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EndGame Macro
A Quiet Warning from the 2 Year Treasury
When you look at the 2 year Treasury, you’re basically looking at the market’s best guess about where the Fed will need to take policy over the next couple of years. It isn’t a sentiment indicator, and it isn’t reacting to headlines the way equities do. It reflects deeper expectations about growth, inflation, and stress inside the financial system.
That’s why, historically, when the 2 year starts drifting lower after a period of tightening, it almost always means the same thing: the economy is weakening under the surface, and the Fed is going to have to ease more aggressively than it’s admitting. You saw this in 2000, in 2006–07, in 2018–19. The rollover tends to show up months before the data confirms anything.
What This Chart Is Telling You Now
If you trace the past year on this chart, the downtrend is obvious. Early 2025 had yields hovering in the low 4s, bouncing around as the Fed was still talking tough. But from spring onward, the direction is mostly one way with softer highs, softer lows, and a clear slide that takes us to roughly 3.5% today.
That matters because the Fed funds rate is still sitting above that, around 3.75–4.0%. When the 2 year drops below the actual policy rate, it’s a quiet acknowledgment by the bond market that the Fed is behind the curve. Add to that the fact that QT ends next week, rate cuts have already begun, and stress is showing up in dollar funding markets and you can feel why the 2 year isn’t buying the soft landing forever narrative.
This isn’t the kind of decline you get when everything is suddenly wonderful. It’s the kind you get when the system starts to tighten on its own and when balance sheets get heavy, collateral dries up, and markets sense that the Fed will need to respond sooner or later.
My View Going Forward
The 2 year is speaking clearly that the tightening cycle is over in reality, even if not in tone. Unless something changes dramatically on the growth side and there’s not much evidence of that, the most likely path is more easing over the next year, not less.
That doesn’t mean yields crash in a straight line. They can easily bounce on a strong data print or a hawkish comment. But the broader rhythm looks like a market preparing for slower growth, softer labor numbers, and a Fed that eventually has to address it. And when that’s the setup, the 2 year tends to grind lower, not higher.
So when you read this chart, don’t just see a number. See the shift underneath it: the market quietly positioning for an economy that’s losing altitude and a Fed that will have to catch it.
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A Quiet Warning from the 2 Year Treasury
When you look at the 2 year Treasury, you’re basically looking at the market’s best guess about where the Fed will need to take policy over the next couple of years. It isn’t a sentiment indicator, and it isn’t reacting to headlines the way equities do. It reflects deeper expectations about growth, inflation, and stress inside the financial system.
That’s why, historically, when the 2 year starts drifting lower after a period of tightening, it almost always means the same thing: the economy is weakening under the surface, and the Fed is going to have to ease more aggressively than it’s admitting. You saw this in 2000, in 2006–07, in 2018–19. The rollover tends to show up months before the data confirms anything.
What This Chart Is Telling You Now
If you trace the past year on this chart, the downtrend is obvious. Early 2025 had yields hovering in the low 4s, bouncing around as the Fed was still talking tough. But from spring onward, the direction is mostly one way with softer highs, softer lows, and a clear slide that takes us to roughly 3.5% today.
That matters because the Fed funds rate is still sitting above that, around 3.75–4.0%. When the 2 year drops below the actual policy rate, it’s a quiet acknowledgment by the bond market that the Fed is behind the curve. Add to that the fact that QT ends next week, rate cuts have already begun, and stress is showing up in dollar funding markets and you can feel why the 2 year isn’t buying the soft landing forever narrative.
This isn’t the kind of decline you get when everything is suddenly wonderful. It’s the kind you get when the system starts to tighten on its own and when balance sheets get heavy, collateral dries up, and markets sense that the Fed will need to respond sooner or later.
My View Going Forward
The 2 year is speaking clearly that the tightening cycle is over in reality, even if not in tone. Unless something changes dramatically on the growth side and there’s not much evidence of that, the most likely path is more easing over the next year, not less.
That doesn’t mean yields crash in a straight line. They can easily bounce on a strong data print or a hawkish comment. But the broader rhythm looks like a market preparing for slower growth, softer labor numbers, and a Fed that eventually has to address it. And when that’s the setup, the 2 year tends to grind lower, not higher.
So when you read this chart, don’t just see a number. See the shift underneath it: the market quietly positioning for an economy that’s losing altitude and a Fed that will have to catch it.
https://t.co/dwQEH7Nirv tweet
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Dimitry Nakhla | Babylon Capital®
Jensen Huang with some admirable praise for $GOOG foresight around TPUs
“The advantage that Google had is foresight…”
The @BG2Pod episode with Brad Gerstner & Clark Tang from a couple months ago is excellent — thoughtful questions & great insights
https://t.co/9EHpWupZpK https://t.co/yz7K3OfVg3
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Jensen Huang with some admirable praise for $GOOG foresight around TPUs
“The advantage that Google had is foresight…”
The @BG2Pod episode with Brad Gerstner & Clark Tang from a couple months ago is excellent — thoughtful questions & great insights
https://t.co/9EHpWupZpK https://t.co/yz7K3OfVg3
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EndGame Macro
The Dollar’s Most Crowded Bet Is the Wrong One
The top half is the broad dollar index. The bottom half is hedge fund positioning in the dollar, a simple read on whether the fast money is leaning long or short. When that lower line sinks deep into negative territory, it means funds are heavily short the dollar. And historically, whenever positioning gets this one sided, the dollar is either sitting near a local bottom or about to turn higher. You can see the rhythm across the past twenty years: every cycle of heavy shorting eventually gives way to a dollar rebound.
What stands out today is that hedge funds are back in that sell everything USD zone while the dollar itself is sitting toward the lower end of its range. That mix is usually a warning sign. It means people aren’t shorting a strong dollar, they’re shorting a weak one. And that combination rarely holds for long because it leaves the market vulnerable to any shift in sentiment or liquidity.
The Bigger Story Behind the Positioning
These extreme shorts don’t appear in a vacuum. When funds pile into anti dollar trades, they’re effectively betting that global conditions will stay calm and liquidity will stay easy. But the broader macro tone doesn’t match that optimism. Growth is slowing, the front end of the Treasury curve is already pricing future Fed cuts, and dollar funding markets have started to tighten around the edges. In that kind of backdrop, you don’t need a crisis for the dollar to move, you just need the world to feel slightly less certain.
This is why positioning matters so much here. When hedge funds crowd into one direction, they leave themselves exposed; any wobble in risk appetite or liquidity can force a quick snap back. And the dollar tends to be the first asset people buy when the mood shifts from everything is fine to “
wait, something feels off.
My View From Here
This setup doesn’t guarantee a major dollar bull run, but it does tell you that the downside is probably limited. When positioning is this stretched, the dollar doesn’t need great news to rise, it only needs reality to fall short of perfection. And right now, with the cycle cooling and markets running on thinner liquidity, that’s a very plausible outcome.
So the heart of the chart is simple: hedge funds are leaning aggressively against the dollar at a moment when the macro environment is becoming less forgiving. That’s usually the kind of moment where the dollar stops drifting lower and starts pushing back.
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The Dollar’s Most Crowded Bet Is the Wrong One
The top half is the broad dollar index. The bottom half is hedge fund positioning in the dollar, a simple read on whether the fast money is leaning long or short. When that lower line sinks deep into negative territory, it means funds are heavily short the dollar. And historically, whenever positioning gets this one sided, the dollar is either sitting near a local bottom or about to turn higher. You can see the rhythm across the past twenty years: every cycle of heavy shorting eventually gives way to a dollar rebound.
What stands out today is that hedge funds are back in that sell everything USD zone while the dollar itself is sitting toward the lower end of its range. That mix is usually a warning sign. It means people aren’t shorting a strong dollar, they’re shorting a weak one. And that combination rarely holds for long because it leaves the market vulnerable to any shift in sentiment or liquidity.
The Bigger Story Behind the Positioning
These extreme shorts don’t appear in a vacuum. When funds pile into anti dollar trades, they’re effectively betting that global conditions will stay calm and liquidity will stay easy. But the broader macro tone doesn’t match that optimism. Growth is slowing, the front end of the Treasury curve is already pricing future Fed cuts, and dollar funding markets have started to tighten around the edges. In that kind of backdrop, you don’t need a crisis for the dollar to move, you just need the world to feel slightly less certain.
This is why positioning matters so much here. When hedge funds crowd into one direction, they leave themselves exposed; any wobble in risk appetite or liquidity can force a quick snap back. And the dollar tends to be the first asset people buy when the mood shifts from everything is fine to “
wait, something feels off.
My View From Here
This setup doesn’t guarantee a major dollar bull run, but it does tell you that the downside is probably limited. When positioning is this stretched, the dollar doesn’t need great news to rise, it only needs reality to fall short of perfection. And right now, with the cycle cooling and markets running on thinner liquidity, that’s a very plausible outcome.
So the heart of the chart is simple: hedge funds are leaning aggressively against the dollar at a moment when the macro environment is becoming less forgiving. That’s usually the kind of moment where the dollar stops drifting lower and starts pushing back.
Is it time to turn contrarian on the King Dollar?
Hedge funds are holding significant short positions in the DXY, and historically, similar levels have often preceded solid buying opportunities—at least for a short-term rebound.
When a trade becomes too crowded, it’s usually worth considering the opposite side. tweet
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EndGame Macro
Breakevens Don’t Drop in a Healthy Economy
The 5 year breakeven is one of the cleanest signals the market gives about where inflation is likely to settle over the next few years. It isn’t reacting to this month’s CPI print, it reflects the deeper mix of growth expectations, policy credibility, and how much risk investors feel they need to be compensated for. When it’s rising, the market is essentially saying inflation will stay stubborn. When it starts drifting lower, it’s usually telling you conditions are cooling under the surface.
Right now we’re sitting near 2.30%, close to the lows of the year, after spending the early part of 2025 closer to 2.6–2.7%. That shift isn’t random. It lines up with the broader pattern we’ve seen: the 2 year rolling below Fed funds, two rate cuts already delivered, QT ending next week, and softer tone across growth data. If the economy were truly heating up, breakevens wouldn’t be slipping, investors would be demanding more inflation protection, not less.
What It Means Going Forward
This move down in breakevens is the market quietly acknowledging that the inflation scare has broken and the real tension is drifting back toward growth. When breakevens slide like this, it’s the market quietly saying inflation isn’t the threat anymore, the slowdown is. Investors only let future inflation pricing sink when they’re convinced the economy doesn’t have enough strength left to generate meaningful price pressure on its own. It’s essentially an admission that demand is cooling, momentum is fading, and the Fed won’t need to lean against overheating because the cycle is already losing steam. Lower breakevens are a sign growth is softening beneath the surface.
So the message here is subtle but important…expectations are normalizing because the cycle is slowing, not because we’re entering some booming new phase. A breakeven sitting just above 2% with a bearish tilt usually belongs to a late cycle environment, a place where inflation risk is no longer the main story and the market is starting to price the possibility that the Fed may need to ease more to keep the slowdown from slipping too far.
It’s a calm surface with a familiar undertow, the kind you see before the conversation shifts from inflation to growth.
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Breakevens Don’t Drop in a Healthy Economy
The 5 year breakeven is one of the cleanest signals the market gives about where inflation is likely to settle over the next few years. It isn’t reacting to this month’s CPI print, it reflects the deeper mix of growth expectations, policy credibility, and how much risk investors feel they need to be compensated for. When it’s rising, the market is essentially saying inflation will stay stubborn. When it starts drifting lower, it’s usually telling you conditions are cooling under the surface.
Right now we’re sitting near 2.30%, close to the lows of the year, after spending the early part of 2025 closer to 2.6–2.7%. That shift isn’t random. It lines up with the broader pattern we’ve seen: the 2 year rolling below Fed funds, two rate cuts already delivered, QT ending next week, and softer tone across growth data. If the economy were truly heating up, breakevens wouldn’t be slipping, investors would be demanding more inflation protection, not less.
What It Means Going Forward
This move down in breakevens is the market quietly acknowledging that the inflation scare has broken and the real tension is drifting back toward growth. When breakevens slide like this, it’s the market quietly saying inflation isn’t the threat anymore, the slowdown is. Investors only let future inflation pricing sink when they’re convinced the economy doesn’t have enough strength left to generate meaningful price pressure on its own. It’s essentially an admission that demand is cooling, momentum is fading, and the Fed won’t need to lean against overheating because the cycle is already losing steam. Lower breakevens are a sign growth is softening beneath the surface.
So the message here is subtle but important…expectations are normalizing because the cycle is slowing, not because we’re entering some booming new phase. A breakeven sitting just above 2% with a bearish tilt usually belongs to a late cycle environment, a place where inflation risk is no longer the main story and the market is starting to price the possibility that the Fed may need to ease more to keep the slowdown from slipping too far.
It’s a calm surface with a familiar undertow, the kind you see before the conversation shifts from inflation to growth.
Bond mkt now pricing in 5Y inflation rate at 2.30% - near the lows of the 1yr range - having coming down 11bp MTD despite no additional inflation data since 10/24. https://t.co/u4WiRaYQmG tweet
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Wasteland Capital
Another killer $BABA report! 耶! Acceleration to +15% like-for-like revenue growth vs +10% last Q. Cloud +34% vs +26% last Q. Quick commerce rev +60% (huge S&M spend, but winning the war?). Massive cloud capex continues (RMB120bn LTM), 9th Q of triple-digit AI-rev growth. 太棒了! https://t.co/rDxgpTPbWK
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Another killer $BABA report! 耶! Acceleration to +15% like-for-like revenue growth vs +10% last Q. Cloud +34% vs +26% last Q. Quick commerce rev +60% (huge S&M spend, but winning the war?). Massive cloud capex continues (RMB120bn LTM), 9th Q of triple-digit AI-rev growth. 太棒了! https://t.co/rDxgpTPbWK
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WealthyReadings
$BABA cloud services continue its growth acceleration and margins expansion.
In brief: more cash generation.
No surprises for me & many $BABA bulls. https://t.co/unPi9uX7SE
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$BABA cloud services continue its growth acceleration and margins expansion.
In brief: more cash generation.
No surprises for me & many $BABA bulls. https://t.co/unPi9uX7SE
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WealthyReadings
$BABA Chinese e-commerce platform continues to accelerate revenues. Chinese consumption is re-accelerating, boosted by governmental policies.
Once again: no surprises for me & many $BABA bulls. https://t.co/1EDIRDhby8
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$BABA Chinese e-commerce platform continues to accelerate revenues. Chinese consumption is re-accelerating, boosted by governmental policies.
Once again: no surprises for me & many $BABA bulls. https://t.co/1EDIRDhby8
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EndGame Macro
The Recession Has Already Started And Here’s the Proof No One Wants to Look At
This isn’t a doom thread, it’s the actual sequence a credit driven recession follows, and today’s data fits that playbook almost perfectly. These cycles don’t hit all at once; they fall like dominos. And once the first few tip, the rest usually follow.
Here’s how that chain reaction works, and where current numbers place us.
Subprime Cracks First
Serious auto loan delinquencies are now around 5%, basically back to the 5.3% GFC peak. Student loan delinquencies sit near 9.4%, far above the 6.5% peak in 2009. Multiple subprime auto lenders have failed or stopped originating. That’s always the first break.
Collateral Starts Failing
Office CMBS delinquencies have hit 11.8%, the highest ever recorded. Bank CRE delinquencies remain near 1.5%, but the stress is concentrated in office loans with brutal refinancing math. Auto collateral is weakening. Specialty lenders and suppliers are folding around the edges.
Specialty Finance Blows Up
Tricolor is bankrupt. PrimaLend is gone. Automotive Credit Corp stopped originating. First Brands collapsed with $10B+ liabilities. When these non bank lenders vanish, entire credit channels freeze long before banks make official moves.
Banks Tighten Broadly
This is where credit stress becomes a real economy problem. Banks pull lines, raise standards, cut approvals, and tighten across CRE and consumer credit. Small businesses lose financing. Households can’t qualify. CRE borrowers can’t roll debt. We’re entering this phase now.
Unemployment Turns Up
Labor always lags credit. Announced job cuts have already exceeded 1 million, one of the worst years since 2009. Unemployment has climbed to 4.4%, rising slowly but steadily, exactly how recessions begin before they become official.
Corporate Stress Spreads
Around 655 large corporate bankruptcies have been filed through October, the highest in 15 years. Industrial and consumer discretionary names are getting hit. This is the middle innings of the downturn.
Funding Markets Send Warnings
The 2 year (3.5%) is now below Fed funds (3.75–4%), a clear sign policy is too tight. The curve has shifted into a pre recession bull steepener. Five year breakevens are 2.3%, near the bottom of their post COVID range. Crude is under $60, down almost 20% YTD. These are early tremors in the plumbing.
The Fed Gets Forced to Move
If unemployment heads toward 6% next year, which this setup typically produces the Fed’s gentle drift to 3% over years collapses. With rising joblessness, slowing inflation, and swelling deficits, real rates can’t stay tight. A 200–300 bp cut cycle is the realistic path. If funding stress or deflation bites, cuts closer to zero aren’t dramatic, they’re math.
Housing and Markets
Mortgage rates drifting from the low 6s into the mid 5s over the next year is likely, with high 4s possible if unemployment rises. But lower rates won’t stop prices from falling. A 10–20% national decline over a couple of years is reasonable, deeper in the most levered metros.
Markets follow three acts: denial then earnings reality and then policy panic. Historically that delivers a 20–30% drawdown before liquidity ignites the rebound.
The Bottom Line
Combine GFC style delinquencies, record office stress, 650+ bankruptcies, 1M+ layoffs, rising unemployment, a bull steepening curve, falling breakevens, and sub $60 oil and you don’t get a soft landing. You get a recession already moving.
The real question now whether we get a deep but manageable downturn, or a sharper deflation scare before policymakers finally step in.
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The Recession Has Already Started And Here’s the Proof No One Wants to Look At
This isn’t a doom thread, it’s the actual sequence a credit driven recession follows, and today’s data fits that playbook almost perfectly. These cycles don’t hit all at once; they fall like dominos. And once the first few tip, the rest usually follow.
Here’s how that chain reaction works, and where current numbers place us.
Subprime Cracks First
Serious auto loan delinquencies are now around 5%, basically back to the 5.3% GFC peak. Student loan delinquencies sit near 9.4%, far above the 6.5% peak in 2009. Multiple subprime auto lenders have failed or stopped originating. That’s always the first break.
Collateral Starts Failing
Office CMBS delinquencies have hit 11.8%, the highest ever recorded. Bank CRE delinquencies remain near 1.5%, but the stress is concentrated in office loans with brutal refinancing math. Auto collateral is weakening. Specialty lenders and suppliers are folding around the edges.
Specialty Finance Blows Up
Tricolor is bankrupt. PrimaLend is gone. Automotive Credit Corp stopped originating. First Brands collapsed with $10B+ liabilities. When these non bank lenders vanish, entire credit channels freeze long before banks make official moves.
Banks Tighten Broadly
This is where credit stress becomes a real economy problem. Banks pull lines, raise standards, cut approvals, and tighten across CRE and consumer credit. Small businesses lose financing. Households can’t qualify. CRE borrowers can’t roll debt. We’re entering this phase now.
Unemployment Turns Up
Labor always lags credit. Announced job cuts have already exceeded 1 million, one of the worst years since 2009. Unemployment has climbed to 4.4%, rising slowly but steadily, exactly how recessions begin before they become official.
Corporate Stress Spreads
Around 655 large corporate bankruptcies have been filed through October, the highest in 15 years. Industrial and consumer discretionary names are getting hit. This is the middle innings of the downturn.
Funding Markets Send Warnings
The 2 year (3.5%) is now below Fed funds (3.75–4%), a clear sign policy is too tight. The curve has shifted into a pre recession bull steepener. Five year breakevens are 2.3%, near the bottom of their post COVID range. Crude is under $60, down almost 20% YTD. These are early tremors in the plumbing.
The Fed Gets Forced to Move
If unemployment heads toward 6% next year, which this setup typically produces the Fed’s gentle drift to 3% over years collapses. With rising joblessness, slowing inflation, and swelling deficits, real rates can’t stay tight. A 200–300 bp cut cycle is the realistic path. If funding stress or deflation bites, cuts closer to zero aren’t dramatic, they’re math.
Housing and Markets
Mortgage rates drifting from the low 6s into the mid 5s over the next year is likely, with high 4s possible if unemployment rises. But lower rates won’t stop prices from falling. A 10–20% national decline over a couple of years is reasonable, deeper in the most levered metros.
Markets follow three acts: denial then earnings reality and then policy panic. Historically that delivers a 20–30% drawdown before liquidity ignites the rebound.
The Bottom Line
Combine GFC style delinquencies, record office stress, 650+ bankruptcies, 1M+ layoffs, rising unemployment, a bull steepening curve, falling breakevens, and sub $60 oil and you don’t get a soft landing. You get a recession already moving.
The real question now whether we get a deep but manageable downturn, or a sharper deflation scare before policymakers finally step in.
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AkhenOsiris
$GENI
Genius Sports today announced a global partnership with Publicis Sports to reshape the future of fan engagement through FANHub, Genius Sports’ proprietary sports advertising platform.
Through FANHub, Publicis Sports clients will gain access to the most advanced sports advertising technologies available. This AI-driven platform enables brands to connect with specific, verified fans at peak moments of passion and attention, delivering messaging that aligns seamlessly with in-game action. By leveraging Genius Sports’ proprietary data signals, Publicis Sports further strengthens its rich data sets, enabling teams to activate real-time campaigns that move in sync with the game-turning key moments of drama, triumph, and surprise into powerful opportunities for brand engagement and emotional connection.
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$GENI
Genius Sports today announced a global partnership with Publicis Sports to reshape the future of fan engagement through FANHub, Genius Sports’ proprietary sports advertising platform.
Through FANHub, Publicis Sports clients will gain access to the most advanced sports advertising technologies available. This AI-driven platform enables brands to connect with specific, verified fans at peak moments of passion and attention, delivering messaging that aligns seamlessly with in-game action. By leveraging Genius Sports’ proprietary data signals, Publicis Sports further strengthens its rich data sets, enabling teams to activate real-time campaigns that move in sync with the game-turning key moments of drama, triumph, and surprise into powerful opportunities for brand engagement and emotional connection.
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