Treasury Hasn't Done Enough to Lower Yields, iCapital's Suzuki Says

Summary

Dan Suzuki of iCapital argues the Treasury's recent long-end yield measures are too small and mostly symbolic, leaving U.S. long-term yields in a higher-for-longer environment unless the economy slows enough to pull them down in the second half. He also flags oil near $90 as the key near-term inflation swing factor that could reaccelerate inflation and eventually force the Fed to hike rates.

• Treasury long-end yield actions are small relative to QE-era buying and ongoing issuance, so they are largely symbolic.
• TGA drawdown speculation could reduce the buffer at the next debt ceiling and increase term premium.
• Bond vigilantes are back, supply is heavy, and yields are in a higher-for-longer environment.
• Second-half yields could fall if the economy slows; otherwise long-end yields could break above 5%.
• Oil is the biggest near-term inflation swing factor.
• Oil staying near $90 for another month or two could push inflation higher.
• The Fed would eventually have to start hiking rates if inflation reaccelerates.