00:00I'm not surprised this has happened because we published a note yesterday saying this is a
00:04band-aid, right? This is not a cure for the situation we are in. Look, even if you plot
00:11the amount of buybacks relative to the amount of hyperscale issuance in the offing, look at the
00:17net supply in the offing, you need a magnifying glass to identify the impact of these buybacks,
00:23right? And then, of course, you aren't even controlling the more critical issues of deficits,
00:30of Fed credibility, of the fact that the AI build-out is a massive growth engine for the
00:35economy. All those factors are the main drivers. A small band-aid won't fix it.
00:40So those things you mentioned, the AI, the Fed uncertainty, is that just lifting global rates?
00:50Are we getting this higher for longer? Is this something we need to get comfortable with as a
00:53market? Yeah, look, I think that's exactly right. So I think one crucial point here is
00:595.25 in the long bond, I don't think is restrictive. I think it is just a normal rate level
01:06for the kind
01:07of growth environment we find ourselves in, kind of inflation environment we find ourselves in.
01:13If you look at the performance of the stock market, look at small caps versus overall stocks,
01:18look at the S&P equal weight. All those stock market numbers are going up despite a world of
01:24high rates. And what that tells you is markets telling us the growth numbers are so good that
01:30they're going to outweigh the impact of high rates. That's why these stock numbers are up.
01:35All I know is I'm not refinancing the mortgage on the Jersey Shore compound here. What do you expect
01:39to hear from out west next week with all those muckety-mucks, including Tom Keen out there?
01:44Yeah, look, I mean, I don't bring good news for you on the mortgage front. I think
01:49that's been a constant feature of our conversations. I think rates are still going
01:53to keep going up. The Fed's going to be challenged. The Treasury's going to be challenged.
01:59The next event, of course, is, you know, Jackson Hole, where people are going to focus on whether
02:04the Fed is going to do something about credibility. And this is the challenge with the Fed as well,
02:09is darned if they hike, darned if they don't, right? If they do address the credibility issue,
02:15they will have to do more rate hikes than they had planned before July meeting. So I think if they
02:20had planned for like, or the market thought they would do two, I think the market now needs three
02:25or four to give them the credibility back. Alternatively, if they don't do anything and let
02:31the markets do their own thing, then the long end keeps selling off anyway. So darned if they hike,
02:36darned if they don't. But I think just yesterday's activity from the Treasury Department suggests
02:41that this administration is sensitive to interest rates. I'm sure Mr. Trump's real estate
02:46friends are, you know, calling him up saying, hey, you got to get rates down here. I'm trying
02:50to get some deals done here. How does that all work out, do you think? Yeah, look, I think you
02:56can't fight the fundamentals. You can technically, you know, make some supply demand conditions for the
03:03short term. This has been tried before with the yen. This has been tried before in bond markets in UK
03:08and Japan. In a world where the fundamentals are as strong as they are, it's very hard to just take
03:15down two billion per month of supply to a fixed issue. Good evening with us with BMP Paribas,
03:21the giant of Paris, France. So you come, you're in the tourist area, you go up to Opera, and our
03:26offices
03:26are right there. Right there. I love the BMP Paribas offices. And you turn right on Italian, you go down
03:31and there's the
03:31Gneet Dinger building, the Boulevard des Italiens. Oh, nice. The French yield is a mess. Like yesterday, Japan,
03:40lower yield off the Besset moment. France, like a rock, didn't move. Can you brief us what you're
03:48hearing from your BMP Paribas experts about the fragility of debt in France? Yeah, look, I think the
03:56issues with fiscal situation are global, as you said. Japan, France, US, every country is dealing
04:03with them. I mean, in Europe, obviously, the ECB matters too. And we think the ECB is going to hike
04:09in September one more time. Hike one more time. That's pretty well understood. I think the ECB goes
04:14on hold thereafter. So that does kind of keep the European bond market a little bit more stability
04:21compared to all the all the fun in the US. Here in the US, I mean, we have a steepening
04:27curve here.
04:28What's that telling us now? Not that I understand this stuff, but Lisa promise just wrote in says I
04:34have to ask that question steepening yield curve. What does that mean? Yeah, so I call this a K-shaped
04:38bond market, right? If you look at what happened since the July FOMC, two years are down, 30 years are
04:45up. That's a K, right? So different parts of the market have a different reaction. I think the
04:50the steepening also has completely reversed the entire flattening we saw post the June FOMC,
04:57where the market assigned a lot of credibility to the Fed. The steepening recently is a combination
05:02of that credibility has been wiped off. Plus, of course, the massive hyperscaler issuance. Plus,
05:10I think people are starting to notice that the interest burden and the tax receipts are not keeping up
05:17and deficits are ballooning again. You know, Guneet's here, Paul. So I'm rocking the, you know,
05:21the fancy mathematics on the terminal. Yep. And unit is so much. If you look at a daily chart,
05:26if you're trading a five minute chart, some fancy hedge fund dude, or you look at a weekly chart,
05:32which is sort of the convention of longer term perspective. Guneet right now on a weekly chart,
05:38it's like the Besant move didn't happen. We're out at a higher 30 year yield, just on a weekly chart.
05:45I didn't know that till just now. Yeah, it's amazing. I expected this to be faded. Eventually,
05:50I thought there's gonna be a speed bump. And maybe through September 9, when the buybacks actually
05:54happen, or the new buybacks happen, people might wait to fade this. But I'm actually impressed at how
05:59quickly this has been faded. That just tells you markets have realized that this is not not going to do
06:05much in the overall context. All right, Tom, on the Bloomberg terminal, all you have to do is type
06:10in US debt. And that gives you the US Treasury total public debt outstanding 40 trillion, which
06:16we've been reporting. Look at the graph from the last gajillion. It's just straight up and to the
06:22right. At what point? I've been asking the same question, Tom, since I started on Wall Street in 1986.
06:28At what point does our US debt become a problem? Look, I think I wish there was a magic number
06:33of debt to
06:34GDP off 100%, 120%. I don't know the number. I think what's pretty clear is the interest burden
06:41continues to go up. And markets can't look the other way. I think that dynamic has changed.
06:48I just don't know. I mean, Sweeney is a font of wisdom, folks. I don't look at that. I just
06:54took
06:54it logarithmic. And there's a big spike up, like call it let me get right there. There's a big COVID
07:00spike
07:00up. Slope matters. Brian Sullivan over at the Death Star taught me this. Slope matters.
07:05Okay. So I got a big COVID slope of increased debt. And what's important, as you say, Paul,
07:12from 2022, folks, it's linear. I mean, there's not a jump condition here. It's just growing.
07:21Yeah. So I think what happened last year, for example, is we had the tariff revenue come in.
07:25Yep. And people were calmed about like, hey, we are now controlling this thing. Tariff revenues are
07:30coming in. The spending and the discretionary stuff has gone down. So it looked controlled,
07:35but all that stuff has reversed. And then some interest burden is high. Tariff revenues have
07:41turned negative because of- Right.
07:42Tariff revenues have turned negative because of-
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