In the aftermath of yesterday's dismal 20Y auction, we summarized the ugly state of play (which ironically boils down to the sudden "realization" that bond markets are actually begging for higher tariffs and more fiscal space) and quoting DB's George Saravelos, concluded that there are two solutions: i) either a "sharp revision" of the Big, Beautiful Bill to result in credibly tighter fiscal policy (i.e., much more revenue, which means higher taxes, which means recession if not depression as the tax cuts from the TCJA are eliminated and consumer spending implodes) which is clearly not happening now, or ii) dollar devaluation to make US Treasuries more attractive to foreign buyers (mostly Japan), who have traditionally stepped in to buy US paper during risk off episodes... and refuse to do so now.
Why? Because after being frozen in suspended animation with their heads in the sand, the bond vigilantes have finally woken up and looking at this chart, in complete and utter shock.
