The US national debt passed $40 trillion last week. Scott Bessent's response was to double the Treasury's bond buybacks, from $2 billion a time to $4 billion. Against $5.6 trillion of debt maturing in the 10 to 30 year bucket alone, that is roughly $100 billion a year, a fraction of what is actually coming due.
Elsewhere, Bessent has sold euros to buy yen to stop Japan selling Treasuries, tapped the TGA to help fund the buybacks, and signalled in the August refunding statement that future issuance will lean towards bills rather than long bonds. Each move buys time. None of them fixes the underlying arithmetic.
Elvis sits down with veteran macro trader Jonny Matthews, 25 years of institutional experience at Brevan Howard and Citigroup, to unpack why Bessent's interventions are too small to move the market, what shifting issuance to the short end actually risks, and why he still expects yields to go higher.
In this episode:
The $40 trillion debt milestone, and why Bessent's "publicly traded" caveat is disingenuous
Treasury buybacks doubling to $4 billion a time, still a drop in the ocean against $5.6 trillion maturing in the 10 to 30 year bucket
The TGA explained: the Treasury's checking account at the Fed, currently around $1 trillion
Why the yen intervention and swap facility increase is not QE, whatever it looks like
The August refunding statement's hint that long bond issuance is capped, with funding shifting to the short end
Fiscal dominance, and how short dated debt makes the Treasury hostage to the Fed's rate decisions
Mandatory spending rising from 14.2% to 15.5% of GDP by 2036, with interest expense following from 3.3% to 4.6%
The 30 year Treasury yield at 5.24%, and why the Volcker disinflation shows yields can stay high long after inflation falls
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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0:00 Intro: last week's Treasury sell-off and the $40 trillion debt milestone
1:23 Bessent's response, and why it's more smoke and mirrors
2:36 Clip: Bessent on the $40 trillion mark, and why "publicly traded" debt is misleading
5:11 US debt to GDP against Italy and Japan
6:27 Mandatory spending and interest costs rising to 2036
7:42 The yen intervention and the swap facility
8:13 Treasury buybacks: $4 billion a time against $5.6 trillion maturing
10:12 The TGA explained
12:31 Shifting issuance to the short end, and the refunding statement's hidden signal
14:17 Where this goes wrong: debt monetisation and fiscal dominance
16:16 Yield curve control despite a strong economy
18:32 Other levers: bank regulation, the GSEs, and shrinking foreign demand
20:20 Is the dollar's reserve status in question
21:36 A crowded field: global sovereign yields at multi-year highs
23:14 Midterms, entitlement reform, and the UK's Liz Truss playbook
24:50 30 year yields against CPI since Volcker
26:49 Can the US afford to stay in Iran, or walk away
29:02 Wrap up and where to find the Daily Note Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com
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