This week the US Treasury announced that it would be doubling its bond buyback amount to USD 4 Billion per operation and the US 10 year yield fell 10bps before reversing to end back up at 4.74%, its highest rate since a spike 3 years ago, caused by the FED’s Quantitative Tightening. Before that, it was last at the yield just before the GFC in 2007.
Treasury’s FX operations with Japan haven’t had too much success either. USD/YEN at 159.00, down from 164.00, a rate that hasn’t been seen since 1987.
These policy failures have fully focused investors on fiat currency debt spirals with non-sovereign assets jumping in the last three days. Gold up 12% and Bitcoin up 24%.
Andy Burnham, the UK’s unelected Prime Minister, must be pleased to be under the radar as UK debt-to-GDP hits 100% at 3 trillion pounds. With GDP growing at only 1.2% per annum, CPI at 2.6% annualised and a budget deficit at 4% of GDP, there would seem to be no way out of the balance of payments problems the country has been fighting for years.
Markets haven’t been looking at the UK since Liz Truss and Kwasi Kwarteng blew up the gilts market (10 year yield up 125bps in a week and Sterling down 8% in a day) after introducing fiscally irresponsible legislation. They both exited parliament very shortly afterwards.
The crisis began immediately after Chancellor Kwasi Kwarteng delivered his mini-budget (the “Growth Plan”) on September 23, 2022. The resulting severe dysfunction forced emergency intervention by the Bank of England over the following days and weeks.
Who will last longer: Liz Truss or the lettuce? The lettuce lasted longer. Former UK Prime Minister Liz Truss resigned after 45 days in office in October 2022, while an unrefrigerated iceberg lettuce livestreamed by the British tabloid [The Daily Star] remained fresh enough to win the contest.
A lettuce in the current heatwave won’t last long.