Super-Macro Management

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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US payrolls fell by 23,000 in the latest print, with over 100,000 of downward revisions to the previous two months — and yet Treasury yields climbed. When bond markets rally on bad news and then give it all back, something deeper is going on.

 

Meanwhile, the much-publicised coordinated intervention to support the Japanese yen — complete with a conveniently photographed "buy yen" note on the Treasury Secretary's desk — may be far less than it appears. And with Japanese government bond yields hitting two-decade highs, the pressure on Tokyo is building fast.

 

Elvis sits down with veteran macro trader Jonny Matthews — 25 years of institutional experience at Brevan Howard and Citigroup — to unpack why the Treasury market shrugged off a weak jobs report, what the US–Japan yen intervention is really designed to achieve, and why the long end of the bond market in both countries is flashing red.

 

In this episode:

Why Treasury yields rose despite a negative payrolls print — and what a shrinking labour supply means for wages and inflation

The unemployment rate at a 13-month low of 4.1% even as jobs are lost — the retiring boomers and net-zero migration story the headlines miss

Bessent's "whatever it takes" moment: the leaked to-do list, the Exchange Stabilization Fund, and why this intervention is more theatre than firepower

 

Japan's high nominal GDP playbook — inflating away a 200% debt-to-GDP ratio while JGB yields hit two-decade highs — and the 1992 sterling lesson for anyone defending a currency

 

Why 4.5% on the 10-year and 5% on the 30-year now look like floors rather than ceilings — and the asymmetric risk around this week's CPI print ahead of September's Fed meeting

 

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

Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.