Super-Macro Management

Oil is up roughly 12% over the past week, hitting a US economy already at full capacity, 4.1% unemployment and payrolls averaging 106,000 a month. That's the kind of shock that turns into services and core inflation rather than fading on its own. Fed funds futures already price an 87% chance of a hike this week. The real question is what happens to the other 75 basis points still priced in after that.
The other supposed backstop already cracked. Bessent had promised to at least double the Treasury's bond buybacks, with the street expecting 5 to 7.5 billion. The first operation only spent 3.6 billion against 10.5 billion of bonds dealers offered, because Bessent wouldn't pay up for the rest. The 30 year yield broke through 5% anyway, and the 10 year touched a level it hasn't held since 2007.
Jonny sits down with Andy Constan, founder and chief investment officer of Damped Spring Advisors and his former boss at Salomon Brothers, to unpack why the sell-off has further to run, why Treasury's own supply games matter more than talk of QE, and why he thinks the real fault line is the private credit funding the AI buildout, not the bond market.
In this episode:
Oil up around 12% last week, landing on an economy at 4.1% unemployment and 106,000 average monthly job growth
Treasury's buyback boost landing at 3.6 billion spent against 10.5 billion of bonds on offer
The 30 year yield through 5% for the first time in years, the 10 year testing a level not held since 2007
An 87% priced chance of a hike this week, and what happens to the other 75 basis points priced in after that
Term premium on the 10 year at 90 basis points, up from minus 50 in the 2020 bubble
Why long dated TIPS look like the better trade than nominal Treasuries right now
Every major bond deal funding the AI buildout, an 80 billion Google raise included, still trading underwater
Jonny has spent 25 years trading macro at the highest institutional level. This is not retail speculation or headline chasing. It is rigorous, independent analysis from someone who has sat at the table.
New to SuperMacro?
Get 30 days of our Daily Note entirely free at www.super-macro.com
0:00 Intro: this week's G7 bond sell-off and rate repricing
0:58 No Elvis this week, and introducing guest Andy Constan
1:55 The three forces behind the sell-off: fiscal, inflation, and hyperscaler issuance
4:46 Oil up 12%, landing on an economy already at full capacity
6:18 The CPI print, and why PCE inflation isn't getting to target this year
7:24 Treasury's underwhelming buyback announcement
9:11 Inside the first buyback operation: 10.5 billion offered, 3.6 billion spent
10:32 The ECB's hawkish meeting, and why the Fed can't afford to lag behind
11:58 The 10 year touching 5% for the first time since 2007
12:23 The 30 year through its cap, and how high it could still go
13:58 How much hiking is priced into the UK, eurozone and US
16:13 Why current yields aren't as extreme as they look against nominal GDP growth
19:04 Andy Constan: why the Fed has boxed itself into a corner
23:24 How much of the global hiking cycle is already priced in
25:14 Why the dot plot probably won't match what's priced into the curve
27:25 What actually moves the long end: growth and inflation expectations, not supply
28:20 Term premium then and now, and the case for long dated TIPS
30:23 Treasury's buybacks, the November refunding deadline, and Bessent's Yellen U-turn
37:06 The hedge: foreign stocks, gold, and a short dollar
38:10 Why equity valuations hinge on earnings expectations that may not hold
42:51 Every major AI-linked bond deal still trading underwater

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There is a generation of bond traders who have never seen yields this high, levels they would have dreamt of five years ago. The US deficit is running at 5.5 to 6% of GDP with the economy nowhere near a recession, and there is no political will in sight to fix it. That combination alone isn't the buy signal it looks like.
Two live risks sit in front of this call. Wednesday brings the Treasury's buyback announcement, and Bessent has already said he will at least double the size, with room to go further. Friday brings the CPI print that Fed chair Kevin Warsh has effectively staked his credibility on, after reversing from downplaying inflation in July to calling the 2% target non negotiable at Jackson Hole.
Elvis sits down with veteran macro trader Jonny Matthews, 25 years of institutional experience at Brevan Howard and Citigroup, to unpack why he isn't rushing to buy bonds despite the highest yields in a generation, what August's payrolls really mean for the Fed, and why Japan's own hawkish pivot is a warning against betting on long yields falling.
In this episode:
Why elevated yields reflect strength as much as strain, and the three forces, inflation, fiscal discipline and corporate supply, keeping them there
The US deficit at 5.5 to 6% of GDP, with next to no political will to close it
Nominal GDP running near 8%, and why Treasury yields still have catching up to do
August's payrolls: a 106,000 six month average against the 30,000 to 35,000 needed just to hold unemployment steady
Why the case for rent disinflation may already be stalling, against Fed governor Waller's dovish read
PCE inflation above target for 64 straight months, with services alone contributing 2.5 percentage points
Why the Fed's September decision now hinges almost entirely on Friday's CPI print
What Japan's hawkish pivot did to its yield curve, and why it's a warning against being short long bonds
Jonny has spent 25 years trading macro at the highest institutional level. This is not retail speculation or headline chasing. It is rigorous, independent analysis from someone who has sat at the table.
New to SuperMacro?
Get 30 days of our Daily Note entirely free at www.super-macro.com
0:00 Intro: do we buy bonds
0:51 The framing question, and why high yields alone don't mean buy
1:19 The three forces keeping yields elevated: inflation, fiscal discipline, corporate supply
2:50 Why higher yields reflect strength, not a debt doom loop
3:17 The deficit and debt to GDP since Clinton, the GFC and the pandemic
4:19 The 5.5 to 6% deficit, and why there's no political will to close it
4:54 Nominal GDP against the ten year yield, and the catching up still to do
6:32 Interest costs creeping from 3.5% to 4.5% of GDP
8:02 Entitlement spending, and Europe's worse position
9:44 This week's risks: Wednesday's buyback announcement and Friday's CPI
11:17 The yen, the BOJ's hawkish pivot, and Bessent's swap facility theory
13:12 Nonfarm payrolls: the call that played out, and cyclical versus non-cyclical jobs
15:08 The 106,000 six month average, and what it means for unemployment
17:31 PCE inflation, Warsh's reversal since Jackson Hole, and 64 months above target
20:31 Break even inflation at 2.4%, and the Fed's single data point trap
22:10 Waller's dovish dissent, and why rent disinflation may already be stalling
24:04 What Japan's yield curve just did, and why it's a warning on short bonds
26:01 Wrap up: still cautious, and the trade into September

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US interest costs have quietly climbed to around 18% of tax revenues, up from about 5% not long ago. At Jackson Hole, Fed chair Kevin Warsh delivered what looked like a near 180 degree hawkish pivot from his July meeting, sending the two year yield up 11 basis points in a day. The long end barely moved.

Jonny thinks the pivot has less to do with inflation than pressure from the Treasury. Scott Bessent has been doubling bond buybacks and hinting at drawing on the $950 billion TGA to support long dated debt, and the two men meet weekly. A short end hike buys Bessent room to defend the long end without spending the Treasury's own firepower.

Elvis sits down with veteran macro trader Jonny Matthews, 25 years of institutional experience at Brevan Howard and Citigroup, to unpack why the long end didn't budge despite the hawkish pivot, what a September hike really says about debt sustainability, and why he still likes gold and short bonds as the trade.

In this episode:

Warsh's near 180 degree reversal, from downplaying inflation in July to calling 2% a "firm fixed target" at Jackson Hole

The two year yield jumping 11 basis points on the day, while the long end stayed exactly where it was

Fed funds futures pricing close to 90% odds of a September hike, up from around 60% before the speech

Why Jonny expects Friday's payrolls to beat the 55,000 consensus, after a seasonal 50,000 drop in government jobs last month

The 30 year Treasury yield at 5.25%, driven mostly by rising real yields rather than inflation

Break even inflation at 2.4%, up from a well anchored 2%, a sign of fiscal risk over price risk

Why shifting issuance to the short end risks repeating what happened in Turkey's bond market

Interest costs near 18% of tax revenues, and why debt sustainability is now a G7 wide problem, not just a US one

Jonny has spent 25 years trading macro at the highest institutional level. This is not retail speculation or headline chasing. It is rigorous, independent analysis from someone who has sat at the table.

New to SuperMacro?

Get 30 days of our Daily Note entirely free at www.super-macro.com

0:00 Intro: did Warsh just kill the debasement trade

0:50 Warsh's hawkish pivot at Jackson Hole, and the 180 from July

1:53 Bessent's TGA hint, the doubled buybacks, and mixed signals from the Fed

3:17 The political trade off: a short end hike to save the long end

3:54 Line by line: what changed between July and Jackson Hole

6:04 Why short term rates are a blunter tool than they used to be

7:18 The labour market case: stable claims and the high frequency data

9:19 Why Jonny expects Friday's payrolls to beat the 55,000 consensus

11:12 The committee split, and fed funds futures pricing near 90% odds of a hike

13:36 December's dot dispersion, and whether it's one hike or two

14:24 Can the economy handle a 50 basis point hike

16:17 Why hiking still won't bring the long end down

17:01 The real driver of long yields: debt sustainability, not inflation

18:11 Break even inflation at 2.4%, and the purchasing power problem

21:27 Shifting issuance to the short end, and what happened when Turkey tried it

23:44 The chart showing fed funds and the 10 year yield decoupling

24:40 Borrower or lender: the devaluation bet, and the trade Jonny holds

28:14 Wrap up: interest costs at 18% of tax revenues, and the G7 wide problem

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The US national debt passed $40 trillion last week. Scott Bessent's response was to double the Treasury's bond buybacks, from $2 billion a time to $4 billion. Against $5.6 trillion of debt maturing in the 10 to 30 year bucket alone, that is roughly $100 billion a year, a fraction of what is actually coming due.

Elsewhere, Bessent has sold euros to buy yen to stop Japan selling Treasuries, tapped the TGA to help fund the buybacks, and signalled in the August refunding statement that future issuance will lean towards bills rather than long bonds. Each move buys time. None of them fixes the underlying arithmetic.

Elvis sits down with veteran macro trader Jonny Matthews, 25 years of institutional experience at Brevan Howard and Citigroup, to unpack why Bessent's interventions are too small to move the market, what shifting issuance to the short end actually risks, and why he still expects yields to go higher.

In this episode:
The $40 trillion debt milestone, and why Bessent's "publicly traded" caveat is disingenuous
Treasury buybacks doubling to $4 billion a time, still a drop in the ocean against $5.6 trillion maturing in the 10 to 30 year bucket
The TGA explained: the Treasury's checking account at the Fed, currently around $1 trillion
Why the yen intervention and swap facility increase is not QE, whatever it looks like
The August refunding statement's hint that long bond issuance is capped, with funding shifting to the short end
Fiscal dominance, and how short dated debt makes the Treasury hostage to the Fed's rate decisions
Mandatory spending rising from 14.2% to 15.5% of GDP by 2036, with interest expense following from 3.3% to 4.6%
The 30 year Treasury yield at 5.24%, and why the Volcker disinflation shows yields can stay high long after inflation falls

Jonny has spent 25 years trading macro at the highest institutional level. This is not retail speculation or headline chasing. It is rigorous, independent analysis from someone who has sat at the table.

New to SuperMacro?
Get 30 days of our Daily Note entirely free at www.super-macro.com

0:00 Intro: last week's Treasury sell-off and the $40 trillion debt milestone
1:23 Bessent's response, and why it's more smoke and mirrors
2:36 Clip: Bessent on the $40 trillion mark, and why "publicly traded" debt is misleading
5:11 US debt to GDP against Italy and Japan
6:27 Mandatory spending and interest costs rising to 2036
7:42 The yen intervention and the swap facility
8:13 Treasury buybacks: $4 billion a time against $5.6 trillion maturing
10:12 The TGA explained
12:31 Shifting issuance to the short end, and the refunding statement's hidden signal
14:17 Where this goes wrong: debt monetisation and fiscal dominance
16:16 Yield curve control despite a strong economy
18:32 Other levers: bank regulation, the GSEs, and shrinking foreign demand
20:20 Is the dollar's reserve status in question
21:36 A crowded field: global sovereign yields at multi-year highs
23:14 Midterms, entitlement reform, and the UK's Liz Truss playbook
24:50 30 year yields against CPI since Volcker
26:49 Can the US afford to stay in Iran, or walk away
29:02 Wrap up and where to find the Daily Note Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com
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The data all pointed one way last week. Payrolls missed, CPI and PPI came in benign, retail sales underwhelmed across every single aggregate. Sovereign bonds caught a bid, then sold off almost immediately. When bonds cannot rally on their own good news, the problem is not the data.

The US interest bill has now overtaken the defence bill. Niall Ferguson's law says any great power that spends more on debt servicing than defence risks ceasing to be a great power, and the US is running a deficit of 5.5 to 6% at full employment with unemployment at 4.1%. There is no reform coming, in any G7 country, because nobody is going to vote for it.

Elvis sits down with veteran macro trader Jonny Matthews, 25 years of institutional experience at Brevan Howard and Citigroup, to work through why the long end sold off into weak data, what the deficit does when the economy finally turns, and why he is still short treasuries.

In this episode:

Why sovereign bonds sold off into a weak payrolls print, benign inflation and soft retail sales

G7 debt to GDP ratios, and the US on track to pass Italy from over 120%

Japan cutting 220% to 200% with no reform at all, just nominal GDP running above the interest rate

A 6% deficit at full employment, and where it goes in even a mild recession

Ferguson's law: the interest bill has passed the defence bill, and neither one is coming down

AI capex arriving in the bond market as a new and very large competing issuer

Ten years of long dated treasury total return below zero while CPI rose 40 to 45%, and what that does to the 60/40

Why TIPS at 2.4% on the ten year and 3% on the thirty look like the better bet

4.5% on the ten year and 5% on the thirty now acting as a floor rather than a ceiling

Jonny has spent 25 years trading macro at the highest institutional level. This is not retail speculation or headline chasing. It is rigorous, independent analysis from someone who has sat at the table.

New to SuperMacro?

Get 30 days of our Daily Note entirely free at www.super-macro.com

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