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.
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