00:00You and I were having this conversation around the same time yesterday, and you were saying, look, this is likely
00:04short term because of these long term structural issues.
00:07Did you expect it to be so short term that treasuries essentially have mostly erased their gains of yesterday?
00:13Yeah, I mean, it was the knee jerk reaction yesterday that I thought would fade a little bit.
00:18And, you know, when we talk about the size of these buybacks, you know, they're not particularly big in the
00:24grand scheme of things.
00:25Now, you know, they do affect a little bit some liquidity in that it takes out a lot of long
00:31duration or some long duration debt off of, say, dealer balance sheets.
00:35But affecting liquidity doesn't necessarily affect the level of yields or, you know, the longer term trading.
00:42That's going to be driven by fundamentals and also supply demand balances that can be affected by what's going on
00:48in the global rate market.
00:49One thing that hasn't changed course of direction, and that is the dollar, it's barely changed this morning, but still
00:55slightly weaker.
00:56Ira, a conversation also seems to be building that what the Treasury is essentially doing is trying to keep yields
01:02in check at the sake of the dollar.
01:04And something that could lead to inflationary pressure, a commodity super cycle and kind of lead an inflation driven commodity
01:11cycle rather than a super cycle and lead to this kind of dangerous feedback loop.
01:15To what degree is a weakening dollar after yesterday's move a concern for this market?
01:20Well, I think it's been a concern at least since the beginning of the war, right?
01:24And one of the issues has been, you know, will there be a shift in capital flows out of the
01:29U.S.
01:29or if not out of the U.S., then maybe slower flows into the U.S.
01:35and other jurisdictions will benefit.
01:37So I think even yesterday when we chatted, we talked about the Japanese yen.
01:41And if you hedge the Japanese yen back into certain currencies, it actually yields more than U.S. treasuries.
01:47And so that makes it more appealing for a certain group of investors.
01:51So you're not necessarily seeing a lot of selling, but you're just seeing, I think, a bit of a buyer
01:57strike.
01:57And the thing is, when you have a buyer strike like this, it's going to be hard for the market
02:01to rally very significantly unless something changes either fundamentally in the U.S.
02:06or you wind up having a reason, like some kind of structural reason for people to be buying U.S.
02:13debt.
02:13Now, there is, right?
02:14We still have very large insurance companies and other types of flows.
02:18And you did see that yesterday.
02:20Like I was talking to an investor in Asia last night, and they did say, hey, we saw a lot
02:25of flows into the long end, both of the U.S.
02:27and Japan last night from Asian life insurance companies.
02:31So it did have some psychological effect.
02:33But as you mentioned, it's not going to last very long because nothing's changed fundamentally.
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