Etienne Note: YCC is Yield Curve Control, a central bank strategy to purchase bonds in a way that affects the yield curve.
The Fed is buying US Treasury bills (i.e short dated US government bonds) at a faster pace than during Covid.
- Covid: ~$320B
- Last 7 months: ~$290B
In just 7 months, the Fed has already bought almost as many Treasury bills as it did during Covid.
In other words, the Fed is printing money to buy UST bills, thereby suppressing yields... How long until they will implement YCC?
Etienne Note: Yields haven’t cooperated with the Fed’s bill-buying efforts. Long-term rates keep hitting new cycle highs.
Walter Bloomberg reported that the 30-year Treasury yield reached 5.29%, the highest since 2007, while trader Will O’Hara warned the long end could climb toward 5.40%, and potentially 6%, if oil prices keep rising.
According to Axios, the 30-year Treasury yield closed last week at 5.26%, the highest since June 2007, even as inflation reports came in benign. Analysts point to a mix of factors: a worsening federal deficit (the CBO just raised its 2026 deficit forecast to $2.1 trillion), corporate borrowing competing for capital amid the AI buildout, and uncertainty over Fed Chair Kevin Warsh’s departure from forward guidance.
Adding to the pressure, foreign demand for U.S. debt is also fading. Per MSN, Japan, the UK, and China, the three largest foreign holders of Treasuries, all reduced their holdings in June, with China’s stash falling to its lowest level since September 2008.
