Citi sees Treasury yield cap below 5.30% pressuring dollar
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Aggressive U.S. Treasury efforts to cap long-end borrowing costs below 5.30% could weigh on the dollar, Citigroup's Dirk Willer said on Thursday. Investors may look beyond Treasuries for assets that protect against fiscal deterioration. The 30-year Treasury yield hit 5.327% last week, its highest since 2007.
Key Facts
- Citigroup's Dirk Willer said aggressive Treasury efforts to cap long-end borrowing costs below 5.30% could weigh on the dollar.
- The 30-year Treasury yield hit 5.327% last week, its highest since 2007.
- Citi dropped its underweight Treasuries position after the Treasury announcement, while adding gold and staying short the dollar.
- The U.S. Treasury doubled buyback sizes last week to support long-duration bonds.
Dollar Pressure
Citigroup's global head of macro and asset allocation strategy Dirk Willer said aggressive U.S. Treasury efforts to cap long-end borrowing costs below 5.30% could ultimately weigh on the dollar. Investors may buy bonds that aren't capped by central banks, creating negative dollar impetus, Willer told the Reuters Global Markets Forum. Citi had been underweight Treasuries but dropped that position after the Treasury announcement, while adding gold and staying short the dollar.
Treasury Market Moves
The U.S. Treasury's move last week to support long-duration bonds by doubling buyback sizes did little to alleviate concerns about global duration risk. The 30-year Treasury yield soared to 5.327% last week, its highest since 2007. Burgeoning government debt, elevated inflation, and a surge in long-duration debt issuance by AI hyperscalers have added to pressure on the long end.
Fiscal Risk Signals
In the U.S., 30-year Treasury yields have risen broadly in tandem with matched overnight index swaps, leaving the bond-OIS spread relatively contained. That suggests the selloff has been driven more by a repricing of rates than Treasury-specific risk. Asset-swap spreads were quite well behaved, and that's really where fiscal problems should show up most clearly, Willer said.
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Citi sees Treasury yield cap below 5.30% pressuring dollar
