Citigroup’s global head of macro and asset allocation strategy, Dirk Willer, said aggressive efforts by the U.S. Treasury to cap long-end borrowing costs risk undermining the dollar by pushing investors toward uncapped bonds. Speaking to the Reuters Global Markets Forum, Willer noted that such a shift could create negative momentum for the greenback as capital seeks alternatives amid concerns over fiscal deterioration.
The warning follows a surge in the 30-year Treasury yield to 5.327%, its highest level since 2007, just one day after breaching 5.30%—a threshold Willer cited as a potential ceiling for Treasury intervention. The spike reflects mounting pressure on long-duration debt, driven by record government deficits, persistent inflation, and a surge in long-term issuance by AI-focused tech firms. The Treasury’s recent move to double buyback sizes for long-duration bonds has done little to alleviate global duration risk, according to Willer, who added that the term premium—the extra yield demanded for holding long-maturity debt—remains elevated.
Willer also highlighted that while the bond-OIS spread has stayed contained, signaling the sell-off is rooted in rate repricing rather than credit or liquidity strains, positioning shifts ahead of November could further influence the trajectory. He suggested additional levers the Treasury might deploy, including expanded buybacks, phasing out the 20-year bond, or regulatory adjustments to encourage broader Treasury holdings. Citigroup, which had previously held an underweight stance on Treasuries, adjusted its position following the Treasury’s announcement by adding gold and maintaining a short dollar position.
The remarks underscore growing market scrutiny over the sustainability of U.S. fiscal policy and its implications for global capital flows. Willer acknowledged that while policymakers retain tools to stabilize markets, the effectiveness and duration of such measures remain a subject of debate among investors.
