It was important to hear from Scott Bessent immediately after Wednesday’s news to give us his thoughts on why he did what he did. In an interview with Sara Eisen on CNBC an initial reason he gave was the illiquidity in the back end of the Treasury curve, particularly with it being August. Leaving aside whether that’s correct or not, I’d argue instead that retiring supply on the long end will make the market even more illiquid. He rightly called out what the true fix is and that is ‘fiscal consolidation’ as he called it but I think you and me both believe there is zero chance of anything happening with that with Congress, especially in an election year. To me it’s clear that Bessent decided to draw a line in the sand with rates at around 4.75% but the problem is he picked a fight with an entity much bigger than Treasury, that being the market. And in that fight, he just doesn’t have the tools nor the printing press that the Fed does. It is something the market believes, I think, and why it has pushed back against what he did with rates back to where they were just before the announcement. I will finish with this though, the Federal Reserve over the past 30 yrs plus has been the ultimate market manipulator so what Scott Bessent is doing, compared to all the experiments to bully rates and influence the stock market over the years that the Fed has done, is peanuts.
The US dollar index by the way is at a fresh 3 month low while gold is back above $4,600.
I forgot to mention yesterday the updated container price data and they continue to jump. The Shanghai to NY trip for a 40 foot container was higher by another 9.2% w/o/w, by $801 to $9,507 with water issues at the Panama Canal a factor. It was at $2,771 in the last week of February. To LA, the price rose 8.9% w/o/w to $6,802. While prices have doubled since late February to Rotterdam, prices from Shanghai fell for the 6th straight month because of its different route.
WCI Shanghai to NY
At least from a macro level, Walmart is probably the best earnings call read. From them of note and where I bolded the most relevant:
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