WSJ op-ed alleges Treasury “price management” after 30-year yield spike

STANLEY DRUCKENMILLER WROTE THAT THE BOND MARKET IS THE ONLY FISCAL DISCIPLINARIAN THE US HAS LEFT His WSJ op-ed argues the Treasury just moved to silence it.

On Aug 19 the department doubled its long-dated bond buybacks after the 30-year yield hit a 19-year high.

Yields fell within minutes.

By the next afternoon they were back above where they started. "This wasn't liquidity management, it was price management." Nothing was broken, in his telling.

No failed auctions, no forced unwinds, nothing resembling Treasuries in March 2020 or UK gilts in September 2022.

Trading was orderly, which he calls "not a malfunction but the machine doing its job." What the machine was pricing: inflation at 3% to 4% and above target since 2021, a deficit near 6% of GDP that America has never produced in peacetime at full employment, debt past $40 trillion, and net interest above $1.1 trillion this year, more than the defense budget.

His parallel is 1942 to 1951, when the Fed capped long yields to finance the war.

The cap outlived the war, financed deficits with printed money, and fueled double-digit inflation. "Every basis point of artificial yield suppression is a subsidy to procrastination." On what comes next he is blunt. "Anyone who tells you entitlements won't be cut is lying.

Not about the outcome but about who decides it." Warsh speaks at Jackson Hole Friday.