00:00Would it be a mistake then, as Torsten Slock suggested he should do, to have this Fed chair give something
00:05of a policy speech that is hawkish, in order to, again, establish his inflation-fighting credentials?
00:10So, I think you should argue that, yes, we are going to fight inflation. We are going to fight inflation
00:14very strongly. We hate inflation. Inflation's bad. But let's measure inflation correctly. And that, to me, I guess, is the
00:20big disconnect, right?
00:21If we look at various measures of inflation, I think, again, this data task force, I think...
00:25You know why I'm smiling, Pete, because he doesn't have the luxury of making that speech today.
00:28I know he doesn't.
00:29This is an unforgiving bond market.
00:31Again, how far is it going to go? If you get to, what, 5% on 10s, everyone's going to
00:34go, you know what, we will buy 10s.
00:35So, again, I don't think this is a bodge vigilante thing. I think it's supply and demand. I think there
00:40are plenty of buyers at, you know, 5% on 10s.
00:42And, honestly, we saw buyers at 480. So, I don't think he actually runs that much risk of losing control.
00:48Can you explain where the shorts are coming from, then, on this Treasury market? Because they're elevated. They're not beyond
00:54any historical standard.
00:55But shorts do exist on the long end of this curve.
00:57So, one, I think, when you look at the hyperscaler issuance, right? So, they're coming out. A lot of hedge
01:01funds are along these, right?
01:02They look very cheap. I like them. I like owning them outright. But for a lot of hedge funds in
01:06particular, you're trying to take a spread bet.
01:08So, you will be short Treasuries against that. So, I think when you look at that Treasury short, you kind
01:12of have to pull out how much of this is people betting against Treasuries
01:16or how much of this people is running relative value money who are saying, I like credit spreads, so I'm
01:20comfortable taking Meta, Google, Alphabet credit spread risk.
01:24I don't want the rate risk, so I've got a hedge on. And that, to me, is a very different
01:28trade than being outright short.
01:29And I think that's what people are missing. And given the size, scope, and how much has been issued,
01:33there is a huge holding of these elongated spread bonds and the hedge fund community. And I think that explains
01:40much more of that.
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