00:00Help us understand the price action in treasuries this week. We saw a lot of movement. We now have
00:06the two-year at 3.7, and yet we have traders fleeing the 10-year, the longer end. What do
00:13you make of all of this? So I think the moves have been probably the most dramatic in the rates
00:18market. I would say even though U.S. rates have risen a lot, look globally. European rates, UK
00:23rates, that's where the moves have been very, very intense. I think there's a couple of things
00:27going on. Number one is, I think there is this inflation fear. Now, I would argue a geopolitical
00:33driven oil price spike is a stagflation shock, not just the inflation, but I think the market
00:38sort of saying the immediate impact will be on headline inflation. There's some risk of inflation
00:42expectations getting unankered. So that's part of the move. The other part of the move is a
00:47deleveraging exercise. I mean, people own treasuries to hedge risk assets for margin calls. There were
00:54a lot of these sort of relative value trades, swap spreads, basis trades. I think they're being
00:59unwound. And that's why the price action now reminds me a little bit of the, you know, the sort of
01:05post-liberation day price action, which seemed counterintuitive. The fact that rates were rising
01:09then, even though we were dealing with a stagflation shock of tariffs, I think it's somewhat
01:13similar now. But it does make it very difficult for central banks. Now, for the Fed, you know, they've
01:19already cut rates. They are seeing this low higher, low fire labor market. My sense is they're going
01:24to be on hold next week. But to the extent that they want to keep inflation expectations low, I
01:29don't think they can sound dovish. And so we're going to have to watch the data. They're going to
01:32try and buy time. The market's done, I think, a lot of pushing out of rate cuts. I really struggle
01:38to
01:38see rate hikes here because the consumer, remember, savings rate is dropping. You know, we're still not
01:44seeing very high sort of hiring trends. So I have to think this is going to hurt the consumer.
01:48They're going to get tax refunds. But it's not clear. That's all going to go towards filling up
01:52your gas tank. So as the consumer spending starts to slow down, I think Fed rate cuts will come back
01:58on the table. We've been thinking about where do we add duration. I think the 10 year 425 or higher
02:04starts to add value. So I think, you know, owning a little bit of treasuries starting to, you never
02:08want to catch a falling knife. But I think, you know, when the market's already done a lot of that
02:13repricing, positions are cleaner, this might be the time where you start to position for that
02:18growth shock that typically follows an inflation shock.
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