My Thoughts on the Trading Week Ahead: 5/28/24-5/31/24

Core PCE on Friday and Treasury's active debt selling calendar this week figure to set the tone for trading. TL/DR: I'm still cautious on risk.

With US debt to GDP above 120%, deficits running 7% of GDP, US NIIP at -70%, the US government sanctioning "enemies" out of their desire to buy and add to their UST holdings, and the Fed on the sidelines with QT, the US government needs more private demand at higher yields to buy the burgeoning UST supply that shows no signs of slowing down.

Washington DC is completely dysfunctional, there is no appetite to cut spending or to raise taxes, so borrowing more and more from the future is the only way forward. However, DC is only doing this because the Fed enables this behavior by continuously neutering bond vigilantes whenever they peek their heads up and try to enact some pricing discipline on policymakers.