The Fed isn't cutting. The Treasury is. Here's the receipt.
Lots to get done today and with the release of MRE v06 I’m crunched for time so I’ll spare you the intro and get straight into it.
Two things happened this week that don’t belong in the same sentence.. yet here we are.
At the same time, the Treasury’s Q2 refunding meeting quietly rewired the liquidity plumbing. Roughly $40B in nominal coupon issuance cut for Q3, layered on top of ~$300B/yr of MBS reinvestment and the RMP (Reserve Management Purchases).. Fed-adjacent liquidity that doesn’t show up on the QE tape but absolutely lands in the system.
They even floated parking excess TGA cash in the repo market this quarter. They tabled it. But the optionality is loaded.
I deployed my final tranche long into equities yesterday.
The one-liner: Inflation is re-accelerating, the Fed isn’t cutting, and the Treasury just turned the fed put back on through the side door.
Last night I shipped Macro Regime Engine v06.
Today’s morning pipeline run pulled all the new stats and here is where we currently sit for the live engine:
30 bullish votes vs. 15 bearish votes
Reflation winning with a total score of +16
Position sizing: 50% gold, 50% Bitcoin, 50% Ethereum.. equities now at full position
This is the section worth slowing down for, because it’s the part nobody on the timeline is pricing.
The Treasury’s Q2 refunding move, broken into plain English:
~$40B in nominal coupon issuance cut for Q3.. less duration supply hitting the market means yields face less pressure from the auction calendar.
MBS reinvestment (~$300B/yr). When mortgages on the Fed’s balance sheet get paid off, instead of letting that cash disappear, the Fed buys bonds with it. Not technically QE. Functionally, fresh demand into the system.
The RMP: Reserve Management Purchases. The Fed quietly buying T-bills to keep the financial plumbing working. Also not technically QE. Also adds cash back to the system.
Repo market optionality. They floated parking excess TGA cash in the repo market this quarter. They tabled it for now.. but the TGA is full. If anything cracks, that’s the bazooka they pull next.
Add it up and you get fed-adjacent liquidity that doesn’t show up on the tape.
The fed put is back on. Just not the one you were looking for.
As always.. I share the receipts.
Portfolio:
SPY: 100%.. final tranche deployed yesterday.
I should have gone with my gut and lump-summed in. I DCA’d. Took the coward’s way out for the psychology of it. It is what it is.
BTC: 50%
GLD: 50%
ETH: 50%
Bull put spread: untouched, +60% on the position.
~21 days left. Will close and roll.
First time we’re in the green this year after eating the January BTC trade under the original 8th Rule indicator (pre-systems upgrade).
This Week’s Data Drops:
ISM Services PMI.. in line.
JOLTS Job Openings.. in line.
Unemployment: 4.3%.. in line.
FedWatch: 5% June / 10% July / 13% September. They’re not cutting. They don’t have to.. see above.
The setup is a contradiction on the surface and a clean trade underneath:
Inflation is re-accelerating at the import-price layer.
The Fed is sitting at 5% June cut odds.
The Treasury is running stealth liquidity that almost nobody is pricing.
Liquidity is expanding. Stress is green. Reflation is winning the vote count by 2:1.
If you only watch the Fed funds futures, this looks reckless. If you watch the full liquidity stack.. coupon issuance, MBS reinvestment, RMP, TGA optionality.. the equity sleeve at 100% is the logical answer.
The risk: dollar strength on the back of the Hormuz situation, or import prices bleeding into the shelf data fast enough to spook the long end. I’m watching both.
The MRE v6 will tell me to flip before the consensus does.
Until then: follow the signals, manage drawdown, and survive your way into alpha.
I’ll be doing the same. Right after a caffeine run.
For this week’s full video breakdown:
— Durden out.
✊🧼
Disclaimer: This content is for educational and informational purposes only. It does not constitute financial advice, investment advice, or a recommendation to buy or sell any asset. Trading equities and futures involves substantial risk of loss, including the potential for loss exceeding your initial investment.
Past performance, whether backtested or live, does not guarantee future results. Backtested performance has inherent limitations: it is designed with the benefit of hindsight, does not reflect actual trading, and does not account for all factors that may affect real-world execution.
The author is not a licensed financial advisor. Always do your own research and consult a qualified financial professional before making investment decisions. You are solely responsible for your own trading decisions.
Want the live dashboards behind these insights?
Subscribe on Substack Free subscribers get research updates. Paid subscribers get live macro tools + signal alerts.