From Eaton speaking at a conference yesterday, just jaw dropping numbers: “So, when we released our Q2 numbers the total announced projects for data centers was 307 gigawatts to be built, just think about that. And now today, we checked this week, it’s already 342 gigawatts. So, a month later, it’s already more. And then you contrast to what this industry has ever built. We have installed 50 gigawatts. So, today operating, there are 50 gigawatts. So, we are talking about between 6x and 7x what exists today is what’s going to be built in the next years. Most of this is not going to turn into ‘27 or ‘28 revenues. So, it’s going to be a longer cycle, that’s the way to think about it.”

After a soft 20 yr auction on the heels of an eventful morning for the US Treasury, some further thoughts here on what has transpired. In my opinion, no lunch is free here. On one hand, we get lower long end rates (at least for today as I question the sustainability, just like with FX intervention) and Bessent is buying long term Treasuries well below par, likely those with coupons with a one handle or less that are trading at $.50 on the dollar and issued when short rates were at zero. But, by replacing that with T-bills currently yielding around 3.75%, US interest expense will go higher. Also, in response, the US dollar is trading at 3 month low today and if sustained, that imports inflation and could facilitate foreign selling of Treasuries for those not FX hedged. Lastly, with even more short term bond issuance, it ties the hands (among other ties, like excessive gov’t spending) of Kevin Warsh & Co because raising short term rates (which I do not think will happen anytime soon) would be even more expensive for the US government, further inflate US debts and deficits, and result in another rise in long term rates. And, what happens if inflation flares up again, if Warsh doesn’t hike, the long end will do it for him. What a box we are in.