Aug 27·edited Aug 28Liked by Brent Donnelly

I’m arguing that the two largest foreign investors in American government debt, holding $2T of securities, are net sellers and your argument is that auctions have been solid. Ok…

Besides, I would expect auctions to be bid at these levels anyway for a technical bounce. I understand that inflection traders will be all over it too.

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Aug 26Liked by Brent Donnelly

Brilliant writing and analysis of the market as always. Thank you very much!

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Aug 26·edited Aug 26Liked by Brent Donnelly

“1. Yields are topping out as explained above. Techs and fundamentals align, IMO.”

Fundamentals don’t align at all.

– There is massive supply coming into the market, also from the two main foreign buyers, China and Japan;

– Then there’s much larger than expected long bond issuance from the Treasury that should soak up the market with a supply imbalance for the rest of the year. Banks aren’t buyers, they’re sellers, and long positioning is tilted towards small speculators and funds;

– If that wasn’t enough, the Fed is doing QT and has no plans to stop it any time soon.

Good luck with that double top, which could easily draw a handle for a cup and rip higher. Extreme bearishness about China is there, but solid bearishness is also there if you remove the froth, and irrationality can last. I wouldn’t expect the PBOC to refrain from supporting its currency by selling USTs because some trader has a subscription of the Economist and knows how to use it.

(“Nothing in the cross-asset scan suggests China is much different now than it was a few months ago”: lags; you know all about that. And there is a lot in economic data that suggest otherwise.)

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Aug 25Liked by Brent Donnelly

On Renaming Bonds: You did collect book suggestions on Twitter some time back, would be great if you could share them too, thanks very much!

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