I find the use of the term “buyback” annoying. Bessent is managing duration, not shrinking the outstanding supply of Treasuries the way a corporation shrinks the supply of shares when it conducts a buyback. @wbmosler has made the point (for decades) that once the central bank buys government bonds, it’s as if Treasury never issued them in the first place (except that they don’t disappear the way stocks typically disappear with share buybacks). 💡Bessent and Warsh announce that they have decided that past purchases constitute a “strategic buyback” so the bonds disappear from both balance sheets. Warsh gets to shrink the size of the Fed's balance sheet (as he’s long wanted), Bessent gets to execute a genuine buyback, and we duck way back down below the debt ceiling. Everyone wins!

It's worth noting the leverage embedded in household equity exposure. With margin debt relative to GDP now ~4.1%, we're running noticeably hotter than peak dot-com. Highly recommend reading @MacroEdge1 for analysis of that period.