Dalio Macro Monitor

Warsh-led Fed could reshape policy, Treasury markets, and volatility amid rising deficits and shifting demand—key LPL Research insight on regime risks.

Private credit returns are cooling as defaults start to rise, with Fed rate cuts pressuring lenders and raising liquidity concerns – a macro signal of debt cycle stress.

Bond market mood rattled as ceasefire on life support creates uneasy backdrop for big 10Y/30Y Treasury auctions today and later this week.

Treasury Auction Weakness

• 🔥 Weak 3-Year Note Demand: Treasury's 3-year note auction showed weak demand with a 2.54 bid-to-cover ratio below the...

USD holds in a tight range near 98, supported by safe-haven flows as markets watch CPI data and potential Fed balance sheet acceleration—key liquidity regime test.

Key signals of Treasury stress:

• Weak demand: Bid-to-cover ratio hit 2.54, below six-month average
• Fragility deepens: Auction confirms sustained...

Key signals of delayed easing:

• Divisive Fed vote: Held rates steady on April 29 in 8-4 split, closest since 1992
• Persistent inflation: Remains...

Critical trigger for EMB investors: 10Y Treasury yield at 4.4% (77.6th percentile of 12-month range).

• Breach above 4.50% doubles down: crushes...

• Kevin Warsh may sharpen debate on Fed's balance sheet.
• Miran: Shrinkage to $1-2T eventually possible.
• Key caution: Markets sensitive to QT pace.

Watch for liquidity regime signals in this shift.

U.S. debt held by the public stands at around 101% of GDP, per a new Brookings Institution chartbook that arms debt bears with fresh warnings as the debate heats up again.

Investor resilience shines: EM portfolio inflows hit $58.3B, reversing most of March's $66.2B outflow from Middle East tensions.

• Debt drives...

• Historical precedent: March 2020 Treasury stress was not unprecedented, with lessons from 1958.
• High-frequency evidence: 33 years of intraday...

Fed policy debate pivots from how long to hold rates elevated to how quickly to ease without reigniting inflation, signaling the “Warsh Era” and return of rate-hike risk.

BOJ Policy Normalization

• 🔥 Mizuno on Ending CP Purchases: BOJ official Mizuno states ending CP buying will not upset markets, with strong...

BOJ's Mizuno assures ending CP buying will not upset markets, highlighting a key step in monetary normalization. Strong demand persists for BOJ bank lending against corporate debt collateral, suggesting extension of that facility.

Bond traders are bracing for key inflation data and next week's 3-, 10-, and 30-year Treasury auctions, which will test investor appetite as Fed Chair Powell's tenure concludes.

China Shock parallels signal AI's upside. China's 2001 WTO entry drove 30% annual export growth (2001-2006), causing 59.3% of US manufacturing job...

Treasury Debt & Auction Risks

• Bond Auctions Steady: U.S. Treasury will keep the size of some closely watched bond sales steady for at least the...

U.S. Treasury will keep sizes of key bond auctions steady for at least the next several quarters – and that's a problem amid debt pressures.

April CPI risks shattering dovish Fed bets, as swaps curve shows May at ~4.2% easing modestly to ~3.7% by August (June ~4.0%, July ~3.9%)—a key signal of sticky inflation amid shifting liquidity regimes.