Federal Reserve should discuss rate cuts, says Academy Securities’ Tchir

Peter Tchir, head of macro strategy at Academy Securities, isn’t impressed. The US Treasury just doubled the size of its liquidity support buybacks for longer-dated government debt, and the man whose job is to parse these moves for institutional investors described the whole thing as “kind of mediocre.” His bigger message: the Federal Reserve needs to start talking about cutting interest rates and explicitly remove hikes from the conversation. In a market where 30-year Treasury yields recently touched levels not seen since 2007, Tchir’s argument boils down to arithmetic. The government’s interest bill is ballooning, and Treasury buybacks alone aren’t going to fix that. What the Treasury actually did On August 19, the Treasury Department announced it would raise the maximum cap on its buyback operations for outstanding 10-year to 30-year debt. The ceiling moves from $2 billion to at least $4 billion per operation, effective September 9. Markets responded immediately, if modestly. The 30-year Treasury yield dropped from roughly 5.26% to as low as 5.18% after the announcement. That roughly 8-basis-point move might sound trivial, but on trillions of dollars in outstanding debt, small y...