BofA's Hartnett Sees Dollar Slump, Short Bets If Treasury Bond Plan Fails
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Bank of America strategist Michael Hartnett warns that failure of the US Treasury's plan to tame long-term bond yields would pressure the dollar and spur short bets against risk assets before November midterm elections. The proposal to increase buybacks of longer-dated bonds is seen as 'quasi' quantitative easing, the latest in a series of 'Bessent puts'. The 30-year Treasury yield was around 5.2% on Friday, with the S&P 500 down 1.9% since Monday.
Key Facts
- Michael Hartnett, Bank of America strategist, said failure to drag the 30-year Treasury yield below 5% would lead to a dollar slump and increased short bets against risk assets in the coming weeks.
- The Treasury's buyback proposal is characterized by Hartnett as 'quasi' quantitative easing and the latest in a series of 'Bessent puts'.
- The 30-year Treasury yield was around 5.2% on Friday, after reaching its highest level in almost two decades earlier in the week.
- The S&P 500 is down 1.9% since Monday and poised to snap a three-week gaining streak amid bond market volatility.
- Funds focused on US stocks attracted almost $29 billion in the week through Aug. 19, the most in three weeks, according to EPFR data cited by BofA.
Bond Market Pressure
Hartnett said if Treasury Secretary Scott Bessent 'can't drag 30-year yield below 5%,' he foresees a dollar slump and increased short bets against leverage such as AI hyperscalers and private credit. Financials also face the prospect of short selling if the plan doesn't work, he said. Wednesday's announcement by the Treasury followed 30-year yields reaching their highest in almost two decades, and 10-year rates getting to levels not seen since before President Donald Trump took office. Yields initially dropped, but reversed much of the move amid persistent concerns over surging US government debt.
Market Impact
Bond market turmoil has reverberated through stocks, with the S&P 500 down 1.9% since Monday and poised to snap a three-week gaining streak. BofA's bull-and-bear indicator still flashes an 'extreme bull' reading, the strategists said. Funds focused on US stocks attracted almost $29 billion in the week through Aug. 19, the most in three weeks, according to EPFR data cited by BofA. Outflows from semiconductors extended for a third week, bringing total redemptions to $6.3 billion.
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BofA's Hartnett Sees Dollar Slump, Short Bets If Treasury Bond Plan Fails
