Tough Road Ahead
The trend is US treasury auctions have shown that the government is still very comfortably getting the money it needs from lenders to fund its operations but what is clear is that these auctions have become increasingly expensive. Bond buyers are still massively US hedge funds and entities while foreign central banks have eased their purchases.
What I see is, contrary to what Fed Chair Warsh has been saying, he would be forced by the markets (bond vigilantes) to continue increasing the Fed Balance sheet.
Finally, the recent surge in yields or bond sell off hasn’t really been priced in by the stock market and other risky markets. My theory is that they seem to be holding off seeking equities massively as they anticipate the Trump admin may finally capitulate on Iran and quenching higher inflation fears. No matter what, the bond market has already made the first move as always.