I expressed my thoughts on what Scott Bessent & Co announced yesterday so don’t have much to add here but of course watching to see what the follow through is both in the US Treasury market and the US dollar. As I see the buyback as nothing more than what FX intervention brings, a temporary respite, I don’t think it works without a coincident fundamental change in the situation, which there currently isn’t. I wonder what bazooka gets pulled out next if I’m right. The next problem for Treasury would be caused by another rise in inflation expectations in the TIPS market as that would be tough to contain without Fed rate hikes which would now be even more expensive for the Treasury with the increase in T-bill issuance. As for the US dollar today, it’s down again to a 3 month low and gold is at the highest level since early June. We stay positive and long on gold. The 10 yr Treasury yield is basically back to where it was yesterday morning before the news hit at 4.69%.
I’ll say again, what a box we are in.
DXY
I repeat my belief that with respect to inflation, we’re in a commodity bull market that will be followed by ag prices soon. The Bloomberg agriculture index yesterday broke out to the highest level since May 2024. Included in this index is coffee, corn, wheat, soybeans, soybean oil/meal, cotton, and sugar.
We’re long some fertilizer stocks as a play on this. Corn in particular is back above $5 per bushel and wheat is back to $7.
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