PRICKLY BEAR

Kevin Muir (0:03)

Hit it!

Patrick Ceresna (0:04)

It's Friday, August 27th, 2026, episode 299 I'm Patrick Ceresna.

Kevin Muir (0:10)

And I'm Kevin Muir.

This week, it's a no-interview show, so it's just me and Patrick. Dig in, kick back, and let's hear what the charts are telling our resident technical analyst.

Patrick Ceresna (0:20)

And unlike you, I'm gonna crack open a beer and keeping a long-standing tradition. So Danny, what Portuguese beer am I drinking here? So you are drinking, I'm gonna have to read it off my phone, but this is the Prickly Bear. It's a 6% fruit beer, and they use the locally, it's called Prickly Bear, or for your case, Prickly Bear. I literally bought it because I misread, I saw Prickly Bear. And I was like, that's perfect. And it's like, oh, damn it, it's Prickly Bear.

Very off-roaded.

Kevin Muir (0:55)

I thought it was Prickly Bear, and then it was Beanie, you got a Prickly Bear. Okay.

Patrick Ceresna (0:59)

All right, give us a disclaimer, buddy.

Kevin Muir (1:01)

Nothing in this podcast should be viewed as investment advice. Listeners should consult an investment professional before making any decisions regarding topics mentioned in the show. Side effects of too much huddle may include the Bascent Twist Disorder, the Dollar Debasement Dysfunction, and the Jackson Hole Performance Anxiety.

Patrick Ceresna (1:24)

Those are some nasty side effects. Alright, let's jump into this.

Kevin Muir (1:29)

Alright, Patrick, lots going on in the markets even though they're quiet. What do you got for us?

Patrick Ceresna (1:34)

Well, I don't know if you want to say they're quiet. There's some interesting stuff.

Kevin Muir (1:37)

Well, they're quiet in terms of the volumes, buddy. And that's the one thing that people should be aware of, is that yes, there's some interesting things happening, but the actual volumes are quiet.

Patrick Ceresna (1:48)

Right. So, let's dive in to...

First, let's rewind, because I think the most interesting thing that happened was the bond intervention by Bascent the other week.

Kevin Muir (2:04)

Okay.

Patrick Ceresna (2:05)

And that was after we recorded the last episode.

So, there's lots to cover here in terms of what happened, but when we did our last episode, the 30-year yield afterwards started ripping north of 530

And it was, by the way, the interesting part, it wasn't just the actual US 30-year yield, but right across the world, we were basically seeing at the time, the European 30-year yield was ripping to 375 We saw the England bonds basically ripping up to 585, to a higher high. We saw a rising Japanese 30-year yield that was pressing 415, looking like it was gonna take a shot above its May highs. So there was a general strike against long-dated government bonds that was really emergent. And suddenly, we had the FOMC meeting minutes, which were coming out like that, you know, the Fed is more or less staying the course. And then came the Treasury announcement, and this little, is it fair to say, we'll call it an operation twist? Yeah, I think it is. But not a Fed-driven one, a Treasury-driven twist.

Kevin Muir (3:37)

Yeah. It basically is exactly what it is, but it was definitely an attempt at a twist.

Patrick Ceresna (3:45)

Attempt at a twist. But basically, I think that the size itself was not that significant. What I actually think was most relevant was the fact that the Treasury blinked, right? Like the Treasury blinked in that they basically did not like where yields were, and they felt that they needed to step in.

And I feel that the response was not about the dollar size, because we saw ridiculous moves in gold. We'll talk about a huge moves in Bitcoin. All sorts of assets started to move. And it's not just because of this little buying, but rather this idea that we now know where the administration does not like the yield, and very likely to attempt numerous times to defend this area if it's beaten. And I think that it sends a message to the market that this is the kind of place where they're worried. How would you interpret it differently?

Kevin Muir (4:56)

No, I think that that was the problem, is that it did make it look like the Treasury or the administration was worried about rates.

You highlighted at the beginning that it wasn't just a US rate story, but it was across the world.

I kind of, like, everyone seems to be losing their shit about how badly bonds are trading. And I'm like, if you stop and think about it in the grand scheme of things, it's not that big a deal. Like, they haven't backed up that much. And I wrote a piece about this, and I'll just kind of give you a little synopsis. But when you have a nominal GDP of 6.5% with the government deficit of 6%, and with the AI capex build out, basically being the largest capex build out we've seen since the railroads of 1850, okay? And then to top it all off, the geopolitical situation, you know, the Trump has, has, you know, at the very least, changed the other countries' willingness to run deficits for whatever reason. So we have a situation where it's not just the US that's willing to run a large deficit. Now, all countries are either willing or have to run large deficits. So when we stop and think about it, like, everyone is issuing bonds, right? It's a huge supply. We have record corporate, record government, and record non-US government. So the fact that bonds are rising in yield and declining in price is not a surprise. Not only that, Patrick, it's really not that big a deal. Like, we go look at the 30-year term premium. And for those who don't know, the term premium is, in essence, the amount that the market is demanding in excess of what the market expects the Fed funds to average over the life of a bond. So if you're nervous about the situation, you'll say, I think that the Fed funds are going to be 3% over the next 30 years, but I'm going to demand 5% because I think that there's a chance that there's something really bad happens or whatever. Inflation gets out of control. So you demand, so that's a 200 basis point term premium. And if you look at that term premium, yes, it is increased over the last year or two or it's actually been increasing for the last five years, but it's not like it's some obscene level. It's very much just in the middle of the range of the past 30, 40, 50 years. So one of the things that's happening is we're just getting a return to normal of interest rates. And we should be asking ourselves, like, why are we so freaked out about that? And I would contend the reason that we're so freaked out about that is because the US government has never had this much debt and it's increasingly going to make it so the government shouldn't be spending this amount. But to your point, that when you're faced with a market signal that is telling you that you're spending too much, you have a choice of either cutting back on spending or trying to suppress the market signal. And one of the things, and you rightfully point out, is the volumes of this buyback, this liquidity buyback, are actually tiny.