Arthur Hayes Warns Bessent Is Making the Same Liquidity Mistakes as Yellen
TL;DR
- Hayes warns that Scott Bessent is replicating Janet Yellen’s liquidity strategy, prioritizing short-term debt over long-term bonds.
- Yellen released nearly $2.4 trillion into the market by selling more Treasury bills, which boosted Bitcoin and the Nasdaq 100 while the Fed held rates at 5.3%.
- Bessent’s latest increase in long-term bond buybacks added just $20 billion against a federal debt of approximately $40 trillion.
Arthur Hayes, co-founder of BitMEX, published a new essay titled “Same Same But Different” in which he compares the Treasury financing policy of the United States under Janet Yellen with the one currently being implemented by Secretary Scott Bessent.
The central idea is concise: although Bessent presented himself as a distinct voice, he is falling back on the same liquidity playbook as his predecessor when long-term Treasury yields threaten to exceed 5%.
Hayes’s Analysis
Hayes’s analysis begins in the last quarter of 2023. Yellen chose to issue more Treasury bills —instruments maturing in less than a year— and reduce the placement of long-term bonds. Money market funds, which historically parked their cash in the Federal Reserve’s Reverse Repo Program (RRP), began migrating toward those bills because they offered a higher yield than the RRP.
… Continue reading the full article at the original source below.
