Andrew Wells on 'Big Move' in 10 & 30-Year Treasury Yield, Liquidity Boost Warning

**SPEAKER_1** (0:00)
Welcome back to Opening Bell, getting you ready for the Trading Day this morning, where we are seeing some up arrows after selling yesterday, particularly in tech. Andrew Wells, CIO at San Jack Alpha is with me right now. Good morning to you, and we're getting ready for our Tuesday Open. Some of your thoughts as oil has come down, bond yields have come down, and we're waiting on NVIDIA.

**Andrew Wells** (0:21)
Yeah, good morning, Nicole. What we're looking at from our perspective right now is the Fed is no longer the story. The market is now dictating where rates go. And notwithstanding the announcement by the Treasury Secretary that they would look at doing something, both doubling the bond buybacks that they've been doing for quite some time, which was kind of a small move, and that's why we saw kind of a round trip in rates on that. But the big news was the announcement yesterday that they would consider using money from the TGA, the Texas Treasury General Account, to possibly fund new buybacks. And that would be new money that wasn't currently existing in the market coming in and lowering that supply.
So this gave the bond market just a little bit of encouragement yesterday. And for that, we see a pretty nice rally across the curve today.

**SPEAKER_1** (1:16)
We know the Trump administration always puts things, they float things, they float ideas to see how the markets react. I mean, they've done it a million times.
So, you know, that was a floater idea. Last week, it was the doubling of the long-term treasuries from 2 billion to 4 billion, then it was maybe upwards of 4 billion. And now we say, oh, look, there's nearly a $1 trillion fund we can use. It's very interesting because billionaire Stanley Duncan Miller is saying overall that he doesn't think this is a good idea. In fact, and Besant is his protege, but he thinks that he will lose against the bond market. He thought it was a mistake to make this move. What do you think?

**Andrew Wells** (1:58)
Well, I'm going to agree with him. I think that we got a reaction from the bond market that they heard that there could be some buying to help support the long end of the curve. But what really the bond market is hearing here is monetization. And when the treasury begins to become active in some sort of a QE light or what we call taking duration out of the market, they're hearing that there's going to be a monetization occur and the debasement trade just comes right back on. So that's why we see short term, we could see a bond rally, we could see the 10 year show just move back towards four and a half. But in the long term or the medium term, I should say, we think the bond market continues to drift up along into the curve. I think the front end probably stays relatively anchored because it already has two hikes built in to the two year. So we think the two year is a good place to invest, but we're still dubious of the long end for that reason that you just mentioned.

**SPEAKER_1** (2:55)
Well, let's talk a little more about this because, you know, why do you do this? Why would the treasury do it? They usually say it's an urgent situation. There's a feeling that maybe there's no urgent situation. At the same time, maybe it's to bring down mortgage rates. That could be an urgent situation. And if the 10 year, you said, look, the 10 year is coming down. You see it coming down, it's a 466 I mean, I look at it, I feel like, all day, every day.
It really has been, we're sitting around that 47 So, you know, with oil coming down, yields coming down, do you think there's, we're gonna be in a range? Do you see five on the 10 year, sort of sneaking up on us?

**Andrew Wells** (3:33)
We certainly see ourselves moving that direction. The 30 year had the big move this year. The 10 year did too, of course, but the 30 year, you know, getting up and touching 535, that was an unheard of number a year ago. We've never thought that 30 year would get there. I think the 10 year could get to 5%. And we have a lot of things that are moving against the Treasury right now. We have a secular inflation environment. I mean, we have PCE coming up tomorrow. The, they're calling for 3.3%.
That's still a high number. We know the Fed's target that they still kind of refer to as 2%.