Name: The Bond Market Is Trapping The Fed | Weekly Roundup
Uploaded: 2026-09-11T10:00:22+00:00
Duration: 2724 s

Speakers

Felix Jauvin — Co-Host, Forward Guidance

Quinn Thompson — Co-Host, Forward Guidance / Founder, Lekker Capital

Summary

Felix Jauvin and Quinn Thompson discuss the bond market's challenge to Treasury buybacks, the inflation-growth trap facing the Fed, and whether a credibility hike is coming. They debate the path for long-end yields, SOFR pricing, debasement trades, oil and diesel strength, and the wounded semiconductor/AI momentum trade. The conversation leans cautious on duration and semis while staying constructive on debasement and energy.

Treasury buybacks of $6B failed to stop long-end selling, with 10-year fair value estimated near 5.8% on hot nominal GDP.
Felix and Quinn see political incentives pushing policymakers toward yield suppression and inflationary stimulus.
The Fed faces a tight inflation-versus-growth trade-off, with a one-and-done credibility hike possible.
Quinn prefers fading hawkish SOFR pricing and sees room for curve steepening if growth weakens.
Both remain constructive on debasement trades but expect path risk and volatility around the Fed.
Quinn says the semiconductor momentum trade has been deleveraged and may be dead money for six to twelve months.
Felix flags light oil positioning and a diesel breakout as signs of emerging energy-led inflation and leadership.

Ideas

Felix Jauvin Co-Host, Forward Guidance 3:08

Bond market forcing long-end yields higher.

In historical first hikes where the long-end move was driven by term premium rather than inflation expectations, a one-and-done credibility hike has led long-bond yields to fall. He does not believe this is the start of a sustained hiking cycle, so a hike could produce a hike with long bonds rallying.

Felix Jauvin Co-Host, Forward Guidance 3:08

Bond market forcing long-end yields higher.

The Treasury's increased long-end buybacks of $6B are not enough to cap yields; the bond market is calling Bessent's bluff. With nominal GDP running around 6.6%, the fair value of the 10-year yield is near 5.8%, implying long-end yields still need to rise unless policymakers use much more ammunition.

Felix Jauvin Co-Host, Forward Guidance 12:25

Diesel breakout signals input inflation.

Wholesale diesel is breaking out, and he sees a fairly clear one-to-one relationship from diesel into producer input costs. That makes diesel a narrower inflation and input-cost expression within the broader energy supply shock.

Quinn Thompson Co-Host, Forward Guidance / Founder, Lekker Capital 28:30

Fade three hikes priced into SOFR.

The SOFR curve prices three hikes into June/September next year, but with growth likely peaking and inflation still energy-driven, he has a very difficult time seeing the Fed deliver above that. He would fade the hawkish pricing and prefers SOFR because the Fed has more control over the front end.

Quinn Thompson Co-Host, Forward Guidance / Founder, Lekker Capital 29:52

Curve may steepen after Fed pivot.

The curve has flattened hard into the tightening and bond-market pressure. If growth problems force the Fed to become more dovish, the need to cap the long end falls, which could produce steepening.

Felix Jauvin Co-Host, Forward Guidance 33:04

Debasement trades remain long-term winners.

He agrees the debasement thesis is unchanged, but path risk is high because policymakers may need to let air out and expand volatility before the next leg. He expects midterms to produce more spending and inflationary policy, and therefore believes dips in debasement trades are to be bought; inflation could reach 4-6% over the next year or two.

Quinn Thompson Co-Host, Forward Guidance / Founder, Lekker Capital 40:24

Avoid semiconductors after leverage unwind.

Much of the air has been let out of the semiconductor trade, the prior momentum trade. After such a levered runup and unwind, relief rallies will likely bring out trapped top buyers, and the area is likely dead money for at least six months to a year, so he would avoid it.

Felix Jauvin Co-Host, Forward Guidance 42:44

Oil leadership emerging with light positioning.

Despite the worsening Iran situation, deteriorating oil supply/demand and a vertical price move, oil positioning is still fairly light. That suggests investors are anchored to old leadership and a new oil-led leadership may be emerging, so he is watching oil for further upside.

The Bond Market Is Trapping The Fed | Weekly Roundup

Summary

Ideas

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