Thanks, yes this is the underappreciated edge risk of AI -- that it actually is good, effective, and able to be rapidly rolled out to effect massive "efficiency/productivity" gains (i.e. mass layoffs) ...and indeed, recession, and deflationary forces........ all of which are good things for long duration bonds
Thank you very much for the article. A question regarding geopolitics. How big is the impact of abandoning us treasuries by China and other world players on tlt?
Yeah part of that is reflected in the relative performance of gold vs treasuries (substantial outperformance) -- so I would say it's already reflected in the price e.g. treasuries look cheap and gold now looks expensive. One of the biggest contrarian trades (not sure if/when it will work) would be to sell gold and buy bonds... but I don't think you'll find anyone brave enough to take that one!
Callum, excellent technical work as always. But I believe these charts are missing the "Dark Matter" of the current bond market.
You ask: "Who is selling?" and "Why is sentiment so structurally bearish?" The answer isn't in the AAII sentiment surveys or technical support lines. It is in the TIC Data and UNCTAD trade flows.
1. The Missing $1.2 Trillion (The Whale has left the pool) In 2025, China (System B) recorded a historic trade surplus of nearly $1.2 Trillion. In the old cycle (2001-2020), this money was algorithmically recycled into US Treasuries. But look at the data now: China's Treasury holdings haven't spiked; they have breached the long-term support of $730 Billion. The "Buyer of Last Resort" has stopped buying. You cannot analyze the price of a bond without analyzing the exit of its largest historical customer.
2. It’s Not a Bear Market; It’s an Asset Swap You view this as a cyclical valuation opportunity. I view this as a structural "Great Asset Swap." System B is systematically liquidating "Fiat Obligations" (US Debt) to hoard "Physical Inventory" (Copper, Gold, Uranium, Energy Metals). Why? Because they realized that in a kinetic conflict, US Treasuries are not "Risk-Free Assets" but "Options with Geopolitical Clawback Clauses" (see what happened to Russian FX reserves).
3. The Verdict Charts reflect the past psychology of market participants. But they do not reflect the Thermodynamic Shift of global capital. We are moving from a world priced in "Yield" to a world priced in "Security." While Wall Street debates if yields have peaked, the Smart Money is following the $1.2 Trillion outflow from Paper into Atoms.
Silver too. I believe China is exploiting the fraudulent system of paper/physical Silver in the US. Which I believe will create trust issues in the US currency.
I’ve been actively building up my position in TLT specifically, and its up around 25% of my portfolio. Most of the rest is precious metals & Uranium mining stocks, all with covered calls sold, and I’ll be able to move a lot more over in January once those calls expire. I’m looking for a quick move to the high 90’s where I’ll either reduce, sell covered calls, or both.
As someone noted in response to Subutrade post, the chart of short interest in TLT should be considered as % of shares outstnding as they too have skyrocketed. The ratio SI/SO is catually lower.
If one believes in AI, should one also buy a long bond to maturity? AI = automation = loss of jobs = recession/deflation = return of ZIRP?
Thanks, yes this is the underappreciated edge risk of AI -- that it actually is good, effective, and able to be rapidly rolled out to effect massive "efficiency/productivity" gains (i.e. mass layoffs) ...and indeed, recession, and deflationary forces........ all of which are good things for long duration bonds
Very informative post. Thanks
Cheers!
Thank you very much for the article. A question regarding geopolitics. How big is the impact of abandoning us treasuries by China and other world players on tlt?
Yeah part of that is reflected in the relative performance of gold vs treasuries (substantial outperformance) -- so I would say it's already reflected in the price e.g. treasuries look cheap and gold now looks expensive. One of the biggest contrarian trades (not sure if/when it will work) would be to sell gold and buy bonds... but I don't think you'll find anyone brave enough to take that one!
Callum, excellent technical work as always. But I believe these charts are missing the "Dark Matter" of the current bond market.
You ask: "Who is selling?" and "Why is sentiment so structurally bearish?" The answer isn't in the AAII sentiment surveys or technical support lines. It is in the TIC Data and UNCTAD trade flows.
1. The Missing $1.2 Trillion (The Whale has left the pool) In 2025, China (System B) recorded a historic trade surplus of nearly $1.2 Trillion. In the old cycle (2001-2020), this money was algorithmically recycled into US Treasuries. But look at the data now: China's Treasury holdings haven't spiked; they have breached the long-term support of $730 Billion. The "Buyer of Last Resort" has stopped buying. You cannot analyze the price of a bond without analyzing the exit of its largest historical customer.
2. It’s Not a Bear Market; It’s an Asset Swap You view this as a cyclical valuation opportunity. I view this as a structural "Great Asset Swap." System B is systematically liquidating "Fiat Obligations" (US Debt) to hoard "Physical Inventory" (Copper, Gold, Uranium, Energy Metals). Why? Because they realized that in a kinetic conflict, US Treasuries are not "Risk-Free Assets" but "Options with Geopolitical Clawback Clauses" (see what happened to Russian FX reserves).
3. The Verdict Charts reflect the past psychology of market participants. But they do not reflect the Thermodynamic Shift of global capital. We are moving from a world priced in "Yield" to a world priced in "Security." While Wall Street debates if yields have peaked, the Smart Money is following the $1.2 Trillion outflow from Paper into Atoms.
Sell the Paper. Buy the Fire.
(If you want to understand the mechanics of this "Physical Capitalization," I break down the flows here: "Great Asset Swap" https://chinarbitrageur.substack.com/p/the-great-asset-swap-when-china-stops?r=71ctq6
Silver too. I believe China is exploiting the fraudulent system of paper/physical Silver in the US. Which I believe will create trust issues in the US currency.
yes, Sliver! https://chinarbitrageur.substack.com/p/from-precious-metal-to-industrial?r=71ctq6
I’ve been actively building up my position in TLT specifically, and its up around 25% of my portfolio. Most of the rest is precious metals & Uranium mining stocks, all with covered calls sold, and I’ll be able to move a lot more over in January once those calls expire. I’m looking for a quick move to the high 90’s where I’ll either reduce, sell covered calls, or both.
Anyway, I appreciate the update.
Thanks John
As someone noted in response to Subutrade post, the chart of short interest in TLT should be considered as % of shares outstnding as they too have skyrocketed. The ratio SI/SO is catually lower.