Treasury Yields Poised to Move Higher
Treasury Secretary Bessent said that UAE and others in the region approached the U.S. about executing currency swaps, meaning the region has an appetite for Dollars, most likely needed to pay down Dollar-denominated debt. So if UAE and Saudi own approximately $280 billion in Treasuries combined and each needs Dollars to pay down debt, that suggests there is pressure to sell at least some of the $280 billion Treasury position.
How many other countries are sucking wind and considering selling Treasuries? Yields have to go higher. I’m sorry, whomever is in love with the 10YR at a 4-5% yield is a fool.
Heck, at this point I am hoping China will exert heavy pressure on Iran to open the Strait of Hormuz soon. If the U.S. starts dropping bombs on Iran, and if Iran in turn drops bombs on the UAE and Israel, oil could shoot from $100 to $200 in a week’s time or less. If the U.S. hammers Iranian oil production, it’s not as though that supply could be built up in a month. $10 gas at the pump does not sound like fun.
The U.S. is playing with fire, I’m not sure why. All we’ve done is drive the price of oil 50%+ higher while growing the fiscal deficit ($1.2 trillion YTD), which has only accelerated the Dollar’s decline. At this rate the USD won’t be the global reserve currency for much longer.
