Wealthion Macro Bites – Treasury Taps Its $950B War Chest to Steer Long-Term Yields

U.S. Treasury Secretary Bessent announced an unprecedented campaign of maximum economic pressure and secondary sanctions against Iran (“economic D-Day”) aimed at isolating the Iranian regime and penalizing any nation or entity continuing trade or oil purchases.   Bessent telegraphed the new sanctions will be “the single greatest financial offensive ever" and claimed the U.S./Israel war with Iran was "entering its endgame.”

Responding to Bessent’s threats, Iran’s Secretary of the Supreme National Security Council Mohsen Rezaei warned, “If the economic war continues, not a single drop of oil will be exported, neither through the Strait of Hormuz nor from anywhere else in the Persian Gulf.”  Rezaei also warned Iran would consider any country’s support for the U.S. sanctions an “act of war.”

CNBC reports this morning that Secretary Bessent will use the Treasury’s $950 general account at the Fed to help fund its recently announced plans to increase purchases of government bonds.  Using the TGA would provide Treasury considerable firepower to influence long-term bond yields.  Most market participants assumed Treasury would fund its long-dated repurchases by selling short-term bills. Whoa!

After bilateral trade negotiations collapsed at the 11^th hour, President Trump imposed 50% tariffs on $20B of Canadian imports (5% of total Canadian exports to U.S.) including dairy, wine, wood products, furniture, ceramics and hockey sticks.  Canadian Prime Minister Carney said he would retaliate “dollar for dollar” with tariffs beginning 9/8, targeting sectors including steel, dairy, agricultural equipment, paper and electronics.  Carney said details will be released “in the coming days,” while declaring Washington had “asked too much” and that he was not prepared to “compromise Canada’s sovereignty or undermine our key industries.”

Thailand Finance Minister Ekniti Nitithanprapas said on Monday the government is considering taxes on gold trading and importing.  The proposed tax would be set at a level “unharmful” to the gold trading industry but would be designed to allow authorities to track and monitor "grey" funds.

Week ahead: PCE Price Index Wednesday @ 8:30 am (est. +0.1% m/m and +3.6% y/y); Nvidia earnings Wednesday after close; Chair Warsh addresses Jackson Hole Economic Policy Symposium Friday @ 10 am.