The Research Brief
A Weekly Survey of Markets, Policy, & Power
Issue No. 23 · Sunday, the 23rd of August, MMXXVI · London
- UK CPI jumped to 2.9% in July from 2.6% — above the Bank's own June guidance of "a little under 3%" for Q3, and with the Treasury modelling a 3.4% average in Q4. The autumn cut that consensus had pencilled in is now doing heroic work.
- Eurozone flash manufacturing PMI hit 52.8, a four-and-a-half-year high, and hiring returned for the first time this year. The ECB has been handed cover for its hawkish bias. France, at 48.8 composite, is not participating.
- The 30-year Treasury touched 5.34%, its highest since 2007. Bessent doubled the buyback ceiling on Wednesday; the relief lasted a single session.
- FTSE 100 up 0.62% while the DAX fell 1.15%. Index composition, rather than macro direction, is now setting relative performance in Europe.
The Editor's View
A note from the desk
Bessent's Buyback Will Not Hold the Long End
The Research Brief takes the view that Scott Bessent's expanded buyback programme will fail to hold the 30-year Treasury below 5.1% through the end of September, and that its more durable effect will be a wider term premium than existed before he intervened. The arithmetic is unkind. The Treasury's new floor is at least $4bn per operation — Bessent has been explicit that the figure can go higher — but even operations of that scale sit against a debt stock that crossed $40 trillion this same week, and against US corporate issuance running at almost $1.7 trillion year-to-date, up 27% on last year, much of it financing AI data centres. That is a liquidity operation being asked to do the work of a demand operation, and the market solved for it inside forty-eight hours: Wednesday's rally was fully retraced by Thursday, with the long bond closing Friday at 5.237%. JPMorgan's Maia Crook has the right of it — the lasting cost is the retreat from "regular and predictable" issuance. The counterargument worth taking seriously: a soft core PCE print on 26 August followed by a Warsh speech leaning on AI-driven disinflation would compress the long end anyway, and the buyback would collect credit it has not earned.
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