A potential realignment between U.S. fiscal and monetary authorities could drive a rally in long-dated Treasuries, according to Citrini Research. The research firm anticipates that the Treasury Department and Federal Reserve will coordinate a policy shift—dubbed a "Treasury-Fed Accord" or "Treasury twist"—to reduce the supply of longer-dated government debt and increase issuance of shorter-term securities.
Citrini recommends a tactical trade betting on 30-year bonds outperforming five-year notes over the next three months, as the yield gap between the two maturities is expected to narrow. The firm cites recent comments from Treasury Secretary Scott Bessent, who last week outlined plans to expand buybacks of long-term bonds, and a scheduled address by Fed Chair Kevin Warsh at the Jackson Hole symposium as signals of alignment between the two agencies.
The Treasury’s next quarterly refunding announcement, scheduled for November 4, is viewed as a key inflection point. Citrini expects the contours of the "Treasury twist" to become evident by then, potentially pushing long-term yields lower and boosting demand for 30-year bonds, which recently traded near two-decade highs.
Beyond the near-term outlook, Citrini maintains a cautious stance on long-dated bonds. The firm argues that Treasury Secretary Bessent’s strategy—aimed at keeping nominal economic growth above government borrowing costs—could leave bondholders with real returns below inflation, while lower long-term yields may encourage additional fiscal expansion and stoke inflationary pressures.
The research firm’s assessment follows its earlier high-profile call, published earlier this year, warning of an AI-driven economic collapse. Citrini did not provide updated commentary on that forecast in the current report.
