00:00Is there the possibility of some kind of combustion next week?
00:03So markets right now have taken this announcement from Besant with a little bit of skepticism,
00:08but then he had to come out and say, no, but we have a bigger plan.
00:10I promise you there is a bigger plan.
00:12We're going to get to this debt mountain and the U.S. can do it.
00:14If we don't get details of that, does this narrative start to take over everything else
00:19and become the real focal point for the Treasury market,
00:23never mind the supply, never mind the competition from AI debt,
00:26the fact that we're not addressing this?
00:29No, I don't think so.
00:30I think we've been here before, Vonnie, right?
00:32We've been here before in the last three, three and a half years.
00:34It's not like the fiscal issue, the debt issue has gone away.
00:37It's not like it's a U.S. issue alone.
00:40It's pretty similar in the Eurozone, pretty similar to what we are seeing in Japan, right?
00:44It's a global issue, number one.
00:45Number two, we're able to do all this.
00:48We're able to talk about fiscal and about the issuance and about hyperscale of debt so much.
00:53Why?
00:54Because growth has been so strong.
00:55Let's face it, when you look at economic surprise indices,
00:59for a very brief period at the end of last year,
01:02they dipped for, I think, a week or two into negative.
01:05But they've been basically on an uninterrupted positive streak
01:08for the best part of the last year and a half.
01:11What we're seeing right now very clearly is the U.S.,
01:14the growth momentum is starting to slow down on the consumption side.
01:17It's not falling off the cliff, but I think a lot of the positive impulses,
01:21like from the OBBBA, for example, like tax refunds, like things like the CAPEX incentives,
01:27the immediate expensing of CAPEX, you know, a lot of those impulses have been happening
01:32in the second half of the last year and the first half of this year.
01:36They're pretty much gone now.
01:37They're not reversing, but we're not getting these new impulses.
01:40So that means, I think, in the remaining four and a half months of this year,
01:44there's a very decent chance that we get maybe a month or two
01:46of actually negative economic surprises.
01:49And that then does put, I think, the picture pretty much upside down,
01:53because then perhaps the first reaction is a bit of ball steepening first
01:56in the Treasury curve, because people will be reluctant
01:59to immediately put on duration.
02:01But I think if we get a streak of a couple of weeks uninterrupted
02:04of negative economic surprises, that narrative of US exceptionalism
02:08being a bit disappointed, then actually, I think you can get
02:12a bit of a bid for duration back.
02:14And that does then help the entire Treasury curve, I think.
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