Chris Whalen Answers Your Questions on the Fed, Rates & the Next Bailout

Summary

Chris Whalen answers viewer questions on Fed policy, rates, Treasuries, and crisis risk. He argues the Fed and Treasury are unlikely to fight war-driven inflation with higher rates and that shrinking reserves plus Treasury repos would push short-term rates down. He is negative on long-dated Treasuries, prefers cash alternatives such as money market funds and mortgage REITs Annaly and AGNC, and expects the yen to keep weakening. He sees no large macro shock before the midterms, though fiscal deficits continue to run hot.

• Whalen says Warsh and Bessent view war-driven inflation as beyond Fed control.
• Shrinking Fed reserves and Treasury repo operations are expected to lower short-term rates.
• He would not buy 30-year Treasuries and prefers higher-yielding alternatives.
• He expects Japanese yen weakness to continue and sees benefits for Japanese industry.
• He warns 5% 10-year yields worsen Treasury deficit math.
• The next crisis bailout would likely need to be larger than COVID-era support if the Treasury market seizes.
• He expects the US economy to keep rolling with no big binary event before the midterms.