Nicholas Mugalli
Institutional TMT & Macro Research, AI/Semiconductors/Policy
Long-dated Treasuries are set to rally as an Iran deal would crush oil and bring the long end its disinflation. Iran floated reopening the Strait of Hormuz within a week once the blockade lifts, crude sold off, and Trump wants a way out at the UN General Assembly, with Iran's president in the same city. An open strait means falling oil, energy dropping out of CPI and 10- and 30-year yields coming in hard. Kevin Warsh stays hawkish just long enough to keep bonds honest, then cuts. x.com
Rising long-dated Treasury yields are temporary, and a deal with Iran should bring them down. Commerce Secretary Howard Lutnick said bond markets will treat the US really well once there is an Iran deal. Elevated starting yields also give a margin of safety: heavy coupon carry cushions price declines even if fiscal supply keeps pressuring the curve, making long-end government debt a compelling tactical entry as yields stretch toward record highs. x.com x.com x.com
The pause in attacks until the November 3 midterms is the catalyst for the next leg up in risk assets, including bitcoin, US small caps and long-dated Treasuries. x.com
The prospect of renewed US attacks on Iran sends long-dated Treasuries up this time. HormuzLetter relays Drop Site's report that US forces are positioning for an expected green light to resume attacks. x.com
Long-dated Treasury yields face more upward pressure than in the 1990s, a common comparison. Then, yields were high but falling from the early-1980s Volcker peak, and the US was the sole superpower. Now yields are turning up from their 2020 low, while the Iran war has driven oil-led inflation and exposed weaker US military dominance, denting confidence in Treasuries. Foreigners bought over $940 billion of US stocks in a year while selling Treasuries. Pressure persists until macro tensions ease. … Show more
Potential spending cuts and AI-related deflation make long-dated US Treasuries an asymmetric opportunity. A Democratic sweep could cut spending; an AI-trade blowup could cause deflation, while the AI trade hurts employment. Ending the Iran war could reduce spending and oil prices. Further crude gains could damage the economy hard and quickly enough to outweigh the inflation threat. x.com x.com
Peace with Iran will be the market catalyst by easing oil-driven inflation and financing concerns. Normal cargo costs would stabilize oil prices as refineries rebuild and production rises; inflation expectations and the US 10-year yield would fall, bringing liquidity back into technology. The deal is an extremely strong suspicion, not concrete knowledge, and its timing is unknown. Unlike the 21.4% SPY drawdown before the April 2025 tariff pause, the index has seen no drawdown yet. x.com
The closed Strait of Hormuz adds an energy-driven inflation shock that pushes long-dated US Treasury yields higher still. Japan and China, the two biggest foreign Treasury holders, are dumping $5.35 trillion and $550 billion in Treasuries respectively; more supply requires higher yields to draw buyers, raising US debt-financing costs. The bond shock then pressures stocks, real estate and crypto, with October 12 at risk of one of 2026's biggest market sell-offs. x.com
Long-dated US Treasuries should rally over the next few trading days because the US-Iran draft agreement should send oil sharply lower. Falling oil should lower inflation expectations and pull long-end yields down, lifting bond prices. x.com x.com
Long-dated US Treasuries look favorable as the rise in 10-year yields appears mostly over; inflation searches have peaked, and only 13 of 29 tracked commodities are above their 50-day averages. x.com x.com x.com
Long-dated Treasuries are in a bear market as several forces push long yields higher. Oil and diesel prices tied to Russia-Ukraine, a Fed more determined since Jackson Hole to return inflation to 2% by holding rates high into a supply shock, and heavy corporate issuance for the AI buildout all weigh on bonds. Long yields are also returning toward their long-term average of about 5%. x.com
A possible US strike on Iran poses near-term upside risk for crude oil. If Trump expects to lose the midterms, he may act between Israel's October 27 election and the November 3 US vote. Crude has filled the $101 gap and reached the rising channel's midpoint; if it keeps breaking higher, the next levels are $105, $110 and the channel top near $115. x.com
