Bob Michele

"The bond market is sitting here with a growing stack of chips... We are the perfectly priced market... Even if inflation runs at about 3% this year, you are talking about positive yields." As equity markets face "AI anxiety" and tariff confusion, capital is rotating. With yields >4% and credit spreads behaving (assuming no recession), bonds offer a "counterbalance to risk" that is mathematically attractive compared to expensive equities. LONG Inflation re-accelerating significantly, forcing the Fed to hike or hold rates higher for longer.

The global competition for capital driven by AI investment and sovereign borrowing, combined with persistent deficits, will push the neutral interest rate higher, sending 10-year Treasury yields into a 4% to 6% range over time.

If the Federal Reserve pushes back against market expectations for rate hikes, long-term bond yields would rise as markets conclude the Fed is not sufficiently inflation-vigilant, making long-term bonds bearish.

The bond market has already repriced the Fed's hawkish tilt and a potential rate hike, with the 10-year yield now around 4.5% in the middle of a trading range (4.20-4.30% low, 4.625% high). The FOMC caught up to the bond market's earlier pricing, making bonds look inviting.

Bob Michele states that in the current environment of uncertainty and lack of hedges, "There is one [safe haven]. It's Treasury bills, Treasury bills, but not duration." In a market where traditional safe havens (gold, long-duration bonds) are failing and equities are selling off, the short-term, liquid, and high-yielding nature of T-bills provides a capital-preserving haven. He advocates "just let the markets go to wherever they're going" and highlights T-bills as the singular working hedge. LONG T-bills as a defensive, low-risk parking spot during a period of high macroeconomic uncertainty and technical market washouts. A sudden, sharp resolution to the crisis leading to a violent "risk-on" rally, making T-bills an opportunity-cost laggard.