It's Crunch Time For Bonds | Bill Fleckenstein

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**Bill Fleckenstein** (1:29)
One of the things that I've said in the over the last couple of years since the Trump administration came into power was that the biggest problem they're going to have is going to be the bond market at some point.
And they've tried to finesse it by doing a lot of borrowing at the short end instead of longer stuff. And they bought back illiquid longer bonds and then finessed them on the shorter end. But we're kind of maybe getting to crunch time.

**Adam Taggart** (2:00)
Welcome to Thoughtful Money. I'm your host, Adam Taggart. Very pleased to be sitting down here with the great Bill Fleckenstein. And Bill, there's a lot that's been going on with bonds. You have long predicted that the bond market would basically, in your words, start to take the printing press away from the Fed.
It definitely seems to have made a lot of progress towards that so far this year. But anyways, first off, Bill, thanks so much for joining us.

**Bill Fleckenstein** (2:29)
Oh, well, thanks for having me.

**Adam Taggart** (2:30)
All right. Well, it's always a pleasure. And like I said, I think this is a really timely moment to bring you on the channel. So especially the past couple months, bond yields have continued to rise, certainly much higher than the administration would like. But it's been, I think, many years since we've had 30 year back, well into the fives in terms of yield. And then the day we're speaking, had a very interesting development in the bond market, where Treasury Secretary Scott Bessent, who has kind of been monkeying around and trying not to admit that it's any sort of artificial scheme or anything, but just announced that the Treasury is going to start becoming a lot more aggressive in purchasing long-term Treasury debt, long-duration Treasury debt with short-term Treasury debt, and try to bring those long-term yields down. And this very much sort of smells like some of the previous Fed's operations that were called Operation Twist. How material is this?
How much do you see what's been happening as validation of your thoughts that the bond market is really going to start exerting itself here to limit what the Fed and perhaps even the Treasury can do?
Is this all great validation or am I reading too much into it?

**Bill Fleckenstein** (3:59)
Well, there's a lot to try to cover there. I think the first point to make is, I've probably been talking about yield curve control since rates, sorry, about the possibility of the bond market taking the printing press away for a long time, but certainly since rates were zero during COVID. The reason I bring that up is because especially with macro developments, really big picture, huge developments, they could take quite a long time to come to pass.

**Adam Taggart** (4:31)
Sure.

**Bill Fleckenstein** (4:31)
And what you have to do is you have to be aware of that, and then but be careful about how you might act on it, because a lot of times the catalyst or the length of time before it might matter is not knowable. I say that to hopefully be useful to people that are listening to these kind of interviews, to just be aware of things that have a long gestation period.