The long end
Monday, August 17: the 30-year Treasury yield printed 5.31 percent, the highest since 2007. Tuesday: 5.33 percent. The same week the national debt crossed 40 trillion dollars.
Wednesday, August 19, forty-eight hours after the first print: Treasury announced it would at least double its buybacks of 10 to 30-year bonds, from 2 billion to at least 4 billion dollars per operation, running September 9 through November 4. The buybacks are funded by issuing bills. Long bonds come out of the market, short paper goes in. That is duration being taken out of private hands, whatever it is called.
Thursday morning the relief was gone. The 10-year was back above 4.70 percent, from 4.64 the day before. Thursday afternoon the Treasury Secretary said on television that the operations "could be more than 4 billion per issue." The escalation came before the program started.
Why the long end, and why now: a 5.3 percent long bond is a 7 percent mortgage and a refinancing wall for every company that borrowed at 3. Those are the two places the bond market shows up in a household's life and a CFO's, and both are being held down with a program that has an end date.
The yen
In late July the United States and Japan intervened together to support the yen, the first coordinated operation in roughly three decades. The interesting part is not the intervention. It is how Japan raised the dollars: not by selling its Treasuries, but by pledging them at the Fed's repo facility and borrowing against them, with Washington's encouragement. Treasury has since asked the Fed to make that facility larger.
Read it from both sides. Japan gets dollars without dumping bonds into a market Treasury is trying to hold up. Treasury gets no forced seller in the long end during the weeks it is buying. Friendly balance sheets, lent to each other, against the same collateral.
A reserve manager anywhere else watching this learns what a Treasury holding is for under stress: it is collateral you are encouraged to borrow against and discouraged from selling, at the moment you most want to sell it.
Beef
Friday, August 21: up to 300,000 metric tons of imported ground beef allowed in outside tariff quotas for 90 days, to be sold at "25 percent below current market prices." Ground beef hit a record 6.89 dollars a pound in July. The United States herd is 86.7 million head, the smallest since 1951.
Americans eat about 56 pounds of beef a head a year by USDA's 2025 estimate, roughly 19 billion pounds or 8.7 million metric tons; ninety days of that is about 2.2 million tons. Three hundred thousand tons dropped into that window at a mandated discount is about 14 percent of the beef eaten in it, and a much larger share of ground beef specifically, so it will move the retail price for a quarter. What it does to the herd is the other half: when the price is held down at a seventy-five-year low in cattle, ranchers keep fewer heifers, and the rebuild that the price was signaling gets slower. The cattlemen's association said it "creates chaos at a critical time of the year for American cattle producers, while doing nothing to lower grocery store prices." Ninety days from August 21 is about November 19.
The gauge
September 30: the Bureau of Economic Analysis changes how it prices three components of the PCE index, the Fed's preferred inflation measure, retroactive to 2021. Goldman estimates core PCE reads about 0.2 points lower after the change. The number being rationed here is the measurement itself.
What was not rationed
In the same two days the buybacks were announced and escalated: gold up 14 percent on the month, silver up 9, gold miners up 15, Bitcoin up 20 percent on the week. Long bonds fell. The indices went nowhere.
That is not a market that believes the long end got capped. It is money leaving the system that does the capping, for the assets that have no counterparty and no facility. When price is held, trust moves somewhere price still floats.
In his own words
Two years before he ran any of this, the current Treasury Secretary described it from the other side of the desk, on a podcast, October 2023:
"There is clearly a slow-motion de-dollarization going on, but could the initial stages be a dollar rally, because companies, countries are paying back their dollar debt. So there's a dollar thirst before there's a dollar boycott."
"All of this debt swirling around the system, one as an investor should be thinking about the preservation of purchasing power almost above all. I'm a long-term believer in gold and a distrust of the central banks."
On Russia's frozen reserves:
"The mistake the Russians made was they moved out of dollars into euros. If the Russians had moved entirely into gold, price would be higher, but they would have all their reserves in Moscow."
And the method:
"Sequencing is very important in macro."
No comment is needed. The dates are the comment.
The calendar
- September 9 Buybacks begin.
- September 30 The inflation gauge changes.
- November 3 Midterm elections.
- November 4 Buybacks end.
- About November 19 The beef window closes.
Each of these is a price being held rather than a cause being fixed, and each has an end date inside the same ten weeks. The can is being kicked, and the can is priced in gold.
What to do with it is not complicated. Rationing holds until it does not, and while it holds, the assets it is holding up go up; the record on this site has been long the things that float and harvesting into strength, and that does not change on a date. What changes the posture is the first day the long end re-breaks its August high with the buybacks running. Until then, the tape is the tape.
Turmoil is where the work is. Nobody compounds anything when everything is smooth.