Besant’s remarks are over. Tonight’s speech, in terms of how | Cato_KT on Binance Square

Post

--

Besant’s remarks are over. Tonight’s speech, in terms of how binding it is on the bond market, is very limited. As mentioned earlier, of the scenarios described, only the last one appeared—the most useless of them all: emphasizing U.S. economic resilience + shifting the bond-market problem to the Middle East.

On the other hand, the fiscal consolidation plan did not provide an immediate, actionable answer. The market’s real concerns—whether Besant is increasing the expected share buyback amounts and reducing long-term bond issuance—were also not given clear guidance.

Judging by the market reaction as well, tonight Besant’s speech was basically ineffective in terms of intervention in the bond market. Of course, whether the Besant policy is truly ineffective cannot be confirmed 100% yet.

For one thing, energy prices rebound in the short term, and inflation pressure could push yields on the long-end higher, potentially offsetting bond-market effects. For another, rate hikes have not been implemented yet, and whether there will be rate hikes in the future remains uncertain—so the bond market has not yet priced this in clearly.

Next, the pressure shifts to Waller: we’ll see the dot plot tomorrow and how Waller explains this rate hike and whether there will be more in the future. At present, with bond yields elevated, both the Fed and Besant have limited room to maneuver.

However, it’s not all without benefits. The bond market’s crisis may force Trump to compromise on the Iran issue, which could ease energy prices. And right now, the only short-term “correct solution” for the bond market is a pullback in energy prices!#美联储加息是否已成定局

Cato_KT

·

--

Let’s talk about the US 10-year Treasury again: can tonight’s hearing by Bessent resolve the Fed’s policy dilemma?

With the 10-year Treasury yield firmly settling above 5%, before the rate hikes are confirmed, any rise in bond prices as a result of yield being repriced ahead of tightening—due to rate-hike expectations—is a normal phenomenon. The key question is: after rate hikes are confirmed, where will the bond market go?

If, after the September FOMC meeting, the Fed does not release any signal of further rate hikes—meaning it is a dovish hike—then it will be difficult to suppress the rise in both short- and long-end yields.

Because the 10-year Treasury yield still faces relatively hard-to-compress term premium in the near term, driven by inflation risk premia associated with expectations of maintaining high interest rates and high oil prices.

But if it releases a signal of further rate hikes—i.e., a hawkish hike—then the 2-year yield could surge too fast. The 10-year yield may stabilize or even pull back; a rapid flattening between the 2-year and 10-year yields would push the market into a “bear flattener” phase. After a bear flattener comes inversion—meaning banks are under pressure, and this becomes a phase where financial and economic risks are exposed.

So for Waller, although his role is only to manage short-end rate controls in coordination, facing a dilemma like this means the Fed has already been trapped in a policy two-way bind. The difficulty of getting the timing and intensity right is high, and the risks are greater.

Therefore, the weight of tonight’s Bessent hearing is undoubtedly higher, because the impact of Bessent’s remarks will determine tomorrow’s room for Waller’s policy maneuvers. In my view, here are the key points to focus on tonight’s remarks:

1) Whether there are comments about expanding the scale and frequency of long-term Treasury repo operations—especially if the expectation for each repo amount of 6 billion is raised again. This would be a direct positive for the bond market.

2) Whether there are key remarks about controlling the pace of growth in long-term Treasury issuance—this would directly affect supply-demand balance, and would also be a direct positive for the bond market.

3) Whether they emphasize fiscal discipline and a path toward a declining deficit—this would be a marginal positive for the bond market, but the impact would be weaker than the first two.

4) Whether they only say that the Treasury market is stable and demand is strong—this is the weakest option and would basically have no meaningful effect on the bond market.

However, it’s important to note that while Bessent’s remarks tonight can influence long-end yields, it will be difficult to single-handedly knock down the 10-year Treasury yield. That’s a key risk point. If, after Bessent’s speech, the 10-year Treasury yield continues to hold steady and maintain its trend, then the hard problem will have to be handed to Waller tomorrow! #美联储加息是否已成定局

Disclaimer: Includes third-party opinions. No advice. Binance AI may be used without guarantee. See T&Cs.