Scott Bessent 'May Have Overplayed His Hand'

0:00 I think a couple of things could stop it at first. The fact that you're going to see buyers stepping in. I mean, right now you can get 5% for ten years. That's not that's not a bad deal in the US. The second thing is you the higher those yields go, the greater the risk that you see an impact on gross. And so there is a self leveling mechanism there where at some point, you know, if you go to 6 or 7%, let's say you, you need to start talking about recession.

0:30 and at that point, what do you, what do you own. Well, you probably want to own treasuries rather than anything else. And the last potential trigger would be a some change in narrative around the I. Of course. Mhm. I thought Druckenmiller comments to Piper Sandler to an event that they hosted about us borrowing costs remaining a little low. What was interesting because there is also in the background a sense of whether it's the kind of markets versus the U.S.

0:57 Treasury. Yeah, there's definitely that. And I think, Scott Benson may have overplayed his hand by sort of pointing the markets and say, you know, test me if you want, because the market is going to test him and, the market will will do so until, proven wrong, so to speak. And so that that's the risk for the time being. This, this, family fight to go between. So they're speaking between the fed as well as the Treasury and markets, and that is going to keep you elevated, for now, unless we have maybe next, next week, a much stronger message coming from the fed. What do you think happens, actually with yen. I mean, I thought it was quite brave, maybe a little bit unconscious, you know, for the Treasury secretary to say, basically saying, the House test. Me.

1:43 Yeah. I mean, the House limits, which he doesn't. Well, I think I think again, the market will want to test that claim and see if it really means it. so I think you're going to see you're going to see some repositioning initially because that's, that's a new information that we need to, incorporating the price. but beyond that, I think we're going to see further, tests of this, claim. And so I think it's going to be a volatile time for, for, for the pair for the currency pair. Is the stress actually going to be felt in Europe? we saw that with French bonds yesterday under quite a bit of pressure, the spread between 80 and but yields the 38 yields also close to 6% is actually are we not paying enough attention to those. Well unfortunately I think Europe is always stuck between a rock and a hard place.

2:34 And I think this time around it's going to be it's going to be the same. the, the elevated oil prices has a much more, a much bigger impact on Europe. the deficit situation in Europe is probably worse than in the US in some respects, at least, in some countries. You also have a bigger political uncertainty. I'm not saying that the political landscape in the US is, clear, but actually it's it's even more difficult in Europe if you think about the situation in Germany, the situation in France. so we do think that this is another, potential stress point for, for markets.

3:09 And yeah, we would be more concerned potentially about, European yields than, than us here at this stage. You know, I'm amazed actually. I'm stunned at the fact that it's we're in a sweet spot. Equities are higher. Oil, after all of the concerns we had is fine. Like is there? What do you think were misunderstanding? Is this, like, as good as it gets? Is it just the CapEx spending? When it comes to hyperscalers and I just propping everything up? Yeah, I think I think that's that's the key. I use the key.

3:39 I used the key for us. Gross and global gross. I used the key for, the bond market. and of course, I used the key for equity market. So a lot rests on whether, the I trade continues and the narrative remains quite optimistic about that. So, is it is it a Goldilocks? Definitely not. Because is is very concentrated around the one specific narrative. And the risk is that if that narrative turned, everything turns. but for as long as this narrative continues, I don't think we should necessarily be too worried about our. It is on balance, and it is going to be problematic at some point. I don't think is going to be problematic just yet. And there's there's no reason for those people to see anything other than I is great with, pending IPOs, let's say.

4:25 Mhm. midterms. I know that it's unpredictable and it's politics, but I suppose how do you think about it in markets? I mean, this $5,000 check that I did that was revived by President Trump. I mean, when I was in the US last week, I was asked some people about whether that check idea would return, and then it did. how would markets react to that if that were a reality? Republican lawmakers seem quite cool on it. But think about it.

4:53 If it were to happen. No, it would, it would be. I don't know if that's the right word, but close to a disaster. Because at a time where markets are very focused on the risk of, inflation, giving an extra 5000 to everyone is not going to help. and when Mark, at a time when the markets are worried about deficits, spending another trillion three and a half is not something that, they will welcome either. So I think I think is, is a is a pretty bad idea. and I don't think is going to happen. I mean, I think people are still awaiting their tariff dividends, at this stage.

5:28 So, look, it's it's it's politics. it's a campaign. So why not? I don't think I hope that it's not going to materialize because, could actually be problematic for for markets.