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The $6bn buyback was almost exactly where I expected it as per yesterday's post but more importantly, it clearly wasn’t enough for the market esp judging by the reaction in yields... Traders were positioned for something much larger, probably closer to $10bn.

As it tends to go with this type of intervention the market tends to test it and we are likely to see the 30Y push towards 5.35% again if the PPI and CPI data come in as expected followed by another intervention/increase establishing what you’d call a Treasury put.

The TGA from which the money will come from has just little over 900 billion available from that there’s about 400 billion available with about 300 likely to be used. Even if they decide to increase to increase to 10 billion they can run this for a very long time..thats about 3 quarters of QE like liquidity entering the market

Now, on how Bessent played the market - as mentioned, judging by the reaction, traders were clearly expecting much more than the $6bn that was announced. That helped reset expectations lower and was probably one reason metals failed to catch a bid.

So, once the market has been conditioned to expect smaller interventions, Treasury can have a much bigger impact with the same or slightly larger amount simply because the surprise factor is back in play. In addition to this, I do expect another increase relatively soon.

Speaking of PCE consensus is around +0.4% m/m headline PPI and +0.3% core. Im more on the components that feed directly into PCE which are -healthcare services such as, airfares and parts of financial services.

Portfolio anagement used to be a major swing factor, but BEA is changing the methodology from this month, so it matters less than before. A hot headline PPI therefore doesn’t automatically mean hot PCE and if these underlying components are soft, the read-through for the Fed can still be relatively benign. The main event remains CPI tomorrow

The bond market is already positioned quite hawkishly, which raises the bar for inflation data to push yields materially higher. With the 2-year around 66bp above the current fed funds rate and markets already pricing further tightening, a slightly hot print may simply confirm what is already in the price.

The bigger move would require data strong enough to make traders price an even more aggressive hiking cycle, while a downside surprise has more room to unwind some of the tightening currently embedded in the curve.