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PANDORA’S BOX
EVERYTHING GOT OUT. THE HOPE IS AT THE BOTTOM.
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THE ONE-WAY DOOR
The Treasury Started Buying Its Own Thirty Year Debt
Debt crossed forty trillion on Tuesday. On Wednesday the department that issues it doubled the size of what it buys back.
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The buyer and the borrower are the same office now. On Wednesday Treasury lifted the ceiling on repurchases of its own long dated debt. From two billion dollars to at least four. The selloff stopped that morning.
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Four billion is nothing. There are thirty two point two trillion dollars of this debt held by the public. Traders did not read it as a purchase. They read it as an answer to who is watching the long end.
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The timing was not subtle. Total federal debt passed forty trillion dollars on Tuesday. Ten years ago it was nineteen point four. Interest alone has run close to one point two trillion this year. Only Social Security and Medicare cost more.
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45 CENTS ON THE DOLLAR
FOR A THIRTY YEAR TREASURY ISSUED IN 2020
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It has twenty four years left to run. Somebody bought it at a hundred, and for most of those years it was the thing you were told to hold instead of stocks. |
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FROM OUTSIDE THE BOX
Editor’s Note: Jeff Brown and Marc Chaikin, two investment legends who picked Nvidia 10 years ago, are predicting that by the end of this month, Elon Musk’s new AI breakthrough will collide with a strange market pattern with a flawless 100% track record of massive market gains. Click here to see the details or read more below because the last time this happened everyday folks had a chance to turn $10,000 into as much as $350,000 in just about 12 months.
Dear Reader,
For the first time ever…
The two investment legends who picked Nvidia 10 years ago…
Are coming together to issue an urgent buy alert…
On this little-known Elon Musk supplier that’s perfectly positioned for what Nvidia’s CEO called…
Jeff Brown is a former tech executive who picked Nvidia in early 2016, before shares jumped as high as 36,000%.
Marc Chaikin is a 60-year Wall Street titan who’s worked with billionaires and hedge fund legends like Paul Tudor Jones, George Soros, and Steve Cohen.
Regards,
Lindsey Hough
Managing Director, Brownstone Research
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Here is the part that does not reverse. The Treasury cannot print. To fund a buyback it has to issue something else, and traders expect that something to be short bills. Long fixed cost goes out. Short floating cost comes in.
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Bills already make up twenty two point two percent of the stack. The department’s own advisory committee puts the ceiling near twenty. That committee wrote in July of last year that issuance, not buybacks, is the tool for managing the shape of the debt.
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Bessent made this exact argument in 2024. He accused Janet Yellen of putting her thumb on the scale to hide the cost of overspending. Her method was issuing more bills. His method is issuing more bills and buying back the long end as well.
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We graded this AJAR rather than CLOSING because four billion is a gesture, and a gesture can be withdrawn next month. What cannot be withdrawn is that the market has now seen who steps in. Warsh speaks at Jackson Hole next week. He has said he wanted an unfiltered price out of this market, and yesterday he stopped getting one.
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EVERY LEAD PASSES BEFORE IT RUNS
The One-Way-Door Test
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Can it be undone?
The buyback ceiling can go back to two billion next month. Forty trillion does not go back, and neither does a bond somebody bought at par.
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Who is already repositioning?
The dollar fell almost a percent on the announcement. Bills sit at twenty two percent of the stack against a twenty percent guideline.
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What does being late cost?
Thirty year mortgage rates sit near six and three quarter percent. Warsh speaks at Jackson Hole next week.
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THE MOVE · WHILE THERE IS STILL TIME
Find out what your bond fund actually owns. That forty five cent bond is not a thought experiment, it sits inside index funds that track the long end. Put two questions to your statement: what is the average maturity, and what did that sleeve actually return over five years. You are allowed to know both before Jackson Hole next week.
If Treasury drops the buyback ceiling back toward two billion, or the bill share falls under twenty percent, this reading weakens. We will say so. |
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ALSO GOT LOOSE TODAY
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Trump announced what he called economic warfare on Iran this morning and threatened consequences for countries that back it. The war reaches six months next week. |
POWER |
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The chief financial officer of OpenAI told staff the company will be public in 2027 or sooner. The private phase of this build has an end date on it now. |
MACHINES |
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The Senate Republicans’ campaign arm sent AI firms a private memo warning that data centers have turned politically toxic. The buildings are financed. The permits are annual. |
LAW |
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WHAT’S LEFT AT THE BOTTOM
Nvidia returns about half its free cash flow to shareholders, and quarterly free cash flow is up eighteen fold in three years. A company with that much room does not have to be right the first time. Neither do you. WE WATCH THE BOX.
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