Bond traders believe Bessent’s ‘band-aid’ was ‘a heinous financial crime’ | Fortune
Over four decades, Steve Hanke has pursued a worldwide quest to tame the hyperinflation that so frequently ravages developing nations. His solution: Tying their currencies to the U.S. dollar so their governments are no longer free to unleash an avalanche of currency to fund their giant overspending, at the expense of their citizens, who pay for the blowout in rocketing bills for rent, medicine, and groceries.
The professor of applied economics at Johns Hopkins University has advised governments across three continents—whether achieving straight “dollarization” or establishing Hong Kong-like currency boards that fix their monies to the greenback.
Now, the “Money Doctor” is making the most important house call of his career. Venezuela’s National Assembly has just named him special adviser on economic, monetary, and energy affairs, tasking him with curing hyperinflation now running at a 400% annual clip—the worst in the world—as the country tries to rebuild after the ouster of Nicolás Maduro. Hanke’s fix: a full dollarization law that would abolish the bolivar and the central bank outright. He told Fortune’s Shawn Tully he puts the odds of passage at 50% to 80%.
U.S. Treasury Secretary Scott Bessent’s big move on bonds didn’t last long. Yields on the 30-year Treasury are climbing back to where they started on Wednesday, when Bessent announced he would double the Treasury’s purchases of long-dated bonds to at least $4 billion “per operation” in hopes of reducing their interest yield.
The intent of the program is to use the bond market to lower interest rates, thus making credit more available for consumers and businesses.
But Wall Street didn’t take it seriously. The U.S.’s national debt just passed $40 trillion. A $4 billion weekly purchase looks like a rounding error when compared to the big fiscal picture.
“Many commentators seem to be treating this week's U.S. Treasury intervention in bond markets as a heinous financial crime,” ING’s Chris Turner told clients this morning.
Peter Sidorov and his colleagues at Deutsche Bank said in an email, “investors are viewing the Treasury’s steps more as a band-aid than a structural solution.”
“Bond investors seem to feel that four billion dollars is not terribly impressive,” UBS’s Paul Donovan advised clients today.
The “band-aid” metaphor came up repeatedly. Nomura’s Charlie McElligott told the Financial Times it was a “band-aid on a bullet hole” and “not be enough to placate market forces.”
“We don’t think this [intervention] can succeed, in isolation,” Eoin Walsh of TwentyFour Asset Management said. “Interventions such as this look like a sticking plaster.”
Jim Caron, chief investment officer at Morgan Stanley Investment Management: “The Treasury simply can’t control long-term yields.”
Robert Tipp, head of global bonds at PGIM: “It’s a finger in the dike.”
“It’s a little bit like paying your mortgage with your credit card,” James Sullivan, JPMorgan’s co-head of global fundamental research, told CNBC.
The atmosphere will make life complicated for Fed chairman Kevin Warsh next week. He is scheduled to give his annual speech at Jackson Hole. He has publicly pledged not to give “forward guidance” to the markets, because he doesn’t believe the Fed should be guiding the bond market. But the entire intent of Bessent’s intervention was to signal that the Treasury is able to stabilize yields if it wants to—a position that seems to contradict Warsh's noninterference policy.
“We do not think it is hyperbole to say that this break in communication strategy reduces the overall credibility of their guidance,” said Thomas Simons, chief U.S. economist at Jefferies.
Bitcoin, the OG cryptocurrency, has spent much of the past year in a long, humiliating decline from its all-time high of around $126,000 down to the low-$60,000 range, where it has remained for most of this year. Until recently. BTC has gained 23% in the past five days and is up 19% this month. As always, it’s not clear why. But CNBC says declining prices in the bond market have traders looking elsewhere for potential gains. Elsewhere, stocks were mixed globally and U.S. futures were up moderately before the opening bell in New York.
It’s old news, but it’s nice to see it in a chart: For decades, personal finance professionals handed out a standard piece of investing advice: Split your portfolio 60/40 between stocks and bonds. It was thought that the two move in roughly opposite directions as the markets go up and down, and thus hedge each other against excessive losses.
As this graph from Bespoke Investment Group shows, that has not been true for a long time. The 60/40 people have lost a lot of money compared to people who were 100% in stocks.
“Stocks have left 60/40 in the dust after nearly two decades of equity market gains and a struggling fixed income market since the post-COVID inflation surge,” the group said in an email. The iShares 60/40 ETF rose 325% since 2009, but an S&P 500 ETF would have got you more than a 1,000% return.
MacKenzie Scott gave California public education $461 million—and let the recipients decide how to spend every dollar - Sydney Lake
Billionaire Jeff Bezos once asked Warren Buffett why so few people copy his strategy—now he’s backing $7 billion Liverpool FC - Orianna Rosa Royle
Our AI startup is growing 40% a month helping financial advisers do what they love: giving advice - Hardy Michel, Shakeel Lala, and Ben Robertson
It has been another great summer for the hotel business globally, according to Jefferies’ John Colantuoni and his team. The world’s overnight hospitality industry saw sales grow by 8% across the planet in July. Sales were up everywhere except the Middle East, Africa, and Mexico. You can probably guess why travelers avoided the Gulf region more than usual. But what happened in Mexico?
Turns out that a wave of riots and violence by cartels in February initially scared travelers away. And then a massive amount of brown sargassum seaweed—5 million metric tons!—washed up on many beaches on Mexico’s Caribbean coast, according to Travel Weekly, deterring tourists.
“Under Tim Cook, Apple has created market cap growth at a rate of roughly $32 million an hour, every hour, for nearly 15 years or a total of $4.5 trillion overall.”—Wamsi Mohan of Bank of America.
It was a warm, sunny day in the coastal town of Narragansett when a tractor-trailer rollover sent a truckload of squid spilling into a Rhode Island roadway, leaving a stench as they sat in the road for hours in the summer heat. Local authorities have dubbed it the “squidpocalypse of ’26,” the AP reports.
Narragansett Police Capt. Ryan Prest said he was told that the scene “started to smell bad as the squid sat out in the sun for a few hours.”
The fully loaded trailer was taking the squid to a processing facility out of town when the trailer dislodged and tipped on its side as the driver was navigating a turn, spilling a “substantial portion” of its calamari cargo, the police department said. Police responded at 9:27 a.m., and the intersection wasn’t reopened until 5:15 p.m.
They found massive piles of squid on the road.
“Squid has a distinctive odor to it,” Richard Stevens, a Narragansett resident and fisherman, told WJAR. “Especially if it lands on the road and stays there for a while.”
Jim Edwards is the executive editor for global news at Fortune. He was previously the editor-in-chief of Business Insider's news division and the founding editor of Business Insider UK. His investigative journalism has changed the law in two U.S. federal districts and two states. The U.S. Supreme Court cited his work on the death penalty in the concurrence to Baze v. Rees, the ruling on whether lethal injection is cruel or unusual. He also won the Neal award for an investigation of bribes and kickbacks on Madison Avenue.