Days after warning of a potential “market dysfunction” in the U.S. Treasury market, economist Craig Shapiro has signaled a significant shift, suggesting the “Fed put” might be nearing activation.
What Happened: In a recent X post, Shapiro pointed to the rapid escalation of conditions he previously outlined, stating, “Less than 3 days later, we are here: UST market dysfunction.”
Shapiro, the macro strategist at 3-Circle Investments by the Bear Traps Report, said in his analysis earlier this week that the Federal Reserve would only intervene when financial stability becomes a risk, specifically triggered by a malfunctioning Treasury market.
According to him, factors like forced deleveraging, basis trade unwinds, or foreign repatriation could initiate such a scenario. These conditions could now be materializing after the U.S. imposed 104% tariffs on China, which has shot the 10-year and 30-year Treasury yields up, amid a market correction.
While investors move toward reliable fixed income instruments during market turmoil, which should lower the bond yields, the contrary rise in yields suggests multiple possibilities.
Moody’s Analytics Chief Economist Mark Zandi suggested to ResiClub that the sharp yield increase is likely caused by hedge funds selling Treasuries to cover margin calls on their stock positions. On the other hand, some experts have pointed out that China could be selling U.S. Treasuries in response to heavy tariffs.
“Buying more gold which will anticipate the Fed’s reaction,” said Shapiro, revealing his investment strategy based on the expectation of …