conditions requiring 25-30% cuts to defense and entitlements.
[E9538] FFTT analysis shows net capital gains and taxable IRA distributions represent approximately 200% of year-over-year growth in Personal Consumption Expenditures. Since top 5% of taxpayers pay 63% of individual income taxes with stock-based compensation, falling equity prices directly reduce tax receipts and force higher Treasury issuance, creating a reflexive feedback loop between stock markets and fiscal sustainability.
[E9558] US Treasury increased quarterly borrowing estimate by 143% due to tax receipt shortfalls, with California and NYC seeing 20-31% y/y declines in tax revenues. Gromen argues this fiscal deterioration creates constraints that will force the Fed to pause tightening, as continued rate hikes would exacerbate government funding costs amid declining revenues.
[E9579] The Fed's repo interventions since September 2019 signal a shift from 'temporary & technical' to structural support of US deficits, indicating loss of Fed control over rates. The Fed is purchasing approximately 60% of UST net issuance, which Gromen frames as creating a 'perfect storm' for bonds in 2020 — not a healthy dynamic but evidence of fiscal dominance forcing monetization of government debt.
[E5765] With US debt/GDP at 130% (highest since WWII) and foreigners having departed the Treasury market, any Fed taper risks triggering a vicious cycle: USD strength forces foreigners to sell US equities to raise dollars, crashing markets essential for consumer spending. The NIIP is now -67% vs -40% in 2013, indicating much higher foreign ownership of US assets and greater vulnerability.
[E5777] US 'True Interest Expense' (Treasury spending plus entitlement pay-go costs) exceeds 100% of US tax receipts as of October 2021, creating fiscal dominance that forces the Fed into accommodative policy regardless of inflation. Any tightening that hurts asset markets would reduce tax receipts and require even more Fed monetization.
[E8007] 10-year Treasury term premia are breaking higher, signaling rising inflation expectations. Gromen identifies 4.8-5.0% on the 10Y Treasury yield as the level that may trigger US government solvency concerns and force currency devaluation. Heavy speculator long USD positioning into QRA creates risk of violent unwinding and potential Treasury market crash similar to 3Q23.
[E5789] Fed balance sheet expansion to monetize US deficits structurally pressures bonds long-term. As de-dollarization reduces foreign UST demand (e.g., China's first EUR bond issuance in 15 years), the US must rely more heavily on the Fed to finance deficits. Gromen warns that if Germany shifts toward EU fiscal stimulus, it could force unwinding of short bund/long UST trades, further pressuring Treasuries.
[E8024] Luke Gromen argues the US has entered fiscal dominance similar to Brazil in the 1980s, where banks holding 50% of Treasuries/MBS can force Fed policy by threatening to boycott bond auctions. Over $15 trillion of US federal debt needs refinancing within two years, mathematically forcing the Fed back to QE and yield curve control before YE 2025 to prevent a banking crisis.
[E8025] Former Dallas Fed economist confirms US resembles Brazil 1980s fiscal dominance: when government issues huge amounts of debt to banks, any attempt to tighten monetary policy causes losses on existing bank portfolios. New 19% capital boost requirements further stress the banking system, compounding the $15T refinancing wall plus $2T+ commercial real estate needs.
[E5639] Bond markets are signaling inflation is not transitory: negative-yielding debt globally has dropped despite weakening economy. Bonds are selling off on weak economic data, indicating markets now prioritize inflation risk over growth concerns. This behavior suggests the 'transitory' inflation narrative is failing as of September 2021.
[E5626] Gromen argues record foreign UST holdings are misleadingly driven by leveraged hedge funds and tax havens ('ULICS') rather than stable sovereign buyers. These funds are levered and managed month-to-month, making Treasury markets far more volatile during equity sell-offs as these players de-lever, undermining the apparent stability of UST demand.
[E5627] Gromen warns that if CPI falls sharply over the next 6 months as expected, US tax receipts will collapse below 'true interest expense' (entitlements plus debt service), forcing the Fed to choose between resuming massive QE or allowing free markets to set US borrowing rates — effectively reintroducing the US fiscal crisis.
[E5666] Fed officials' statements reveal structural constraints on balance sheet reduction: Brainard proposes rule changes to allow banks to absorb more USTs, while Mester explicitly conditions QT on market functioning. The $500B outflow from USTs requiring offsetting equity inflows highlights the fragility of Treasury market dynamics and the Fed's limited capacity to tighten.
[E5684] Gromen warns of a doom loop where higher USD drives higher yields and lower stocks, with US government borrowing representing 85% of global GDP growth. Both stocks and bonds are selling off simultaneously, described as the bursting of the sovereign debt bubble. A vicious cycle could overwhelm the global financial system if the Fed doesn't pivot, forcing the choice between QE resumption or system collapse.
[E5898] US federal debt at 130% of GDP vs less than 33% in 1979 makes Volcker-style rate hikes impossible — a 5% rate rise would cost Treasury $1.5 trillion extra in annual debt service, nearly double the defense budget. Bond markets are selling off on weak economic data, prioritizing inflation over growth concerns, and global negative-yielding debt has dropped despite economic weakness.
[E8056] Russell Napier, cited approvingly by FFTT, argues bond yields will be 'entirely decoupled from inflation' for at least 15 years due to central bank intervention and regulatory requirements, paralleling 1939-1979 precedent. The Fed balance sheet grew $900B in 6 months ($150B/month, 25% above its stated minimum), enabling this financial repression. The Warren Buffett indicator at all-time highs reflects QE driven by rising federal debt as foreigners buy fewer USTs.
[E8069] US debt-to-GDP at 125% (vs 30% in 1975) prevents aggressive Fed rate hikes despite 7.9% inflation as of early 2022. Gromen argues the last time the Fed fell this far behind on inflation was 1975 and it took 9 years to control. China's reduced UST purchases, previously driven by need to stockpile dollars for oil, create a structural funding gap precisely when US fiscal deficits require more foreign financing.
[E8093] Global central banks stopped being net buyers of USTs in 2014, and leveraged hedge fund basis trades filled the gap as marginal buyers. COVID forced these hedge funds to unwind, leaving a structural financing gap the Fed must permanently fill. An estimated $7T in USTs sitting in global FX reserves could begin bidding for gold if UST yields go nominally negative, representing a fundamental shift in reserve asset dynamics.
[E8103] Former Dallas Fed Chair Richard Fisher warned 'we have been suppressing the yield curve; if rates rise, it's a ticking time bomb.' Hedge fund dependency as marginal UST buyers at a time of dwindling global private sector demand relative to burgeoning supply creates structural fragility — if repos become harder to obtain at reasonable rates, Treasury prices would drop and national debt funding costs would rise significantly.
[E8113] Gromen warns that with 120% debt-to-GDP, a recession would drive deficits to 9-10% of GDP, potentially triggering rising 10-year yields IN a recession rather than falling yields, creating a debt spiral. The MOVE volatility index approaching 130-140 crisis levels indicates bond market dysfunction. Traditional safe havens of long-duration bonds may fail in this scenario.
[E8125] TIP/TLT ratio is rising despite declining inflation, which Gromen argues confirms Charles Calomiris' warning about positive real rates pushing the US into fiscal dominance. Rapidly growing Treasury supply is crowding out private credit markets; Treasury prices decline faster than inflation expectations due to oversupply, creating fiscal dysfunction even as inflation expectations fall.
[E8137] Munger warns that rising government debt-to-GDP levels represent 'new territory' with probable dangers, and that the 2% inflation target is likely unsustainable given current fiscal policies. This implies structural risk to Treasury bonds from higher-than-expected inflation eroding real returns and potentially forcing rate adjustments.
[E8143] Gromen argues UST and MBS markets are experiencing severe dysfunction with MBS going 'no bid' and trading conditions at worst levels since early pandemic (as of June 2022), with bid-ask spreads soaring and liquidity evaporating—all before the Fed has officially begun QT. Quote: 'The cost of transaction in bonds is rising fast and this time there is not an anchor from the Fed or other central banks buying bonds.'
[E8144] Gromen cites historical precedent that since 1991, all 18 governments with deficits exceeding 11% of GDP and debt-to-GDP ratios exceeding 110% defaulted within two years. With US debt/GDP at 120%, the implication is the US faces similar sovereign stress risk as the Fed tightens into fiscal fragility.
[E8160] Gromen argues Treasury market dysfunction will force Fed intervention by Q3 2022. Corporate earnings misses at Walmart and Target signal coming tax receipt shortfalls, which will require higher Treasury issuance into already dysfunctional markets. The system cannot survive without accommodative policy given current debt levels, creating a forced pivot regardless of inflation.
[E8173] Gromen calls long-term western sovereign bonds 'certificates of confiscation,' arguing the US fiscal deficit at 8% of GDP during near-full employment is mathematically irrecoverable. Cutting to 3% would require 30-35% cuts to entitlements and defense, triggering recession that worsens deficits by 6-12% of GDP. Fed balance sheet expansion is inevitable as Chinese capital repatriates from US assets.
[E8188] The Fed cannot meaningfully tighten without crashing stocks, which would reduce tax receipts, widen deficits, and create UST market dysfunction requiring more liquidity injection — a reflexive loop constituting fiscal dominance. Saudi surplus has shifted entirely from bonds into deposits and equities, removing a key marginal buyer of Treasuries.
[E8204] US 10-year Treasury term premiums hit 10-year highs despite risk-off conditions, equity selloffs, DOGE spending cuts, and Bessent not terming out debt. Gromen argues markets are pricing a US debt/fiscal crisis as the 'marginal buyer of USTs has become more price sensitive' since foreign official sector stopped growing UST holdings a decade ago. Rising term premiums in risk-off conditions is historically anomalous.
[E8205] The 'Bessent Put' operates identically to the 'Yellen Put' — both Treasury Secretaries intervene to suppress UST market volatility when MOVE Index rises above 135, using jawboning, USD liquidity, and 'whatever else it takes.' Gromen argues the US government backstops stock markets not for speculators but because otherwise 'the UST market will dysfunction and the US government will have an EM-like debt crisis and spiral.'
[E8218] Gromen argues at 120% debt/GDP, rate hikes become 'UST interest payment stimmys' — higher yields increase government deficit spending that adds income and net financial assets to the economy. The Fed is trapped: holding rates 'higher for longer' creates more chaos in credit markets while fueling inflation. Expects US fiscal crisis or banking crisis later in 2023 as inverted yield curve pressures banks while rising rates increase funding costs.
[E5723] Weak 30-year Treasury auction showed primary dealers forced to buy 25% of issuance (double normal levels), yields spiking 15bp, and bid-to-cover well below average. Gromen argues this demonstrates accelerating UST market dysfunction despite recent Quarterly Refunding Announcement (QRA) relief, stating the QRA 'only bought the Treasury six trading days of breathing room.'
[E5724] Hedge funds have become the dominant marginal buyers of US Treasuries since foreign central banks stopped growing UST holdings in 2014. These highly-leveraged, price-sensitive buyers with monthly return mandates create structural volatility, replacing traditionally stable foreign central bank demand. SEC regulation of basis trades could further reduce this key marginal demand source.
[E8247] US deficits are crowding out money markets and forcing Fed monetization. FTN's Vogel notes 'there's no down time on the supply front' regarding Treasury dealer stress. US individual investors are buying the majority of newly issued long-term government debt for the first time, with one investor stating 'I'm looking for the downside protection' regardless of yield — suggesting fragile demand composition.
[E5800] US Treasury market has become structurally dependent on Fed intervention as 'trillion-dollar-a-day market maker of last resort.' Post-2008 banking regulations reduced bank market-making capacity while Treasury issuance expanded dramatically. HFT firms provide liquidity in calm conditions but flee during stress, creating repeated crises requiring Fed backstops.
[E5801] Gromen warns 'the US Treasury market is a dangerous place to dream' as yield curve flattens dramatically despite consensus expectations for a bond rout. Dollar strengthening 'for reasons no one can explain' alongside curve flattening signals liquidity stress rather than healthy normalization.
[E5821] US 'True Interest Expense' (Social Security, Health, Medicare, Net Interest, VA Benefits) hit 130% of federal receipts in February 2025 and 108% fiscal YTD despite record revenues. With debt/GDP at 120% and deficits at 7% of GDP, Gromen argues the fiscal position is mathematically unsustainable and forces a binary choice between inflationary or deflationary crisis.
[E5852] Gromen argues the March 2023 banking crisis is fundamentally the fourth episode of UST market dysfunction since 2019, not a traditional banking crisis. Banks hold $2.7 trillion in USTs/MBS they could sell to fund deposit outflows, but the real systemic risk was this volume hitting already-stressed UST markets that couldn't handle $450 billion of foreign selling in 2022. MOVE index hit 198, exceeding March 2020 and October 2022 levels.
[E5854] Banks hold $2.7 trillion in USTs/MBS they could sell to fund deposit outflows. The real systemic risk was this volume hitting already-stressed UST markets that couldn't handle $450 billion of foreign selling in 2022. MOVE index hit 198, exceeding March 2020 and October 2022 levels — a reading only seen twice in 30 years (post-Enron/9/11 and 2008 crisis peak).
[E5865] US Treasury has bought back $169B in securities since May 2024, with $74.8B in Q1 2025 alone, appearing to implement soft yield curve control. Market sensitivity of 10-year UST yield to US data surprises has fallen to zero — a pattern historically seen only during QE when the Fed actively suppresses long-term yields. Bessent indicated willingness to 'up the buybacks' during market stress.
[E5877] March 2020 saw the biggest monthly drop in foreign UST holdings on record, causing Treasury market liquidity to 'all but dry up' and forcing emergency Fed intervention. This serves as a preview of what occurs when government deficit spending crowds out private markets. COVID accelerated the looming US fiscal crisis dynamic of Treasury issuance overwhelming buyer capacity.
[E8258] Federal transfer payments plus interest expense now exceed total federal receipts, with Social Security/Medicare insolvency approaching the late 2020s. The GENIUS Act stablecoin legislation could create $3.7T in T-Bill demand by 2030, and SLR modifications are needed to support Treasury market functioning — all forms of financial repression to manage unsustainable fiscal dynamics.
[E5914] The $500B outflow from US Treasuries was previously offset by massive inflows from global central banks and sovereign wealth funds into US equity markets. As these equity inflows reverse due to tech rotation, the Treasury funding mechanism weakens. Brainard's push to change banking rules to allow more UST purchases signals structural stress in Treasury market absorption.
[E5921] Gromen identifies a doom loop of higher USD, higher yields, and lower stocks threatening system collapse. The simultaneous selloff in both stocks and bonds is described as a 'bursting sovereign debt bubble.' US government borrowing represents 85% of global GDP growth, meaning a recession would trigger a fiscal crisis as tax receipts fall while structural spending remains high, forcing the Fed to choose between QE resumption or system collapse.
[E5956] The $7T Treasury refinancing wall in 2025 creates acute vulnerability to USD strength. If tariffs drive DXY significantly higher, foreigners holding USTs would be forced to sell $8.5T in Treasuries to raise USD for debt service, triggering a cascading bond market collapse. DOGE's proposed $2T spending cuts are described as mathematically impossible without debt restructuring.
[E5965] Gromen identifies an incipient US balance of payments crisis ('Voldemort') where foreign creditors have stopped financing US deficits, 71% of gross UST issuance is at 6 months or less maturity, and the Fed is forced to absorb 90% of Treasury issuance since September 2019. This creates a structural funding crisis in short-term repo markets.
[E5966] With 51% of ETF flows going to fixed income as of December 2019, consensus is positioned for continued low inflation/rates. Gromen argues this positioning is wildly offsides because the Fed is openly considering letting inflation run hot, with headline CPI breaking above 2% for the first time in 12 months.
[E5980] With US debt/GDP at 130% (highest since WWII), the US needs sustained negative real rates of -5% to -10% for years to inflate away its debt burden, similar to the post-WWII playbook when nominal GDP growth ran 500-800 basis points above Treasury yields for four decades. Foreign buyers have departed the Treasury market, leaving the Fed as the buyer of last resort.
[E5993] US 'True Interest Expense' (Treasury spending plus entitlement pay-go costs) exceeds 100% of US tax receipts as of October 2021, meaning any Fed tightening that hurts asset markets would reduce tax receipts and force even more monetization — a fiscal dominance trap preventing genuine rate normalization.
[E6006] Fed balance sheet expansion to monetize US deficits creates structural pressure on bonds long-term. China's EUR bond issuance (first in 15 years) and Russia pricing oil in EUR reduces structural demand for USTs as settlement instruments, forcing the US to rely more heavily on the Fed to finance deficits rather than foreign buyers.
[E6018] Treasury market structural problems create dangerous Fed dependency. Post-2008 banking regulations reduced bank market-making capacity while Treasury issuance expanded dramatically. HFT firms provide liquidity in calm conditions but flee during stress, requiring repeated Fed intervention as 'trillion-dollar-a-day market maker of last resort,' which is 'not how free market finance is supposed to work.'
[E6019] Gromen warns 'the US Treasury market is a dangerous place to dream,' noting the yield curve is flattening dramatically and resisting the widely predicted bond rout narrative. Dollar is strengthening 'for reasons no one can explain,' suggesting structural Treasury market distortions rather than healthy price discovery.
[E5861] BTFP creates a two-tiered Treasury market where banks exchange Treasuries at par while others face market prices, effectively implementing soft yield curve control for banks only. Treasury Borrowing Advisory Committee quietly added a 38-page proposal for regular Treasury buybacks after their January report, representing another form of soft YCC that would be inflationary.
[E6076] US Treasury has bought back $169B in securities since May 2024, with $74.8B in Q1 2025 alone, appearing to implement soft yield curve control. Treasury Secretary Bessent indicated willingness to 'up the buybacks' during market stress. Market sensitivity of 10Y UST yield to economic data surprises has fallen to zero — a pattern historically associated with QE periods when the Fed suppresses long-term yields.
[E6077] Warren Buffett warns of unsustainable US fiscal trajectory, stating he 'wouldn't want the job of trying to correct what's going on in revenue and expenditures' with roughly a 7% deficit gap when approximately 3% is sustainable. This gap implies financial repression via negative real rates is inevitable to manage the debt burden, similar to the 1960-1980 period.
[E6090] COVID has accelerated a looming US fiscal crisis where government deficit spending crowds out private markets. Treasury issuance is overwhelming Fed purchases, and the March 2020 Treasury market dysfunction demonstrated how liquidity can collapse. Gromen argues this forces the Fed into structural balance sheet expansion — a 'Wartime Finance' regime similar to 1942-1951 where Fed effectively finances government deficits.
[E6102] Gromen states Fed yield curve control is inevitable as interest expense becomes unsustainable at over 20% of receipts with 120% debt/GDP. August showed 9% deficit reduction alongside 4.8% money supply growth and 12% income tax receipt increases, proving meaningful deficit control is mathematically impossible without triggering a debt spiral.
[E6103] Powell faces impossible choice: harm bondholders on a real basis or harm the public on a nominal basis. Fed is cutting rates into 5-6% inflation signals because the fiscal situation demands it, signaling that yield curve control and financial repression are the path of least resistance for policymakers.
[E6118] UK is paradoxically buying massive USTs while struggling to sell its own 30-year gilts, highlighting fragility in sovereign bond markets. Foreign investors hold $62T gross/$27T net in US assets; potential repatriation could trigger 'stocks down, bonds down, USD down' scenario similar to post-Liberation Day dynamics.
[E6134] FFTT argues structural pressure exists for continued Fed balance sheet expansion as Treasury issuance outpaces Fed purchases, creating liquidity stress. If Fed and banks fail to buy enough Treasuries, USD could surge sharply triggering risk-off. Government borrowing could overwhelm system capacity and crowd out private securities issuers. Yield curve control implementation expected as Fed caps Treasury yields.
[E6142] Luke Gromen argues the US Treasury is conducting approximately $800 billion in 'stealth QE' through Activist Treasury Issuance (ATI), shifting to T-Bill heavy issuance and running down the TGA to inject USD liquidity, effectively suppressing 10-year yields by an estimated 0.25% and offsetting Fed tightening. This represents de facto soft yield curve control.
[E6143] The July 29, 2024 Quarterly Refunding Announcement (QRA) is identified as a critical catalyst — too much long-end issuance could trigger USD strength and UST market dysfunction. MOVE Index spiking above 120-130 and 10-year UST yields approaching 4.7-4.8% are cited as historical thresholds that trigger rapid policy response.
[E6144] Gromen draws a historical parallel between the US fiscal situation and the Spanish Empire's fiscal crisis, where government debt (juros) served as collateral for short-term funding. The US now uses USTs as collateral for SOFR, and Spain suffered soft defaults with only silver revenue keeping credit flowing — suggesting the US faces similar dynamics.
[E6145] Any US recession would drive the federal deficit to 13-15% of GDP, forcing immediate USD liquidity injection. Gromen assigns zero probability to policymakers accepting austerity that would require 25-30% cuts to Defense and Entitlements, making bond-unfriendly policy responses inevitable.
[E6160] US inflation hit 8.6% (40-year high) as of June 2022 while US debt stands at 120% of GDP with 7% deficit. A 300bp Fed rate hike would push deficit to ~11% of GDP. Since 1991, all 18 countries with deficits >11% GDP and debt >110% GDP defaulted within two years — a 100% default rate per Rogoff & Reinhart data. TLT falling alongside stocks signals growing sovereign debt crisis awareness.
[E6175] US 'true interest expense' (debt service plus entitlements including Social Security and Medicare) already consumed 110% of US tax receipts before COVID, forcing the government to run deficits just to meet obligations. This makes asset price appreciation critical for generating tax receipts from high earners, creating a reflexive dependency on monetary expansion.
[E6176] US threats to void Chinese debt holdings directly undermine UST reserve asset status. Combined with 110% true interest expense ratio, the Treasury market faces structural challenges that erode its safe-haven function, as demonstrated when the Treasury market 'ceased to function effectively' during March 2020 stress.
[E6184] Fed is trapped: with $31T in debt and structural 5%+ deficits, raising rates to fight inflation bankrupts the government via higher debt service costs (adding $300B+ in extra interest payments), while letting inflation run breaks bond market credibility. Both paths lead to Treasury market dysfunction. The $6.3 trillion corporate bond maturity wall through 2025 must refinance at higher rates while competing with massive UST issuance, compounding the crisis.
[E6199] Luke Gromen argues US deficits projected at 72% of global GDP growth in 2023E (vs 32% in 2022 and ~20% historical QE trigger level) create insufficient global balance sheet capacity to finance Treasuries without Fed intervention, risking UK gilt-crisis-style dysfunction in the world's reserve currency bond market.
[E6215] Gromen expects the sovereign debt bubble to burst, with US Treasury debt dramatically underperforming real assets. Historical parallel to Free Trade 1.0 breakdown (1914-1940s) shows developed country sovereign debt collapsed in real value. US debt service now exceeds defense spending at 3.1% vs 3.0% of GDP, signaling fiscal unsustainability.
[E6223] Gromen identifies unprecedented Treasury market dysfunction: for the first time in 60 years, USTs underperformed equities during a major stock drawdown. Brian Sack noted 'liquidity in the UST market has deteriorated further.' Foreign central bank selling accelerated to $2.5T annual pace in September 2022 while Treasury needs to issue $2.2T, creating a potential $5.8T annual supply glut.
[E6237] Primary dealers are being forced to warehouse record Treasury inventories rather than allowing yields to rise to 5% as Jamie Dimon predicted, effectively socializing the funding of US deficits through the banking system. Basis swap costs have made hedged Treasury purchases uneconomic for European and Japanese investors since September 2018, collapsing foreign demand and creating structural supply-demand imbalance.
[E6238] CBO projections assume defense spending falls to 2.5% of GDP by 2029, but historical 'great power competition' required 8.4% of GDP (1969 Vietnam era), implying a potential $1T annual deficit increase requiring Fed monetization. A recession could further increase Treasury supply by 5-8% of GDP immediately, compounding the funding crisis.
[E6253] Gromen argues the Inter-Agency Working Group (IAWG) acknowledges large structural deficits are driving rapid Treasury supply growth while foreign central bank demand stopped growing in 2014 and primary dealer capacity hasn't kept pace, creating a supply/demand mismatch requiring policy intervention. Multiple mechanisms needed to 'contain' long-end yields including gold revaluation for debt buybacks, GSE recapitalization, regulatory changes freeing bank balance sheet, and stablecoin Treasury demand.
[E6254] USD strength above DXY 106 historically triggers Treasury market stress according to Gromen. Treasury/Defense Secretary confirmations are identified as critical for executing yield curve management strategy. Matthew Pines cited as saying these roles 'will be necessary to contain the long end of the UST curve,' indicating coordinated multi-agency approach to prevent bond market dysfunction.
[E6265] The US has reached WWII debt levels without fighting a war, violating Ferguson's Law where $1.2T annual interest expense exceeds defense spending. Gromen argues this signals weakness to adversaries and creates a national security imperative for debt restructuring. Treasury Secretary Bessent cannot term out US debt without risking pushing 10-year yields above 4.8%, which would trigger a debt spiral, so he continues Yellen's soft yield curve control strategy keeping duration short.
[E6275] Foreign central banks are selling USTs at record pace with $1 trillion in reserves drawdown to finance energy imports, creating a supply/demand mismatch in Treasury markets. Central banks hold $7.5 trillion in USTs that could be sold into illiquid markets, threatening to drive yields to unsustainable levels for highly indebted governments.
[E6276] MOVE Index hit 160+ as of October 2022, which according to MOVE Index creator Harley Bassman indicates the Fed has lost control of Treasury markets. Priya Misra of TD Securities warned that the Fed being forced to step in and buy debt while in conflict with monetary policy tightening represents their biggest nightmare scenario.
[E6291] FFTT highlights that QRA (Quarterly Refunding Announcement) and Treasury issuance mix now drive major market moves in term premiums — an impact never seen prior to COVID. This is described as an 'ENORMOUS sign' the US is already in fiscal dominance, with True Interest Expense approaching 100% of federal tax receipts and insolvency ratio at 35%.
[E6292] Gromen states a recession is 'NOT a policy option' given the US insolvency ratio and True Interest Expense nearing 100% of receipts. A recession would cause nonlinear fiscal deterioration, making USD weakening the only mechanism to stabilize Treasury markets and avoid systemic crisis.
[E6310] FFTT's thesis implies USTs face structural headwinds as central banks diversify reserves (12-year pattern of gold flowing West to East away from UST holdings), tariff strategy reverses the trade deficit flows that recycled into Treasury purchases, and the debt-based system faces incompatibility with AI-driven deflation. The combination threatens the traditional UST demand base from both foreign official and private sectors.
[E6325] Gromen recommends fading the rally in medium and long-term USTs, calling them a 'lose/lose proposition.' Either USD liquidity injections debase currency hurting real bond returns, or lack of intervention causes system dysfunction also hurting bonds. UST market liquidity at 14-year lows compounds the risk. Upcoming July QRA identified as key catalyst.
[E6326] 5-year inflation breakevens are plunging while UST liquidity deteriorates to 14-year lows, creating dangerous conditions. Gromen argues declining inflation actually threatens the US fiscal position by removing the only thing preventing another 3Q23-like debt spiral, making long-term Treasuries fundamentally unattractive.
[E6338] Fiscal dominance is now structural: US borrowing needs exceed what long-end UST markets can absorb without dysfunction, forcing heavy reliance on T-bills. Gromen warns of potential UST market dysfunction (MOVE index blowout) if the Fed fails to step in, framing it as 'more QE, or a MOVE blowout, or more bank failures.'
[E6339] The $2.1 trillion H2 2023 effective issuance need creates structural instability in UST markets. With US banks weakened by commercial real estate stress and foreign buyers retreating, the marginal buyer for Treasuries is disappearing, making auction failures or forced Fed intervention increasingly likely.
[E6357] US reshoring will spike inflation to levels that could blow up the UST market unless policymakers implement yield curve control to cap yields. AI-driven unemployment paradoxically creates a scenario where banks drive unemployment through cost-cutting, leading to credit losses that force UST sales and higher yields even in recession — breaking the traditional flight-to-safety dynamic for Treasuries.
[E6371] Spitznagel identifies rising interest rates — whether through natural normalization or forced adjustment of artificially suppressed rates — as a key catalyst that triggers malinvestment liquidation. The Austrian framework holds that rate suppression creates predictable distortion cycles, and when monetary stimulus loses effectiveness, accumulated distortions must correct, implying structural vulnerability in the current rate environment.
[E6383] With US sovereign debt over 100% of GDP and 2.2% debt service costs, Gromen warns a recession risks triggering a 'debt death spiral' as declining GDP becomes unsustainable against fixed debt servicing. Less than 5% of bonds yield above 5% while pension funds need 7% returns, creating structural funding gaps that force the Fed to maintain rising stocks versus bonds.
[E6394] Gromen argues continued foreign UST selling pressure driven by $13T in offshore USD debt servicing needs will perpetuate Treasury market dysfunction. He states that unless the US dramatically cuts military, entitlement, and foreign spending, the endpoint is always resumed UST market dysfunction followed by more USD liquidity from Fed/Treasury.
[E6395] Gromen presents the 'interest rate stimulus' theory: with $35T government debt, each rate increase puts approximately $50B monthly into bondholder pockets, while households earn more on $13T in short-term assets than they pay on $5T consumer debt. Higher rates are therefore actually stimulative, complicating conventional tightening assumptions.
[E6404] FFTT argues the US has entered a fiscal trap where Fed rate hikes at current debt/GDP levels increase deficit spending through higher interest costs, creating deficit-driven inflation rather than dampening demand. This represents a paradoxical reversal of traditional monetary policy effectiveness, placing the US on the 'wrong side of the Pain Line.'
[E6405] Rising US-China tensions would be 'terrible for bonds' due to supply chain disruption and inflationary pressures, contrary to consensus safe-haven demand views. Historical parallel cited: Pearl Harbor caused UST yields to spike from 2% to 2.5%, demonstrating that geopolitical conflict with major trading partners is bond-bearish, not bond-bullish.
[E6419] Hedge funds via Cayman Islands, UK, and Luxembourg now dominate marginal UST buying, with Cayman Islands alone accounting for $69B of $127B monthly foreign UST purchases. This replaces traditional central bank buyers with leveraged, fickle capital, creating structural volatility when the MOVE Index hits the 130-140 threshold.
[E6420] Basis trades are surging and straining the $4 trillion repo market funding capacity, identified by Gromen as a key forward-looking catalyst for market stress. Combined with hedge fund domination of UST marginal buying, this creates a fragile market structure prone to dislocations.
[E6421] Fed Governor Waller stated 'the biggest risk to r-star down the road is unsustainable fiscal policy,' while Kashkari said 'if US debt continues to climb, neutral rate will climb.' Gromen frames these admissions as confirmation that bond investor assumptions about debt being deflationary have been fundamentally inverted.
[E6434] US Treasury near-doubled its deficit forecast to $2.66 trillion annualized for the next 6 months, with Q4 2022 borrowing revised up 37% to $550B. US deficits projected at 72% of global GDP growth in 2023 far exceed the 20% threshold that historically triggered Fed QE, creating an unprecedented supply/demand mismatch in Treasury markets that forces a binary choice between renewed monetization or a global debt doom loop.
[E6491] Even in a recession scenario, effective UST supply could reach $5.5-6.5T annually ($2T baseline deficit + $1.5T recession-driven deficit + $2-3T foreign selling). Treasury announcing 'market resilience' buyback measures for 2024 signals official awareness of structural dysfunction in the bond market.
[E6448] Gromen argues the Treasury's 30-month shift to short-term bill issuance was necessary to prevent 10-year yields from reaching 4.6-4.8%, levels that would trigger equity volatility and basis trade unwinding. The resulting 'Red Queen problem' of accelerating refinancing needs forces either continued front-end issuance or Fed balance sheet expansion, both of which are structurally inflationary.
[E6461] Hot January CPI drove 10Y UST yields to 4.63%, demonstrating that Treasury Secretary Bessent's plan to term out US debt would push yields above the 4.8-5.0% danger zone that triggers risk asset selling and discredits the administration. Gromen argues this makes conventional debt management untenable.
[E6462] Trump's call for Fed rate cuts 'to go hand in hand with upcoming tariffs' signals coordinated soft yield curve control (YCC) — using tariffs to drive USD/yields up while Fed cuts drive them down, managing the 10Y yield. Gromen calls Trump 'crazy like a fox' for this coordinated approach to containing long-end rates.
[E6463] Gromen notes the Fed would 'simply print any losses due to interest rate risk,' highlighting the Fed's illiquid balance sheet position which limits its ability to support the USD during sustained selling pressure and effectively monetizes Treasury duration losses.
[E6474] Gromen argues US fiscal dominance creates a vicious cycle where Fed rate hikes increase government interest payments (stimulus), driving deficits, GDP growth, and inflation — requiring even higher rates. With US debt at 130% of GDP, long-term UST yields could reprice 'significantly higher in a non-linear fashion' later 2023 or early 2024. Treasury basis trade risks and $1.85T issuance by year-end create systemic vulnerabilities similar to September 2019 repo crisis.
[E6489] US Treasury market faces existential supply/demand imbalance: $2T net new issuance + $5T rollovers + $1.2T Fed QT creates unprecedented supply while traditional buyers disappear — US banks stopped buying and foreigners are selling from $7.5T in holdings. Gromen states 'No private sector entity or entities (other than the Fed) have the balance sheet to absorb this amount of UST supply at current rates.'
[E6490] For the first time in 45 years, long-term USTs now have higher downside volatility than gold, indicating a structural break in the traditional safe-haven status of Treasuries. Gromen calls this a regime change where the pain trade is higher yields, and hedge funds will be forced sellers if rates spike further.
[E6505] Gromen warns that the US Net International Investment Position (NIIP) at -65% of GDP means foreigners own enough USD assets that selling during Fed tightening could break US asset markets including the Treasury market. This differs from previous tightening cycles when foreign holdings were much smaller, creating systemic vulnerability in sovereign debt markets.
[E6506] Fed tightening is unsustainable given US fiscal constraints at 130% debt/GDP. Real rates must go more negative, not higher, to maintain debt sustainability. The US needs to inflate debt/GDP down from 130% to approximately 80% before any rate normalization is feasible, otherwise Treasury market disruptions will force a Fed 180-degree policy reversal.
[E6519] Gromen describes a policy of capping debt yields while printing unlimited money for fiscal stimulus, effectively reducing the real burden of debt without formal default. This creates an 'effective debt jubilee' that structurally disadvantages bond holders, with the Fed forced to absorb Treasury supply to maintain yield caps as stimulus expands (additional packages promised after April 20, plus Trump's $2T infrastructure proposal).
[E6533] Rising MOVE Index signals imminent UST market distress. Gromen argues Powell faces an impossible dilemma: 'Powell can have price stability (low volatility) in the UST market, or price stability (low inflation) in the US economy, but he cannot have both.' Failed UST auctions, widening term premiums vs German Bunds, and tailing auctions cited as evidence of fiscal dominance already manifesting.
[E6534] US interest expense exceeds 4% of GDP, creating a self-reinforcing loop where deficit spending supports growth but rising rates increase interest costs, forcing more borrowing. Gromen argues 'the Fed is chasing its tail' — higher rates worsen the fiscal position, crowding out the banking system and requiring ever more Treasury issuance.
[E6545] US faces fiscal crisis despite all-time high tax receipts because 'True Interest Expense' (Treasury, HHS, SSA, Veterans Affairs) growing faster than revenues — Treasury spending up 10% y/y vs receipts up only 6% y/y. With 120% debt-to-GDP, 7% deficit-to-GDP, and insufficient foreign UST buying, the fiscal trajectory is unsustainable without aggressive rate cuts. 10-year UST yields above 4.8-5.0% could trigger another 'Liberation Day' style market disruption.
[E6560] Dalio's framework shows debt-to-GDP changes ranging from -129% to +165% across crisis cycles, with recovery timelines of 3-21 years post-crisis depending on policy response. The analysis warns that 'monetization should not be viewed like a light switch' but 'like a spigot that regulates the flow in degrees,' implying sustained Treasury market intervention is necessary during deleveragings, with risks of inadequate or excessive responses creating prolonged bond market stress.
[E6569] Despite record trailing 12-month US tax receipt growth of 20-30% y/y (highest in 40+ years), US 'true interest expense' (Social Security, Health, Medicare, Net Interest, Veterans) at $565B still consumes nearly 100% of record tax receipts at $552B. Debt/GDP only fell from 135% to 122%, insufficient deleveraging for policy normalization. Foreign creditors no longer buy enough Treasuries to fund deficits.
[E6583] The US September fiscal surplus of $198B (touted by Treasury Secretary Bessent as 147% higher than prior year) required unsustainable accounting: a 43% cut in federal outlays vs. prior 11-month run rate, Medicare spending $50-70B below average, interest expense $44B below average, and $107B in mysterious 'negative outlays.' Gromen argues this masks structural fiscal deterioration.
[E6584] Sanctioning Russian oil companies producing 5% of global oil supply risks spiking oil prices, which historically correlates with higher 10-year Treasury yields. Gromen warns this could push yields to dysfunction levels of 4.6-4.8%, paradoxically harming US markets more than Russia and creating a self-defeating sanctions dynamic.
[E6598] With US debt at 130% of GDP, a 5% rate rise would cost Treasury $1.5 trillion annually in extra debt service — nearly double the defense budget — making traditional Fed tightening economically impossible. Unlike 1979 when debt was 33% of GDP, current ratio means monetary tightening would trigger fiscal crisis rather than cure inflation. Only sustained 12% inflation can restore debt sustainability.
[E6609] Despite loosest financial conditions since February 2022, the MOVE volatility index hit 127 and UST liquidity remains poor. Nearly $9 trillion in existing USTs must be refinanced over the next 12 months. Global FX reserves flat at $11.9T while US debt exploded to $33.9T, creating a permanent shortage of price-insensitive UST buyers who disappeared after 2014. FFTT recommends underweight long-term USTs via put options.
[E6620] US interest expense as percentage of tax receipts is at 50-year highs, creating what Gromen describes as a 'debt death spiral' risk. The fiscal desperation forces a binary choice between sacrificing the currency or the bond market, with monetary debasement being the only viable solution for a highly-indebted sovereign with domestic currency debt and a printing press.
[E6636] Gromen argues the US cannot reshore effectively without yield curve control. Infrastructure investments, particularly electrical grid and manufacturing capacity, would drive skilled labor wage inflation that would break the UST market before reshoring succeeds. Bond market dysfunction is the binding constraint on US industrial policy.
[E6654] JPM CEO Jamie Dimon predicted an inevitable 'crack in the bond market' due to unsustainable US fiscal math. Gromen notes the UST market is already fragile after Liberation Day dysfunction occurred in just 5 trading days, suggesting structural vulnerability is accelerating.
[E6655] Reaching Treasury Secretary Bessent's 3% GDP deficit target by 2028 would require cutting $1.2T annually, equating to 24% cuts to entitlements and interest payments since defense spending is increasing. Gromen argues this is politically impossible, making fiscal accommodation and financial repression inevitable.
[E6670] Gromen warns investors to avoid the $128 trillion global bond market regardless of whether inflation arrives gradually or suddenly. The US fiscal math requires 18% annual nominal GDP growth for two years (accelerating to 19-22% over three more years) to reduce debt/GDP from 130% to 80% by 2026, assuming debt continues growing at 8.75% CAGR — implying bonds are structurally mispriced.
[E6680] US Treasury increased Q2 2023 borrowing estimates by $449 billion, driven by $322 billion lower beginning-of-quarter cash balance and $117 billion in lower receipts/higher outlays. Gromen argues this validates predictions of collapsing tax receipts due to 2022 asset losses eliminating capital gains tax revenue, accelerating the debt ceiling crisis toward the June 1 deadline.
[E6681] Treasury announced its first buyback program since 2000 for 2024 implementation, which Gromen interprets as 'soft Yield Curve Control' — replacing expensive paper with cheaper paper because 'the US government cannot afford the interest rate that free markets would set for it.' This signals hidden liquidity stress in the UST market despite its reputation as the deepest, most liquid market.
[E6682] Gromen argues the US is financing itself like distressed companies at the short end of the curve, with fiscal recklessness creating systemic dysfunction. Stan Druckenmiller quoted: 'The fiscal recklessness of the last decade has been like watching a horror movie unfold.' The combination of massive deficits, minimal foreign UST buying, and AI-driven deflation will force coordinated central bank QE to prevent bond market collapse.
[E6694] Gromen highlights a St. Louis Fed white paper by Charles Calomiris showing that if global real interest rates returned to their ~2% historical average, the US would experience 'immediate fiscal dominance' given existing debt levels and projected deficits. Investors holding $8.8T in cash demand at least 1.5% real returns or will exit to inflation hedges, creating a policy trap where the Fed cannot maintain high real rates without crashing Treasury markets.
[E6695] USD strength forces foreign holders of $7.6T in Treasuries and $13T in offshore USD debt to intervene by selling Treasuries, effectively increasing Treasury supply at the worst possible times. This creates a reflexive feedback loop where rising USD strength threatens Treasury market stability by expanding effective supply during periods of stress.
[E6696] Gromen notes stocks and bonds are showing the highest correlation in 35 years, meaning the bond market is driving stocks and the entire market has become 'all one trade.' This structural correlation breakdown removes diversification benefits and amplifies systemic risk from any Treasury market dislocation.
[E6714] T-Bill roll mechanics creating structural liquidity tightening with $550B weekly rollovers crowding out money markets. The NY Fed's emergency meeting with dealers confirms policymakers view money market strains as serious. Gromen warns more liquidity without real capacity gains in grid and oil/gas risks COVID-like inflation acceleration leading to higher rates and UST market dysfunction.
[E6735] The proposed Standing Repo Facility would make USTs and bank reserves fungible, effectively nationalizing US funding markets and putting the government in charge of its own borrowing limits rather than bond markets. This removes market discipline from Treasury issuance and eliminates funding market volatility.
[E6748] US 'True Interest Expense' (entitlements + Treasury spending) reached 100% of receipts in Q4 2023, only the second time in post-war history. Gromen states 'budget projections are totally ludicrous if market rates stay these levels; Federal finances are in enormous danger,' signaling a structural crisis in Treasury sustainability.
[E6749] Long-term USTs increasingly trade like 'risk-on assets' rather than safe havens post-COVID, with yields rising when USD strengthens instead of falling. This behavioral regime change means Treasuries no longer function as traditional portfolio hedges, requiring Fed intervention as 'Powell is assets only hope.'
[E6750] CRE-related banking stress could force banks to sell $4T+ in USTs/Agencies classified as 'High Quality Liquid Assets,' creating a potential cascade in Treasury markets. Jamie Dimon warned of a bond or currency market rebellion against US debt levels.
[E6751] Treasury issuance composition is deliberately favoring T-Bills over coupons to manage interest expense. Yellen's surprisingly low Q2 2024 borrowing estimate of $202B reflects expectation that weaker USD will drive stock gains and boost tax receipts, with every 10% increase in receipts reducing issuance by ~$100B in Q1 and ~$140B in Q2.
[E6768] The core driver of Fed balance sheet expansion is 'too much UST supply vs. not enough foreign demand,' creating repo market stress that forces immediate liquidity injection regardless of equity levels. The US government funding crisis requires continued asset price inflation for tax receipts, making fiscal constraints the binding force on monetary policy.
[E6769] Former Fed Governor Larry Lindsay quoted stating 'the financial arrangements of the state are no longer sustainable,' comparing current US fiscal trajectory to Rome, the Ming Dynasty, and Zimbabwe. Long-dated Treasuries face pressure from required liquidity injection as the fiscal deficit must be monetized.
[E6780] Foreign UST demand is evaporating: China's UST holdings hit 12-year lows and Japan is also reducing holdings. FX-hedged UST yields are negative in EUR and barely positive in JPY, making foreign purchases economically irrational while the USD remains strong. This creates a structural funding gap that only Fed QE can fill.
[E6781] Gromen argues the US government has become critically dependent on asset bubbles to generate tax receipts and consumption. With May 2022 tax receipts down 16% y/y, the government faces an impossible trilemma: default on obligations, allow crowding out of private markets, or resume QE — with QE being the only politically viable option.
[E6801] Peak Cheap Oil incompatibility with debt-backed system forces either debt deflation spiral or monetary system change. Rising term premiums expected as markets realize recession is unlikely given wage inflation dynamics from reshoring-driven 'Dutch Disease.' US debt at 120% GDP with 9% tax receipt collateralization vs 40% in 1980 makes long-term bonds structurally bearish.
[E6807] Gromen argues Powell cannot replicate Volcker's 1979-81 inflation fight because US debt/GDP is 120% vs 31% in 1979, and budget deficit is 7% vs 2% of GDP. A 300bp rate hike would push deficit to 11% of GDP, and historically all 18 governments since 1991 with deficits exceeding 11% of GDP and debt/GDP exceeding 110% defaulted within two years.
[E6808] Yellen's replay of her successful 2014-15 strong dollar strategy faces dramatically worse conditions: in 2014-15 US deficits were at 15-year lows with highest foreign Treasury participation in 15 years, whereas today has record deficits with low and falling foreign demand due to negative FX-hedged yields from dollar strength.
[E6809] A US recession combined with high inflation would cause a 20% decline in tax revenues plus 10% COLA increases, pushing US entitlements to nearly 90% of total tax receipts, essentially bankrupting the government without Fed monetization of debt.
[E6818] Gromen warns of potential 3Q23-style UST market dysfunction as record corporate bond issuance ($150B), Chinese UST selling from $278B repatriation, and EM debt issuance all compete for limited capital. The Treasury needs to refinance $9T over the next 12 months. The QRA is described as 'absolute Must Watch TV' given these converging pressures on bond supply absorption.
[E6831] 71% of $11.5T in UST issuance has occurred at maturities of 6 months or less, creating upward pressure on the front end of the yield curve. Demand for USTs has trended down since 2014, with foreign central banks absent as net buyers, highlighting a structural funding vulnerability in US government debt markets.
[E6832] Former NY Fed Chair Dudley expects the Fed to introduce a permanent Standing Repo Facility, effectively allowing USTs to count as required bank reserves. Gromen sees this as de facto monetization infrastructure, blurring the line between Treasury securities and central bank reserves.
[E6841] US deficit doubled to $2.02 trillion despite strong economic growth, indicating loss of fiscal control. Interest expense is approaching 30% of tax receipts — a threshold that historically triggers monetary, economic, and banking crises according to James Turk. At 120% debt/GDP, modest rate increases push interest expense to unsustainable levels, risking a bond market 'convulsion' followed by forced Fed intervention.
[E6842] Long-term Treasury bonds are particularly risky in a US recession because historical patterns show deficits rise by 6-12% of GDP during downturns, which would add $1.5-3.2T in new issuance. This supply flood would overwhelm any safety bid, potentially causing yields to rise rather than fall — a reversal of traditional recession playbook for duration.
[E6853] Gromen highlights that during the 2020 crisis, foreigners sold approximately $1 trillion of USTs overnight during the CARES Act proposal and continued selling afterward — breaking the 20-year pattern of flight-to-safety buying during crises. This structural shift in foreign demand for Treasuries undermines their safe-haven status.
[E6854] Gromen contrasts current conditions with the 1979 Volcker era: federal debt was less than a third of GDP then versus over 130% of GDP now, meaning the Fed cannot induce recession to fight inflation without triggering a fiscal crisis. 'This time the treatment would kill the patient.'
[E6869] ISDA has requested permanent UST exclusion from SLR calculations, which FFTT characterizes as 'QE in all but name' — enabling banks to buy Treasuries with infinite leverage using created capital. Primary dealer UST holdings are at record highs while facing $20T in projected debt increases over the next decade. UST yields referenced at 4.10-5.25%.
[E6870] FFTT identifies an 'infinite regression' inflation spiral in UST markets: with $2T deficits and US debt/GDP at 120%, rate hikes increase government interest expense, expanding deficits and nominal GDP growth, which pressures rates higher in a feedback loop. Rate cuts also fuel inflation through increased deficit spending.
[E6885] Gromen argues US 'True Interest Expense' (Treasury interest + entitlements) has reached ~80% of tax receipts and would exceed 100% if recession causes receipt collapse while rates stay elevated. This forces the Fed to 'print the difference' via rate cuts or QE to prevent UST market dysfunction. He notes austerity was attempted twice (Q2 2022, Q3 2023) and both times caused immediate Treasury market dysfunction, as spending cuts reduce GDP and receipts faster than deficits.
[E6894] Gromen warns the US could 'lose the curve' — a scenario where investors lose faith in US fiscal discipline and refuse to buy long-term Treasuries at reasonable yields, forcing either unsustainable yield spikes or Fed yield curve control. BofA's Michael Hartnett echoes: 'The greatest credit event of all would be a recession in which US yields went up, not down,' highlighting the tail risk of a bond crisis during economic weakness.
[E6916] Treasury Q2 2024 borrowing estimate jumped 20% above January projections due to unexpectedly low cash receipts, despite strong conditions including 7% GDP deficits, 30% equity gains, low unemployment, and 5.5% nominal GDP growth. Gromen calls this the most important takeaway from the Quarterly Refunding Announcement, suggesting the US needs exponentially higher deficits just to service existing debt.
[E6917] In March 2024, 'True Interest Expense' hit 104% of receipts for the first time, a threshold Gromen identifies as historically triggering USD market dysfunction and forcing Fed/Treasury liquidity injections. Long-term Treasuries described as 'certificates of confiscation' given 10-year yields at 4.65% versus government employment costs rising 4.8% annually and structural inflation.
[E6938] US 'True Interest Expense' (Social Security + Health + Medicare + Net Interest + Veterans Benefits) hit 121% of receipts in October 2024, meaning the US is borrowing just to pay interest on its debt. Druckenmiller quoted: fixing without touching entitlements requires raising taxes 40% or cutting spending 35% permanently. This signals a structural debt crisis with upward pressure on UST yields.
[E6965] US weekly Treasury roll has grown from $100B in 2013 to $500B in 2024, while marginal buyers have shifted from stable central banks to fickle hedge funds. Foreign holdings growth is now dominated by Cayman Islands and UK entities, indicating speculative rather than strategic buying, creating inherent market fragility requiring ongoing Fed intervention.
[E6966] US 'True Interest Expense' has reached approximately 100% of government receipts, forcing the Treasury to shift issuance to the short end as the only viable financing option. This fiscal reality means the Fed and Treasury must always 'blink' when UST market stress emerges, requiring continued liquidity injection.
[E6982] US Treasury must refinance $15.5 trillion over the next three years at significantly higher rates. August 2024 deficit hit $381 billion, driving 'True Interest Expense' (Social Security, Medicare, Net Interest, Health, Veterans' Benefits) to 150% of receipts. Long-term bonds are toxic in both scenarios: no-recession sends 10y yields above 4%, while recession drives deficits to 15-17% of GDP requiring massive QE.
[E6994] Foreign demand for US Treasuries is weakening due to negative hedged yields, while Q3 2019 net marketable debt issuance of $433B (more than double the April estimate) creates extreme USD funding pressure. The Fed's independence is compromised as monetary policy becomes subordinate to fiscal financing needs, forcing the central bank into deficit financing.
[E7005] Treasury market liquidity is eroding with Bloomberg liquidity index approaching 2021 highs. Bond fund outflows of $30B in two weeks observed. Treasury market losing status as reliable safe haven — selling off alongside equities for first time in decades during volatility spikes. Gromen describes Fed's course as 'a gamble' on the deepest market in the world.
[E7006] In the past 100 years, US stocks and bonds have both been down only four times. Gromen warns 2022 could be the fifth occurrence, reflecting breakdown of traditional 60/40 portfolio diversification and Treasury safe-haven status as both assets face simultaneous selling pressure.
[E7017] The Fed's establishment of the Standing Repo Facility signals the Treasury market isn't as deep and liquid as conventional wisdom suggests, due to rapid rise in US debt relative to foreign demand. With US debt/GDP at 130%, former Fed Vice Chair Stan Fischer warned 'it would not take much of a shock to growth for the debt ratio to balloon and spark concerns about debt sustainability.'
[E7033] US True Interest Expense has reached 103% of federal receipts, indicating a debt spiral dynamic. The BOE's new Contingent NBFI Repo Facility launching in 2025 allows anonymous shadow bank access to the BOE balance sheet during gilt market dysfunction, representing stealth yield curve control. The UK is the 3rd largest foreign UST holder, making gilt-UST markets interconnected.
[E7041] US Treasury needs to borrow $932 billion in Q1 2023, 60% above October 2022 estimates, signaling a fiscal crisis that Gromen argues has overtaken inflation-fighting as Washington's primary policy concern. He contends Powell cannot be Volcker without allowing US government default on debt, entitlements, or military commitments.
[E7057] FFTT warns of Treasury auction stress as primary dealers and hedge funds providing marginal UST funding could withdraw if the yield curve inverts. Cites 1951 quote from William McChesney Martin Jr. about using 'trick issues' to lock up longer-term debt, drawing parallels to modern yield curve control as a mechanism to finance government deficits.
[E7058] The Fed is considering WWII-era yield curve control (yield caps) to finance government deficits, an implicit admission that market-based demand for Treasuries is insufficient to fund structural US fiscal shortfalls without financial repression.
[E7067] 31% of all US government debt ($7.6 trillion) matures within 12 months and must be refinanced at much higher rates, creating massive strain on Treasury market liquidity. Foreign selling of USD assets accelerating as Asian currencies hit 10-month lows, forcing creditors like Japan and China to sell from their $7.5T Treasury holdings for currency defense and energy purchases.
[E7068] Gromen identifies a vicious cycle: rates up → deficits up → USD up → foreign UST selling up → rates up. Fed officials already laying groundwork for intervention by distinguishing 'market function' purchases from 'monetary policy' purchases, signaling eventual QE or yield curve control despite above-trend inflation.
[E7080] US 'True Interest Expense' (interest payments plus entitlements) consumes 96% of federal receipts despite record revenues and record stock prices. The US is running a 33% bigger deficit at full employment than in 2019. This fiscal dominance dynamic means any sustained stock decline forces a 'print or default' choice, pointing toward eventual massive money printing.
[E7098] Luke Gromen argues Fed's accelerated QE tapering (signaled Nov 30, 2021) is a deflationary policy mistake given US debt at 125% of GDP and 'True Interest Expense' at 111% of tax receipts. Treasury market liquidity has already deteriorated to March 2020 crisis levels, with rising real rates incompatible with twin-deficit nation dependent on asset prices for consumer spending and GDP.
[E7099] Gromen compares the Fed to AIG in 2008, stating the Fed has 'underwritten an insurance policy on $28 trillion in Federal debt and $100-200 trillion in US Entitlements with insufficient reserves.' Rising real rates would trigger Treasury market dysfunction (yields rising while stocks fall) or consumer spending collapse, forcing reversal.
[E7110] US faces structural fiscal dominance with debt/GDP failing to decline despite inflation that would have peaked at ~18% using 1970s CPI methodology. Debt/GDP only returned to 2021 levels and actually bottomed in Q1 2023, indicating inflation alone is insufficient to reduce debt burdens. Medium-term catalysts include potential SLR exemptions for banks on UST purchases and yield curve control implementation within 6-18 months. FFTT favors shorting long-term Treasuries (TLT).
[E7120] 30-year Treasury yields forming a 'cup and handle' technical pattern threatening breakout above 4.6-4.8% crisis levels despite reduced issuance guidance. Treasury Secretary Bessent dismissed long-term UST issuance, stating 'The time to have done that would have been in 2021, 2022.' Unlike Japan where reduced JGB issuance drove yields lower, US yields continue rising.
[E7121] Both JPY strength and USD weakness now drive higher (not lower) 10-year sovereign yields, cornering US policymakers. This dynamic breaks historical correlations where dollar weakness or yen strength would typically support Treasury demand, suggesting structural deterioration in the Treasury market's traditional safe-haven bid.
[E7142] Gromen describes a post-WWII financial repression playbook being reactivated: US elites openly discussing inflating away COVID debt by running nominal GDP growth 500-800bps above long-term bond yields for decades. This implies sustained negative real rates and effective yield suppression as deliberate policy, with the Fed forced to monetize ever-growing government debt to prevent system failure.
[E7166] US total obligations are estimated at ~1,000% of GDP with interest expense already exceeding 100% of tax receipts as of January 2022. Fed rate hikes create a self-reinforcing debt trap: higher rates increase interest costs, worsen fiscal position, and push toward the 40%-of-tax-receipts threshold that historically triggers sovereign crises. This dynamic makes sustained tightening mathematically unsustainable.
[E7218] Gromen describes a 'Fed Trilemma' where the Fed operates with three mandates — low inflation, full employment, and market functioning — but can only achieve two simultaneously. With US equity market cap at 170% of GDP and debt/GDP at 130%, the Fed cannot allow market dysfunction without risking economic collapse. Consensus Q1 2022 tapering attempt is likely to fail due to the market functioning mandate.
[E7224] FFTT argues US deficits running at $2.2T annualized rate with debt service consuming 16% of tax receipts. Only three meaningful budget categories exist (entitlements, defense, interest) and only interest can be politically cut, requiring the Fed to lower rates. This creates a mathematical inevitability of deficit monetization and makes long-term treasuries unattractive on a real basis.
[E7236] The 10-year Treasury has broken its 40-year logarithmic downtrend, signaling potential chaos. US 'True Interest Expense' already equals 100% of tax receipts, meaning the Fed cannot allow yields to rise significantly without risking a government funding crisis. Historical pattern shows deficits double during Fed hiking cycles, contradicting government projections and worsening issuance needs.
[E7247] BIS Annual Report officially acknowledges western sovereign debt crises become possible when real growth falls below interest rates (r>g). BIS warns higher interest rates weaken fiscal positions with historically high debt levels, and confidence could quickly crumble if growth slows, with government bond markets hit first before strains spread more broadly. This validates FFTT's four-year thesis that long-term bonds are structurally uninvestable.
[E7248] Gromen argues the 'Beautiful Deleveraging' has failed — despite stock bubbles, housing bubbles, and negative real rates, US debt/GDP continues rising. This requires either yield curve control or a 'super bubble' to maintain solvency, making bonds structurally impaired versus inflation-resistant assets. The $130T bond market faces a squeeze as institutional recognition of sovereign debt risks accelerates.
[E7249] Treasury Quarterly Refunding Announcement (QRA) at end of July 2024 could trigger UST dysfunction requiring more USD liquidity injection. Gromen warns of a short-term air pocket risk similar to Q3 2023, with potential brief correction in risk assets if UST dysfunction emerges before policy response.
[E7264] Treasury market liquidity has deteriorated to crisis levels as of March 2023, with unprecedented intraday volatility (10Y and 30Y prices moving a full point within one minute). Foreign holders possess $7.3 trillion in USTs, but only $450 billion of foreign selling in 2022 caused severe dysfunction, signaling structural fragility that required emergency Fed USD swap line interventions.
[E7277] Gromen warns of a worsening US balance of payments crisis as both equities and bonds sell off simultaneously — only two prior days in 25 years saw S&P 500 down 3% and 10y USTs down 1%. Treasury settlement fails hit $507B in early April 2022, highest since March 2020, indicating something is broken in UST market plumbing. Japan may sell up to $100B of its $1.3T UST holdings to defend JPY, adding supply pressure as foreign central bank UST purchases collapsed from 50%+ to 5% of issuance.
[E7287] US Q1 2024 deficit up 20% to $509 billion, annualizing to $2.2 trillion. Debt service consuming 16% of tax receipts. Gromen argues the only viable path to reduce interest expense is Fed rate cuts, as spending cuts to entitlements, defense, and interest are politically impossible in an election year. The Fed is the 'only adjustment variable in town' needing to both cut rates and slow QT.
[E7299] Gromen describes a paradox where Fed rate hikes force $200-300B in annual money printing to banks, which may use proceeds to buy USTs — effectively QE. The Fed uses 'deferred asset' accounting rather than recognizing operating losses, masking balance sheet deterioration. A systemic 'break' forcing Fed balance sheet expansion is expected in 2023H1 despite ongoing inflation.
[E7310] A 'disastrous' 30-year UST auction showed a 5.3 basis point tail — the widest since 2011 — indicating severely weak demand for long-duration Treasuries. Gold prices rose alongside yields for the first time in decades, potentially signaling a 1970s-style regime change in the Treasury market where traditional demand dynamics are breaking down.
[E7327] TBAC reports reveal the long end of the UST market lacks sufficient liquidity for needed issuance, forcing Treasury to shift toward T-Bills despite the inverted yield curve (paying higher short-term rates). Druckenmiller called Yellen's failure to term out debt at 2-year 15bps instead of 10-year 70bps or 30-year 180bps 'the biggest blunder in the history of the Treasury' going back to Alexander Hamilton.
[E7336] Treasury's inability to term out debt even when 30-year rates were at 180bps reveals a structural crisis in long-end demand. TBAC confirmed foreign buyers absorbing a shrinking share of net UST issuance. The resulting T-Bill concentration creates rollover risk and forces perpetual short-duration funding of a growing deficit — classic emerging market debt profile.
[E7338] Gromen argues US debt/GDP at 130% makes significant rate hikes impossible — a 5% rate rise would cost Treasury $1.5 trillion extra in annual debt service, nearly double the defense budget. Quotes David Goldman: 'This time the treatment would kill the patient.' Contrasts with Volcker era when federal debt was less than 33% of GDP.
[E7351] Treasury increased borrowing estimates by 143%, a pattern Gromen compares to pre-repo crisis in 2019. Fed rate hikes stop Treasury interest payments flowing properly and force more bond issuance. New home inventories at 2007 recession levels and homebuilder confidence at worst since 2007 threaten tax receipts, further straining Treasury market functioning. Housing market collapse risks breaking fiscal feedback loops.
[E7359] FFTT argues US policymakers face binary choice between high inflation or dysfunctional UST market. With record $932B Q1 2023 Treasury issuance, credit conditions at tightest levels since Q2 2020/Q2 2008/Q4 2000, and potential recession-driven deficit expansion, UST market dysfunction risk is acute — marking the fourth potential episode in 3 years.
[E7371] Hedge funds have built $900bn in Treasury basis trades with 50-500x leverage. Gromen warns that if MOVE Index hits 135-140, forced deleveraging could turn major Treasury buyers into sellers, creating waterfall selling pressure. MOVE Index creator Harley Bassman notes that once MOVE hits 150, the Fed has historically lost control. MOVE was at 122 as of late September 2023.
[E7372] Fed officials including Goolsbee express confusion about rising long-term Treasury yields during disinflationary trends, admitting being 'stunned' credit crunch hasn't materialized. Gromen interprets this as the Fed not understanding what they are seeing, signaling structural dysfunction in the Treasury market that policy cannot easily address.
[E7373] Foreign official buyers are loading up on US equities rather than long-term Treasuries, suggesting structural decline in foreign demand for USTs. Combined with record negative US Net International Investment Position (NIIP), this creates persistent headwinds for Treasury demand and supports the thesis of a Treasury bond crisis.
[E7387] US debt/GDP at 120% with 7-8% deficits means higher Fed rates paradoxically increase inflation through $500B+ annual interest payments on reserves and reverse repos. With $5+ trillion in reserves, interest payments create 13% of GDP in de facto stimulus. 10-year Treasury term premiums at -0.88% despite fiscal crisis building suggest massive mispricing of duration risk.
[E7400] The Fed's 'third mandate' to maintain Treasury market functioning reflects a structural supply/demand imbalance from high government issuance and declining foreign demand. With US debt at 130% of GDP, the Fed cannot aggressively tighten without risking UST market dysfunction, effectively subordinating inflation control to bond market stability.
[E7416] Gromen highlights that major US banks are running out of balance sheet capacity to buy USTs by Q1 2020, which may force the Fed to begin purchasing coupon (longer-dated) Treasuries beyond current T-bill purchases. Jim Grant warns the Fed has swapped price discovery for administered rates, with the federal funds market becoming a 'ghost town' while the Fed dominates the collateralized repo market.
[E7424] The US Treasury market experienced unprecedented dysfunction in March 2020, which Warren Buffett described as 'the deepest of all markets got somewhat disorganized.' The Fed temporarily excluded US Treasuries from banks' Supplementary Leverage Ratio (SLR) through March 2021, allowing banks to use 'infinite leverage' to buy Treasuries, effectively merging Fed and Treasury operations.
[E7425] Historical precedent from 1940s wartime finance shows government bond yields remained 500-800 basis points below nominal GDP growth for 35 years, enabling the US to financially repress its way out of debt. Bonds will be 'certificates of confiscation' in real terms even as nominal prices are supported by Fed intervention. Kenneth Rogoff is advocating 'deeply negative rates' as a debt reduction mechanism.
[E7453] USTs on a weekly basis have lost money 69% of the time in 2022, described as unprecedented since 1961 and worse than anything in the 1970s. Foreign holders (EU/UK/Japan) forced to sell USTs to fund energy import deficits would accelerate Treasury market dysfunction, with the doom loop only resolved by Fed intervention or system collapse.
[E7465] CBO projects the Fed will more than double its Treasury holdings to $9.9T by 2035, essentially financing US fiscal deficits as foreign demand wanes. This represents a shift toward fiscal dominance similar to Japan's monetary path. Unless gold rises significantly in USD terms, foreign UST sales could push yields above the critical 4.6-4.8% crisis level as China controls price discovery through CNY internationalization with net gold settlement.
[E7480] US debt at 122% of GDP with 8% deficits means the Fed must either tighten into recession (risking credit crisis) or loosen into inflation spike. Foreign buyers aren't purchasing enough USTs, creating a structural funding gap. The Fed is described as 'government—much more post-office than bank' that will ultimately be forced to monetize fiscal deficits.
[E7492] Japanese repatriation of $3.2 trillion in US dollar assets represents a major structural risk to the US Treasury market. If Japan sells Treasuries to fund domestic deficits rather than continuing to recycle surpluses into US bonds, this removes a key marginal buyer and forces the Fed to backstop the market through QE.
[E7501] TBAC reports reveal the long end of the UST market lacks sufficient liquidity for needed issuance volumes, forcing Treasury to shift toward T-Bills despite the inverted yield curve (paying higher short-term rates). Druckenmiller called Yellen's failure to term out debt at 2-year 15bps instead of 10-year 70bps or 30-year 180bps 'the biggest blunder in the history of the Treasury' since Alexander Hamilton.
[E7518] BRICS manufacturing advantage forces the US into massive industrial rebuilding that threatens bond markets. Separately, Treasury Secretary Bessent could redirect $10-13T in Eurodollar deposits to USD stablecoins backed by T-bills, fundamentally restructuring demand for US debt and potentially creating near-zero yields on bills while destabilizing longer-duration bonds.
[E7528] US fiscal deficits of $1.9T consume 29% of $6.6T global GDP growth (at 6% nominal) or 57% at 3% growth, creating unsustainable crowding-out dynamics. Thomas Peterffy quoted saying US default on national debt is 'inevitable' within 5-20 years. US budget compared to 'aggressive leveraged finance deal,' requiring continuous asset price inflation to maintain linear deficit growth.
[E7540] The Fed faces an intractable dilemma: bonds will throw a tantrum if the Fed doesn't address inflation, and stocks will throw one if it does tighten. Seth Klarman and Stan Druckenmiller quoted saying 'the bond market is in a bubble, which means everything is in a bubble.' True Interest Expense already exceeds 100% of tax receipts, severely constraining genuine tightening.
[E7550] MOVE Index reached 124, approaching the 125-130 level that historically forces immediate Fed/Treasury intervention to supply USD liquidity and prevent Treasury market dysfunction. Treasury volatility has surged to critical levels requiring policy response.
[E7551] FFTT highlights that retail investors are the biggest UST buyers while foreigners sell, and TreasuryDirect imposes year-long delays to transfer bonds, resembling historical patterns of locking retail into long-term bonds before major devaluations.
[E7562] Gromen argues US debt/GDP at 125-130% (vs 25-30% in 1970s) makes Volcker-style rate hikes impossible. 'True Interest Expense' at 111% of tax receipts means meaningful tightening would trigger a US debt crisis, forcing the Fed to 'print the difference' rather than combat inflation. This structurally traps Fed policy and threatens Treasury markets.
[E7574] FFTT argues long-term USTs face structural headwinds from fiscal dominance, the need for extended negative real rates to service record debt/GDP, and potential foreign selling as US-China economic divorce accelerates. The Fed cut rates early due to debt sustainability concerns rather than economic weakness, signaling fiscal dominance over monetary policy.
[E7589] Treasury market broke down in March 2020 because leveraged hedge funds had become the biggest marginal Treasury buyers after global central banks stopped net purchases in 2014. When volatility spiked and curves inverted, these hedge funds became forced sellers into illiquid markets, causing the UST market to cease functioning effectively per Fed meeting minutes.
[E7656] Treasury auction buyside participation 'fell through the floor' with indirects taking only 21.6% of the sale, while primary dealers (JPM, BAC, Citigroup) saw $205B inventory increase — revealing a mismatch between official 'strong demand' narratives and actual auction weakness at decade lows as of August 2019.
[E7599] The 2019 repo crisis revealed structural insufficient private sector demand for US Treasuries. Without Fed balance sheet expansion, repo rates spiked sharply as primary dealers could not absorb UST issuance. Gromen recommends moving out of duration, warning that rising long-term yields could persist despite Fed intervention, and that the deficit financing gap is structural rather than cyclical.
[E7607] US $1 trillion budget deficit creates unsustainable Treasury funding dynamics. Primary dealer inventories at record levels concentrated in just three banks. Gromen states Fed must cut rates aggressively enough to re-steepen the Treasury curve so dealer inventories can clear, otherwise funding market stresses will escalate. The Fed is effectively cutting rates to finance US government deficits.
[E7629] Treasury issuance of $992B over the next month overwhelms private sector capacity, forcing eventual Fed balance sheet expansion. Off-the-run Treasury securities became illiquid during March 9-18 breakdown, forcing Fed to expand balance sheet at $20 trillion annualized rate. US deficits are 'dwarfing the US and global private sectors' ability to finance at current yields' while the economy cannot afford higher yields given existing debt loads.
[E7644] US 'True Interest Expense' has reached 109% of receipts (117% including Veterans Affairs), with all components growing faster than nominal GDP. Even eliminating all DoD spending and all other federal programs would still leave a $140B deficit, demonstrating fiscal unsustainability. Bessent stated he and Trump are 'focused on the 10-year Treasury' as a priority.
[E7645] Gromen notes Treasury Secretary Bessent has abandoned his prior criticism of Yellen's debt management strategy due to the acute fiscal constraints. Multiple unconventional policy measures are being considered including Fed SLR suspension (returning to 2020-2021 policy allowing unlimited bank UST purchases), stablecoin demand for Treasuries, and sovereign wealth fund creation.
[E7657] Gromen argues escalating Treasury funding stress will force the Fed into yield curve control or helicopter money, as traditional monetary tools are 'almost exhausted' and negative rates cannot generate sufficient inflation to service sovereign debt burdens. Central bank officials including Fischer, Hildebrand, and Summers openly discuss monetary-financed fiscal policy.
[E7670] At 125% US debt/GDP with deficits at 6-7% during peak cycle conditions, Gromen argues only two outcomes exist: a major crisis worse than 2008/2020, or significant USD devaluation to inject liquidity and maintain Treasury market function. US interest expense projected to reach $1T+ in 2023 vs $475B in 2022, making continued tightening mathematically unsustainable.
[E7671] Gromen argues Powell cannot be Volcker because unlike Volcker's era, Powell faces 125% debt/GDP and must worry about USD strength hurting Treasury market functioning. Unless Powell lets the US government default on Treasuries, he must choose Burns over Volcker — meaning ongoing monetization rather than sustained tightening.
[E7679] FFTT identifies unprecedented Fed policy trap where both tightening and loosening monetary policy drive long-end UST yields higher — tightening due to fiscal crisis concerns, loosening due to inflation fears — resulting in total loss of yield curve control. Current US bond selloff matches largest in history, on par with countries that lost world wars or experienced hyperinflation.
[E7680] China spent only $30B over two months defending CNY at 7.30/USD but caused an 80bp rise in 10Y UST yields, demonstrating extreme US fiscal vulnerability. China holds ~$4T in reserves, meaning minimal UST sales can cause major yield spikes, exposing structural fragility in US bond markets.
[E7681] Rising unemployment historically drives deficit increases of 6-12% of GDP, which at current scale would add $1.5-3.2T in UST issuance. This would overwhelm any flight-to-safety bid, causing yields to rise rather than fall during recession — breaking the traditional safe-haven function of Treasuries.
[E7682] The Fed began running quasi-fiscal deficits (interest payments exceeding income) in September 2022 for the first time in its 107-year history. FFTT notes the last American central bank to run such deficits was the Confederate Central Bank, which subsequently experienced hyperinflation.
[E7683] US real yields above 2.25% create geometric negative impact on equities with convexity, suggesting a non-linear tightening effect. US budget deficits have exceeded 20% of public expenditures in each of the past five years including 2019 pre-pandemic, meeting the historical threshold FFTT cites for hyperinflation preconditions.
[E7698] The US shifted $450B of Treasury issuance from Q2 into Q3 2025, yet 10-year yields still rose during Q2. Q3 2025 now requires $1.007 trillion in borrowing from a higher yield starting point, suggesting severe underlying demand weakness and heightened risk of Treasury market dysfunction.
[E7699] Gromen argues stablecoins will be used for de facto yield curve control (YCC) to 'anesthetize the long end of the UST market,' providing a mechanism for Treasury market liquidity support as traditional foreign demand for Treasuries weakens under the new trade deal framework.
[E7700] With foreign creditor yields at 5+ year highs, USD strength, and $1.007T in Q3 borrowing needs, failure by the Fed to cut rates risks the fourth consecutive Q3 crisis, with potential for severe simultaneous bond and equity market disruption.
[E8284] Gromen expects 10-year UST yields to bottom within 1-2 weeks of April 4, 2025 and begin rising despite falling asset prices, signaling a credibility crisis. Late April Quarterly Refunding Announcement identified as key catalyst — if Bessent upsizes UST issuance guidance, it would manifest a credibility problem for Treasuries as reserve assets. The $23T potential foreign selling of US assets creates additional pressure.
[E8298] Western sovereign debt loads face an impossible dilemma: they 'can afford neither a decline in energy production (or consumption), a.k.a. a decline in economic growth, nor can western sovereign debt loads afford the energy inflation needed to prevent a decline in energy production.' This structural trap means fiscal retrenchment worsens debt sustainability while inflation erodes real debt values.
[E8305] Former Treasury Secretary Larry Summers warns of US fiscal 'doom loop' where deficit projections getting out of control combined with rising real interest rates create self-reinforcing crisis. Current Treasury Secretary Yellen simultaneously floating Treasury buyback mechanisms to address UST market dysfunction, signaling official acknowledgment of Treasury market stress as of October 2022.
[E8306] German bond auctions failing due to energy crisis funding needs, indicating Treasury/sovereign bond stress is spreading globally beyond the US. FFTT identifies potential policy responses including SLR exemptions and Treasury buybacks to address UST market dysfunction.
[E8318] Gromen argues the Fed's attempt to reduce repo operations will fail because the underlying cause—massive US deficits without sufficient foreign Treasury demand—remains unaddressed. Over 80% of the $1 trillion debt increase through March 2019 was absorbed by hedge funds and broker-dealers using repo funding, creating dangerous unhedged basis risk where leveraged investors will sell Treasuries during any risk-off event or yield curve inversion.
[E8319] The US government printed $60B in fiscal Q1 2020 just to pay 'true interest expense' (debt service plus pay-as-you-go entitlements like Social Security and Medicare). True interest expense totaled $860B against only $806B in federal receipts, meaning the US is already 'printing the vig'—running deficits solely to fund interest and entitlement obligations, a dynamic Gromen compares to Argentina's bond-as-reserves accounting.
[E8336] Gromen warns of a global 'sudden stop' in emerging markets forcing UST selling precisely as US deficits explode, creating a supply/demand crisis in Treasuries. He anticipates yield curve control implementation for the first time in 70 years as a necessary policy response, with escalating fiscal stimulus proposals ($1,000+ per adult monthly payments) requiring massive Treasury issuance.
[E8344] Gromen argues Japan's twin deficits (fiscal and trade) from rising energy costs force BOJ to print JPY to cap JGB yields, weakening the yen. JPY weakness reduces Japanese UST demand—Japan being the largest foreign holder—driving US yields higher despite falling credit spreads. 10Y UST yields have already broken the 40-year logarithmic downtrend, threatening US government solvency. This constitutes a sovereign debt 'doom loop' that may force Fed into Yield Curve Control.
[E8345] Gromen describes investment grade bonds selling off due to rising government bond yields rather than credit risk, reversing the traditional crisis progression order. This signals the sovereign debt bubble itself is bursting—unlike 2000 (tech) and 2008 (housing), which were 'kicked upstairs' to sovereign balance sheets. Bank capital ratios are deteriorating from bond losses, showing early doom loop mechanics.
[E8362] Gromen warns that up to $8.5T in foreign UST holdings are at risk of liquidation as the strong USD forces foreign holders to sell Treasuries to service their $13T in USD-denominated debt. US true interest expense has reached 103% of receipts, making the fiscal position unsustainable and pointing toward yield curve control as one of the few resolution mechanisms.
[E8378] US tax receipts are collapsing alongside asset prices while interest expenses rise, creating a dangerous fiscal spiral. High earner income is highly dependent on asset prices, so as markets decline, tax receipts fall while Treasury borrowing needs spike. This dynamic is expected to force massive Treasury issuance, worsening the fiscal outlook through 2023.
[E8379] Former Fed Governor Jeremy Stein (Harvard) is quoted stating that 75bps rate hikes would have been expected to 'blow up the financial system' a year prior, underscoring the unprecedented nature of the rate cycle and the structural risks embedded in the Treasury and rate-sensitive sectors as of December 2022.
[E8399] Gromen argues US fiscal constraints — debt over 100% of GDP, 5% deficits at cycle peak, entitlements cash flow negative — mean the next crisis triggers a US balance of payments crisis requiring Fed monetization. Market rejected 50-year Treasury bonds even during the strongest bid for duration in '5,000 years,' signaling investors expect Fed to destroy purchasing power via printed money. Long-duration bonds will underperform on a real basis.
[E8417] FFTT notes real 2-year yields reached 2009 highs, threatening fiscal stability. Bond markets remain complacent about the fiscal dominance regime shift while stocks and gold correctly price in coming debasement. Tax revenues can no longer cover 'true interest expense' including entitlements, with Treasury receipts down 19% y/y without recession — signaling structural insolvency requiring monetary accommodation.
[E8430] Fed meeting minutes already revealed Treasury market strain, with liquidity conditions becoming 'strained in some financial markets' and market depth deteriorating in US Treasury, US equity, and crude oil markets during the intermeeting period. This suggests the Fed cannot sustain hawkish tightening without risking Treasury market dysfunction.
[E8439] The US government has 71% of $11.5T annual issuance at 6 months or less duration, creating massive rollover risk. Without Fed monetization, repo rates could spike to 10%+, collapsing the economy. The Fed has been monetizing USTs within days of issuance with increasing frequency since September 2019, confirming the Treasury market cannot function independently.
[E8448] Weak 20-year UST auction on 2024-02-23 produced a record tail despite stable DXY, signaling UST market dysfunction. Gromen argues this indicates further dollar weakness is needed for Treasury market stability, and that the Fed will be forced to prioritize UST market function over inflation containment, effectively confirming fiscal dominance dynamics.
[E8462] JPM CEO Jamie Dimon warned the US government must sell $2 trillion in net new bonds in 2024 and roll over another $5 trillion, totaling $7 trillion in Treasury financing needs. Combined with record hedge fund basis trades, foreign creditor selling from high USD/oil, and record negative US NIIP, FFTT warns markets could go from 'functional to dysfunctional in hours rather than days.'
[E8463] Fed economists themselves warned that 'cash-futures basis positions could again be exposed to stress during broader market corrections' and that the trade 'warrants continued and diligent monitoring,' confirming FFTT's thesis that hedge fund Treasury basis trades represent a systemic vulnerability in an already stressed Treasury market.
[E8475] FFTT argues the Fed has adopted a 'shadow third mandate' to ensure UST market function, intervening with liquidity whenever the MOVE Index spikes above 150. This creates predictable liquidity injections during dysfunction episodes, making Fed balance sheet expansion inevitable regardless of inflation levels. US fiscal deficits widened to $1.1 trillion in fiscal 1H23 while foreign demand for Treasuries collapsed.
[E8476] Foreign central banks stopped sterilizing US deficits in 2014 and are now net sellers of USTs. The global private sector lacks sufficient balance sheet capacity to finance US deficits at rates that don't bankrupt the government, forcing the Fed to be the buyer of last resort. Japanese FX-hedged 10yr UST yields are negative at -2.29%, accelerating capital repatriation risk.
[E8490] Net government interest payments at early 1970s lows create false comfort about US debt sustainability, masking that real US debt could be 2000% of GDP. The US requires $200B in weekly Treasury rollovers. William White, former BIS chief economist, warns 'the situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up.' Manufacturing/employment indices at levels that historically triggered QE3.
[E8498] Foreign private investors are set to overtake central banks as the second-largest UST holder for the first time on record. This shifts Treasury financing from patient official buyers to profit-motivated private investors, increasing volatility and forcing USD weakness to prevent market dysfunction. Weekly T-bill issuance has grown 4x from $100B in 2013 to $400B in 2024 (15% CAGR) while receipts grew only 4.1% CAGR.
[E8517] Gromen warns the 'wartime footing' scenario implies 27% of GDP deficits ($8.5T annually), Fed balance sheet growth of 10x in 3 years, and debt-to-GDP reaching 200% by 2030, requiring yield curve control and capital controls. He cites Powell: 'If our ability to pay interest on reserves and other liabilities were eliminated, the Fed would lose control over rates,' signaling fiscal dominance acceleration as the Fed ends balance sheet reduction.
[E8530] Gromen states explicitly that 'if the US wishes to win the so-called Great Power Competition against China, the US bond market has to die on a real basis.' This implies deliberate negative real yields and financial repression are necessary policy outcomes, destroying Treasury bond holders' purchasing power to fund reindustrialization and military competitiveness.
[E8541] Treasury market experiencing structural dysfunction: 10-year yields rising during debt ceiling debate (opposite to 2011/2013 safe-haven pattern) as foreigners sold $1 trillion in USTs since March 2020. Gromen argues the Treasury market is now so large the Fed must remain involved to keep it functioning, signaling permanent structural fragility in the UST market.
[E8542] US 'true interest expense' (Treasury spending plus entitlements) reached 111% of tax receipts, meaning the Fed cannot meaningfully tighten without risking US default on bonds or entitlements. This fiscal dominance structurally traps the Fed and prevents any sustained rate-hiking cycle comparable to the 1970s Volcker era.
[E8564] Gromen argues the Fed has a shadow 'third mandate' — Treasury market functioning — that takes precedence over its dual mandate. Bank of America's Mark Cabana noted 'rising odds of Fed action to support UST market functioning.' Every 100bps rate increase now costs 7.5% of tax receipts vs 1.7% in 1980, making Volcker-style tightening impossible given current debt burdens.
[E8579] With US debt at 120% of GDP and deficits at 7% of GDP, a 300bp rate hike would push the deficit to 11% of GDP. Since 1991, all 18 governments with deficits exceeding 11% of GDP and debt-to-GDP ratios exceeding 110% defaulted within two years. Gromen states 'the Fed's #1 job is to make the Treasury look solvent' and cannot allow a fiscal crisis to develop.
[E8589] US exhibits emerging market fiscal characteristics with 120% debt/GDP and twin deficits, making Volcker-style rate hikes impossible without triggering a debt spiral. Unlike 1980 when debt/GDP was 30%, the current fiscal structure means the Fed cannot raise rates to 15% to contain inflation or gold prices. Gromen argues escalating Ukraine-Russia conflict could trigger immediate Yield Curve Control implementation.
[E8601] TLT declined 38% with record low short interest, and dropped 3% on Japan's relatively minor initial FX intervention. Foreign creditors hold $7.5T in USTs available for sale versus only $600B annual private demand — a massive supply/demand imbalance. Combined with Fed QT at $95B/month and fiscal deficits of $1-2.6T, Gromen sees unsustainable Treasury market dynamics.
[E8610] FFTT identifies Treasury market dysfunction as MOVE volatility index hit 141 on October 3, 2023, a level historically requiring Fed intervention. Seven Fed officials in nine trading days delivered coordinated 'bond market has done our work' messaging, signaling the end of the rate hike cycle to stabilize Treasury markets. This pattern of Fed response to MOVE >150 has occurred three times in the past four years.
[E8627] The UST market broke catastrophically after just 5 days of US tariffs on China, with the MOVE Index hitting 172 — a level only seen three times in 30 years during systemic crises (COVID, GFC-adjacent events). This forced Trump to immediately reverse course after Jamie Dimon's intervention, demonstrating that Chinese factories effectively backstop the UST market through trade surplus recycling.
[E8628] Gromen argues UST market fragility will force the Fed into yield curve control (YCC) or equivalent intervention when US-China tensions re-escalate. The speed of market breakdown (5 days) demonstrates structural dependence on Chinese trade surplus recycling into Treasuries, making the market a permanent vulnerability or 'badly broken rib' that China can exploit.
[E8643] FFTT warns AI productivity advances will force massive government bond market intervention within 18 months, citing Microsoft's Chief Scientific Officer predicting AI creativity breakthrough at exponential pace incompatible with current debt-based monetary system. This forces choice between nominal bond collapse or central bank 'full reservation' through money printing. UK already facing £200 billion QE losses requiring inflation or massive tax increases.
[E8658] Author warns of a sovereign debt death spiral: a recession could trigger unsustainable deficit expansion requiring $660B-$2.2T in additional Treasury issuance. The Fed faces an impossible choice between sovereign debt default (deflationary collapse) or money printing (inflationary collapse) in the Peak Cheap Energy regime.
[E8667] US running 8% fiscal deficit at 3.6% unemployment — historically associated with balanced budgets, not massive deficits. Gromen warns a recession would drive deficits to 12-17% of GDP ($3.1-4.4 trillion), forcing Fed intervention. Dan Oliver of Myrmikan Capital states 'the Fed will have to decide whether to defend the dollar or prop up the banking system and support the state.'
[E8680] History shows during major wars (WWII, WWI, Civil War) US real rates fell to -15%. With current debt/GDP at 130% versus 25% in the 1970s, the US cannot run the 'Paul Volcker playbook' of raising rates. Debt must be inflated away to 80% debt/GDP or lower before positive real rates are feasible.
[E8707] FFTT argues collapsing US Federal tax receipts (first y/y decline in a year, down 5%) directly pressures Treasury solvency, forcing the Fed to pivot. The thesis holds that the Fed's primary unstated mandate is maintaining the appearance of Treasury solvency, and tightening bank lending standards at recession-consistent levels compound fiscal stress.
[E8716] BIS General Manager Carstens warns governments have a 'narrow window' to put fiscal houses in order before public trust frays, with the era of ultra-low rates over. 10-year UST yields testing 4.8% threshold in coming weeks. The author argues policymakers are trapped: 2022 proved both austerity and expansionary policies now drive bond yields higher, making sovereign debt dynamics structurally unsustainable.
[E8728] On April 9th, 2025, the US financial system nearly collapsed due to Treasury basis trade dysfunction. Hedge funds are short $1 trillion worth of Treasury futures, creating a 'doom loop' where margin calls force Treasury sales, pushing prices down further and triggering more margin calls. The Fed was forced to promise liquidity intervention to stabilize markets.
[E8750] The US has moved 85% of debt issuance to short-term T-Bills despite strong economic conditions and no private sector crisis, revealing hidden fiscal stress. When Treasury attempted longer-duration issuance in Q3 2023 it caused sharp rate rises, forcing retreat to the front end. This pattern historically occurs only during crises, suggesting the government faces restrictive financial conditions even as private sector conditions remain loose.
[E8751] Fed Governor Christopher Waller indicated plans to shift the Fed's portfolio from 4.5% to 33% T-Bills, effectively moving QE to the front end of the curve. Combined with Treasury's existing short-term issuance strategy, this creates conditions resembling outright money printing since shorter-duration bonds are more 'money-like,' amounting to coordinated Fed-Treasury currency debasement.
[E8764] US 'True Interest Expense' (entitlements + interest) reached ~$4.7T annualized through June 2024 vs $4.78T in trailing 12-month Treasury receipts — a ratio of 98%. Social Security growing +8% y/y and interest expense +19% y/y, both exceeding nominal GDP growth, suggesting ratio will exceed 100% within months. Historically this level precedes Treasury market dysfunction and USD liquidity crises.
[E8765] For the first time in 48 years, 10-year UST yields ROSE in response to a year-over-year decline in 'World USD Liquidity,' which Gromen interprets as a warning that US debt/GDP, deficit/GDP, and NIIP/GDP are so high that policymakers cannot overtighten USD liquidity without triggering a US debt spiral. This represents a structural break in the normal relationship between liquidity and rates.
[E8779] Foreign central banks stopped accumulating USTs after 2014, creating a structural buyer gap for US government debt. With $1T+ annual deficits and aging demographics requiring inflation-adjusting healthcare services totaling 500-1000% of GDP in present value terms, the Fed is forced into permanent monetization — a bearish structural setup for long-duration Treasuries.
[E8799] Treasury market stress indicators are flashing warnings: market depth has deteriorated to April 2020 levels, repo agreement failures are at two-year highs, off-the-run Treasury trading has collapsed, and the FRA-OIS spread is rising significantly. Gromen expects foreign central banks to stop buying Treasuries, forcing the Fed to restart QE and/or suspend bank capital requirements to finance US deficits.
[E8810] Gromen warns continued Fed tightening could trigger a fiscal crisis where Treasury yields rise during recession — the Fed's worst nightmare. With US debt/GDP at elevated levels, recession would blow out federal deficits by 500-800bp of GDP, forcing Treasury to issue $4-5 trillion while the Fed simultaneously sells bonds, creating unsustainable upward pressure on yields.
[E8833] US 'true interest expense' (Treasury spending plus entitlement pay-goes) exceeds 100% of tax receipts as of early 2022, meaning the government cannot cover debt service without Fed QE or banking system assistance. No one alive has traded a Fed tightening cycle beginning with US debt/GDP at 122% and deficits at 12.5% of GDP.
[E8834] During the 2016-2019 Fed hiking cycle when rates rose 2.25%, US true interest expense rose 17 percentage points as a share of tax receipts, demonstrating extreme fiscal sensitivity to rate increases and suggesting the current tightening cycle poses severe fiscal risks.
[E8852] Gromen identifies a simultaneous withdrawal of all major UST buyers — Japan, foreign central banks, and commercial banks — creating unprecedented Treasury market stress. Treasury Secretary Yellen is cited as worried about 'a loss of adequate liquidity in the UST market.' The 'Mutually Assured Destruction' dynamic describes how Fed rate hikes strengthen USD but make Treasuries less attractive to foreign buyers via negative FX-hedged yields, forcing higher yields in a self-reinforcing cycle until either USD liquidity increases or the system collapses.
[E8865] Real yields are as deeply negative as during the 1945-1953 financial repression period. Gromen argues the Fed must maintain severely negative real rates until debt levels become sustainable, as True Interest Expense exceeding 100% of tax receipts structurally prevents tightening. This implies further erosion of real returns for Treasury holders.
[E8876] January 2023 saw the largest monthly decline in US tax receipts on record, with California experiencing a 40% revenue drop serving as a leading indicator for federal receipts. US 'True Interest Expense' is approaching COVID crisis peaks that previously required emergency QE intervention. Gromen asks how high the Fed can go before forcing either US government default or Fed resumption of QE to finance true interest expense.
[E8877] A Fed-induced recession to combat inflation would paradoxically worsen the fiscal deficit by an estimated $1.3 trillion through reduced tax receipts and increased spending, creating a vicious cycle. The asset-price dependent tax base means even a flat stock market—not a decline—puts pressure on the receipt side of the US fiscal picture, per former Fed Chairman Greenspan.
[E8888] UST MOVE volatility index at 198 vs a 'loss of control' threshold of 150, signaling increasing Treasury market dysfunction. Foreign central banks have net sold $300B in Treasuries since 2014 while buying $400B in gold, creating a structural financing gap for US deficits. Treasury auction failures may accelerate as tax receipts fall 10% y/y despite 6% inflation.
[E8889] US 'True Interest Expense' (interest + entitlements) trending toward 118% of tax receipts, exceeding the 117% COVID peak. At current debt-to-GDP of 125%, raising rates to Volcker-era 8% real (12-14% nominal) would require $3.7-4.3T annual interest payments, making rate normalization fiscally impossible without sovereign insolvency.
[E8909] Bond vigilantes have returned with 10Y UST yields spiking above 5%, but unlike 1983 (35% debt/GDP), the US now has 120% debt/GDP, negative 65% NIIP, and $13 trillion offshore USD debt. This creates a debt spiral feedback loop: higher rates → higher deficit → more UST supply → higher rates. Government deficit projections assume 3.75-4% 10Y yields vs 5%+ reality, guaranteeing higher deficits than forecast.
[E8910] MOVE volatility index closing above 140 (at 141 as of publication) historically triggers unwinding of 50-500x leveraged hedge fund UST relative value trades. Previous unwinds dumped $500B+ in short periods, forcing Fed intervention. Real money selling rather than hedge fund unwinding is driving current Treasury dysfunction.
[E8924] Historical relationship between Chinese industrial weakness and US Treasury yields is inverting — Chinese industrial profit weakness now drives higher US yields (behaving like EM bonds) while Chinese government bonds fall (behaving like historical USTs). This inversion indicates BRICS surplus recycling away from US assets, creating structural upward pressure on US yields as foreign central bank demand for Treasuries declines.
[E8947] Fed's standing repo facility described as 'nationalization of money markets.' US savers' and banks' balance sheets cannot absorb the torrent of Treasury issuance, forcing the Fed into debt monetization whether it wants to or not, with ISM at 47.8 signaling 80% recession probability requiring $1.0-1.6T additional UST issuance.
[E8948] US Treasury's weighted average maturity is declining despite record global demand for duration ($16T negative-yielding debt), implying structural weakness in foreign appetite for long-dated Treasuries and raising refinancing risk as the deficit expands.
[E8963] Net capital gains plus taxable IRA distributions represent approximately 200% of year-over-year growth in US personal consumption expenditures. Since PCE is ~2/3 of US GDP, falling asset prices would pressure the receipt side of the US fiscal picture, potentially triggering a deficit spiral requiring monetization. Greenspan himself warned of this dynamic in May 2015.
[E8972] FFTT frames USTs as the structural weak point in the current cycle, comparing them to Pets.com and Lehman Brothers. The analysis highlights that unlike the 1997-98 Asian Crisis when US NIIP was -5% of GDP and UST yields fell during currency weakness, the current -70% NIIP means foreigners hold massive USD assets to sell, causing UST yields to rise with currency weakness — a fundamentally different and more dangerous dynamic.
[E8991] Recent 10-year Treasury auction showed a 3.1bp tail — the third worst post-COVID performance — amid UST market stress. Highly-leveraged relative value hedge funds (up to 500x leverage) who became major marginal buyers of USTs had to de-gross when VIX spiked, limiting the traditional flight-to-safety bid and preventing 10y yields from dropping significantly during the volatility event.
[E8992] Luke Gromen highlights the fragility of Treasury market structure by quoting: 'If hedge funds stopped buying Treasuries, I don't know who would buy them.' Leveraged relative value hedge funds facing margin calls could overwhelm policy intervention capacity, and unhedged Japanese holdings of USD debt create selling pressure if USD weakens, requiring Fed/BOJ coordination.
[E9002] At 130% debt/GDP, any meaningful withdrawal of Fed liquidity would spark debt sustainability concerns and a global financial crisis. The Treasury market has grown so large it has outpaced private sector capacity to absorb during stress periods, per Fed Vice Chair Quarles, requiring permanent Fed backstop and making genuine policy normalization structurally impossible.
[E9027] Gromen identifies a $1 trillion Q3 2025 Treasury issuance requirement amid foreign creditor stress as a potential trigger for bond market intervention. The structural shift away from foreign capital flowing into US bonds — as implied by Bessent's factory investment pivot — threatens the existing Treasury funding model and could precipitate a crisis requiring Fed accommodation.
[E9083] Chicago Fed white paper presented at Jackson Hole (Aug 2022) warns Powell that with debt/GDP >100%, positive real rates would cause debt to grow faster than GDP, triggering a sovereign debt death spiral. Fed mathematically cannot be Volcker — can only choose Arthur Burns (high inflation) or Benjamin Strong (depression via overtightening).
[E9046] Luke Gromen argues the US hit 130% debt/GDP in Q3 2020, the first time the reserve currency issuer reached this level in two centuries. Historical data shows 98% of countries with gross government debt >130% of GDP have defaulted through restructuring, devaluation, high inflation, or outright default over 222 years of data. The Fed has never begun tightening with debt/GDP >120% and deficits at ~5% of GDP over the past 65 years.
[E9056] Gromen's "True Interest Expense" metric (Social Security, Health, Medicare, Net Interest, Veterans Benefits) stands at 103% of US government receipts over the past four months, indicating the federal government faces tighter financial conditions than private markets despite loose private-sector financial conditions. This implies unsustainable debt dynamics requiring either default or debasement.
[E9057] Gromen argues the Fed operates under a shadow third mandate of UST market support, intervening when yields spike too high. This structural dependence on Fed backstopping of Treasury markets represents a key forward catalyst for monetary regime change, as the Fed cannot simultaneously control inflation and support government financing needs.
[E9069] UK gilt crisis in September 2022 described as a near-Lehman moment where long-dated gilts found no buyers. Without BOE emergency QE intervention, yields could have reached 7-8%, wiping out approximately 90% of UK pension funds through collateral calls. Gromen argues the US most closely resembles the UK, implying UST market faces similar systemic risk.
[E9070] Global energy-driven current account deficits force countries holding $7.5 trillion in US Treasuries to sell them aggressively to fund energy imports, into an already illiquid UST market. Gromen describes nations selling USTs 'till their hands bleed' to buy energy, creating structural selling pressure on sovereign bonds.
[E9095] Core services CPI annualizing at 10.67% while the Treasury market and economy began breaking down as 10Y UST yields neared 5% last fall creates an impossible policy environment. The Fed cannot raise rates without triggering market dysfunction nor cut without fueling inflation. US debt at 120% of GDP makes this structurally unsustainable.
[E5401] I've shown you how rate cuts have been a positive when you're not in a recession.
[E5173] Bond market pricing industrial cycle recovery and reflation. Yield curve steepening as long-end rises on growth expectations and inflation. Real rates rising supports cyclicals and commodities.
[E5193] Fed in structural bind: cuts rates into AI boom and ATH equity valuations without recession. Higher rates necessary to support growth but politically costly; long-term debt dynamics force eventual normalization or debasement.
[E5161] Bond market pricing higher inflation as commodities/materials begin rising with industrial cycle. Nominal growth 5% vs rates 2% creates real rate compression supporting equities but threatening bonds.
[E5615] 10-year Treasury yield faces structural upside risk if foreign central banks reduce purchases and dedollarization accelerates. Bond market bigger risk than equity market if yields move higher on reduced demand and fiscal deficit persistence.
[E5131] Treasury market liquidity seized up at historic levels. Bid-ask spreads at COVID crisis levels for off-the-run securities. Market depth deteriorated dramatically preventing large block trading without significant price slippage.
[E5313] As we go through this bond v equals adapt or die as an investor.
[E5328] And that's why in the treasury thing, this is was talked about in terms of quantifying treasury cash futures basis trades.
[E5327] Hedge funds would come in, sell futures above fair value and buy cash bonds and levered up 50 to1.
[E5318] went through that last week and in each of the prior instances the market was higher three to six months later so that was the beginning of the week so let's kind of go through a little bit of what happened this week first of all you have to remember there's no Trump put there's no Treasury secretar
[E5494] Despite market weakness and recession fears, Treasury yields are not falling because global central banks (China, Germany, Japan) are spending money simultaneously, creating coordinated fiscal expansion that keeps rates elevated.
[E5509] Europe spending billions on defense (Germany +29bp Bunds one-day move historic), creating correlations break and forcing hedge fund repositioning out of US growth into defensive/international. 30-year yields breaking out globally.
[E5103] Yield curve steepening historically recession signal but offset by AI productivity improvements and fiscal support. Different regime from past mean-reversion patterns.
[E5123] Fed inflation forecast collapsed with PCE expectations moving higher across 2024 and 2025 projections. Fed pivoted from rate cut expectations to potential rate hike scenario by end of 2025.
[E5392] rates went higher and since inflation went higher but now you're starting to bottom out these companies have been forced to cut expenses they've been forced to change up some of their business models and again I think small caps are going to benefit from a rolling out AI which has really been thing
[E5385] going higher and if it's believed that with Trump rates are going to go higher why would small caps do well well the first thing is the Fed is cutting rates and so you can believe in a steeper yield curve but I wouldn't say that that would be until we get up higher we need inflation to go higher bec
[E5383] the cost benefits that'll come next year is about AI agents being rolled out and it's about uh the ability for the blockchain and crypto with the digital payment side to really start to accelerate and I think with the stripe purchase of bridge and the acceleration of stable coins I think this is goi
[E5374] probably some surprises in the areas that people would have been more worried about tenure rates uh unchanged for the week so despite the fact that Trump won uh you didn't get continuation in the move as of as of yet and gold was down for the second week in a row uh the one place where it absolutely
[E5371] biggest post elction day session ever for the S&P 500 up two and a half% uh V collapsed not surprisingly I think the main point which I brought up last week was part of the reason for the rally uh was that at the there had been a lot of protection that was put on this is The Vic showing how far
[E5481] the the company showing massive Revenue uh I'm sorry massive capex spend but not seeing the Revenue come through their earnings are decelerating in terms of the growth side so Nvidia becomes more important and this is the 100 day rate of change which really just says to me that their earnings announ
[E5471] back for a uh pre-election video uh this one uh we'll go through what happened last week kind of what the markets are talking about how the economic data was uh I'll start talking about the structural rise and rates fall this has been going on for for four years but uh I I only started doing videos
[E5482] important uh at this point in terms of the economic data um the payrolls number you know I talked about two weeks ago that the Hurricanes were going to and and the the Port strike were going to distort everything in the near term and that's what we got in terms of the headline payroll numbers that's
[E5484] fine and The fed's Cutting rates so we still have a 97% chance of the FED cutting uh by 25 basis points more importantly you still have rate Cuts in you know and you've got 25 basis points into uh 2026 beginning of 26 so that means for next year we're ending the year with 50 in you've got about 75 b
[E5487] have to move rates lower and it's at the expense right now of what's Happening long yield so they they make the surprise cut uh at about 362 we're now at 438 so you're talking about a 75 basis point rise in tenure rates which is starting to get attention these are the basis point weekly moves so it'
[E5491] point um this is not happening in my opinion because of of of inflation I think this this just happens that the FED cut rates in September we have the elections stand staring in front of us people are buying protection for valid reasons which is the election creates a lot of uncertainty especially i
[E5150] Fed's 50bp rate cut at all-time highs for stocks, gold, and Bitcoin signals stimulative error repeating 'transitory inflation' mistake. Market rejects easing; 10-year yields spike to multi-decade highs post-cut, inflation expectations reverse disinflationary trend.
[E5110] Longest inverted yield curve in history yet no recession. Traditional recession model broken. Previous leading indicators no longer valid in new structural regime.
[E5537] Rate expectations repriced down 50bp on July payroll/ISM weakness. Fed expectations from 480bp down to 466bp then further down 50bp. Citi Surprise index peaked April, rolling down. Economic data surprising downside on rates.