What to know

• BNP Paribas warns unpredictable Treasury debt management is creating a 'K-shaped bond market' with risk of higher borrowing costs.
• Treasury buyback activity is too small relative to hyperscaler issuance to solve underlying problems—fundamental issues of deficit and credibility remain.
• Fed faces a credibility trap at Jackson Hole: addressing it requires more rate hikes than planned, or inaction allows bond selloff to continue.
• Long bond yields at 5.25% are appropriate for current growth conditions, not restrictive, as strong equities suggest markets expect growth to outweigh high rates.

“You can't fight the fundamentals. You can technically make some supply demand conditions for the short term. This has been tried before in bond markets in UK and Japan.”

Guneet Dhingra, Head of US Rates Strategy, BNP Paribas · Bloomberg Television · Aug 19

Guneet Dhingra Head of US Rates Strategy, BNP Paribas