Asks for his take on the risk of foreign selling of US Treasuries.
Scarlet Fu
Russell Brownback
We are not near a solvency tipping point. $26T in private sector cash offsets mitigated foreign official demand. The yield curve is in equilibrium, but running massive deficits creates a vulnerability.
Asks if the US Treasury market could see a meltdown like Japan's due to fast money.
Scarlet Fu
Russell Brownback
The Japanese move was idiosyncratic, driven by forced unwinds of levered players. US market structure is different, with less supply at the long end relative to demand.
Asks if the steepener trade has more room to run.
Scarlet Fu
Russell Brownback
We think it does. The back end follows nominal GDP, the front end is anchored to policy. We expect a bull steepener led by the front end moving lower as the Fed delivers more rate cuts due to a productivity revolution, even with strong growth.
Asks what to expect from the Fed meeting.
Scarlet Fu
Russell Brownback
No policy change expected. The Fed will signal more about the productivity evolution enabling non-inflationary growth. Calls the current environment an 'income regime' to harvest yield, not make big directional bets.