00:00I think a couple of things could stop it. First, the fact that you're going to see buyers stepping
00:05in. I mean, right now you can get 5% for 10 years. That's not a bad deal in the
00:10US.
00:11The second thing is, the higher those yields go, the greater the risk that you see an impact on
00:19growth. And so there is a self-leveling mechanism there where at some point, if you go to 6%
00:25or 7%,
00:25let's say, you need to start talking about recession. And at that point, what do you own?
00:33Well, you probably want to own treasuries rather than anything else. And the last potential trigger
00:38would be some change in narrative around AI, of course.
00:43I thought Jack and Miller's comments to Piper Sander to an event that they hosted about US borrowing
00:49costs remaining a little low was interesting because there is also in the background a sense
00:55of whether it's the kind of markets versus the US Treasury.
00:58Yeah, there is definitely that. And I think Scott Besson may have overplayed his hand by sort of
01:04tempting the market and say, you know, test me if you want, because the market is going to test him.
01:09And the market will do so until proven wrong, so to speak. And so that's the risk for the time
01:17being,
01:17this family fight, so to speak, between the Fed as well as the Treasury and markets. And that is going
01:25to keep yield elevated for now, unless we have maybe next week a much stronger message coming from the Fed.
01:33What do you think happens actually with Yen? I mean, I thought it was quite brave, maybe a little bit
01:38unconscious, you know, for the Treasury Secretary to say, basically saying, I'm the house, test me.
01:43Yeah.
01:43I mean, the house limits, which he doesn't.
01:46Well, I think, again, the market will want to test that claim and see if it really means it.
01:53So I think you're going to see you're going to see some repositioning initially, because that's that's a new
01:58information that we need to incorporate in the price. But beyond that, I think we're going to see further
02:05tests of this claim. And so I think it's going to be a volatile time for for for the pair,
02:12for the currency pair.
02:13Is the stress actually going to be felt in Europe? And we saw that with French bonds yesterday under quite
02:18a bit of
02:19pressure, the spread between OAT and bundt yields, the 30 year gilt yields also close to six percent is actually
02:26are we not paying enough attention to those?
02:29Well, unfortunately, I think Europe is always stuck between a rock and a hard place.
02:34And I think this time around, it's going to be it's going to be the same.
02:37The the elevated oil prices has a much more a much bigger impact on Europe.
02:43The deficit situation in Europe is probably worse than in the US in some respect, at least in some
02:49countries. You also have a bigger political uncertainty. I'm not saying that the political
02:53landscape in the US is clear, but it's it's even more difficult in Europe. You think about the
03:00situation in Germany, the situation in France. So we do think that this is another potential stress
03:08point for for markets. And yeah, we would be more concerned potentially about European yields than the
03:15U.S. here at this stage.
03:16Yeah, I'm amazed. Actually, I'm stunned at the fact that it's we're in a sweet spot.
03:21Equities are higher. Oil after all of the concerns we had is fine. Like, is there what do you think
03:27we're misunderstanding? Is this like as good as it gets? Is it just the capex spending when it comes to
03:33hyperscalers and AI just propping everything up?
03:36Yeah, I think I think that's that's the key. AI is the key. AI is the key for U.S.
03:41growth and global
03:42growth. AI is the key for the bond market. And of course, AI is the key for equity market. So
03:48a lot
03:49rests on whether the AI trade continues and the narrative remains quite optimistic about that. So
03:56is it the gold deal? Definitely not, because it is very concentrated around one specific narrative
04:02and the risk is that if that narrative turns, everything turns. But for as long as this narrative
04:07continues, I don't think we should necessarily be too worried about that. It is unbalanced and
04:12and it is going to be problematic at some point. I don't think it's going to be problematic just yet.
04:17And there's there's no reason for those people to say anything other than AI is great with pending IPOs,
04:24let's say. And midterms. I know that it's unpredictable and it's politics. But I suppose,
04:31how do you think about it in markets? I mean, this $5,000 check that idea that was revived by
04:36President Trump. I mean, when I was in the U.S. last week, I was asking some people about whether
04:41that
04:41check idea would return and then it did. How would markets react to that if that were a reality?
04:48Republican lawmakers seem quite cool on it. But think about it if it were to happen.
04:55No, it would it would be. I don't know if that's the right word, but close to a disaster,
04:59because at a time where markets are very focused on the risk of inflation, giving an extra $5,000 to
05:07everyone is not going to help. And when more time when markets are worried about deficits,
05:12spending another trillion, trillion and a half is not something that they will welcome either.
05:17So I think I think is is a is a pretty bad idea. And I don't think is going to
05:23happen. I mean,
05:23I think people are still awaiting their tariff dividends at this stage. So look, it's it's it's
05:31politics. It's a campaign. So why not? I don't and I hope that's not going to materialize because that
05:37could actually be problematic for for markets.
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