And Bessent’s bluff was called. He has no cards
Since my last Primary Dealer position update at the end of August, the research/marketing arms of Goldman, Citi, BofA, UBS, and Morgan Stanley recommended buying Treasuries. These firms are all Primary Dealers. There’s supposed to be a firewall between research and the trading desks. But connect the dots. Dealer inventories are choked with Treasuries that are losing value. The research departments tell the public to buy Treasuries because they are now a bargain. That sure looks like marketing their proprietary inventory, doesn’t it?
These recommendations are laughable. The Primary Dealer position and financing data show the dealers to be under rapidly increasing pressure, and mounting losses, which so far, have been hidden from their earnings reports.
Before getting to the Primary Dealer Positions and Financing update, I want to update you on Treasury supply and the buyback issue.
This report shows the growing crevices in the Primary Dealer holdings, financing, and hedging statistics. It also includes a look at hedge fund positions in the bond market, which are another canary in the coal mine of deteriorating liquidity conditions across asset classes.
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