The Macro Minute: Are Bessent and Zervos cooking up a Fed-Treasury Accord 2.0?

The potential formation of a "Fed-Treasury Accord 2.0" under Treasury Secretary Scott Bessent and newly appointed advisor David Zervos signals a move toward greater coordination between fiscal and monetary policy. This shift may involve expanding Treasury buybacks or reinstating yield curve control, potentially ending the 75-year era of independent monetary policymaking established in 1951. Current models peg the 10-year Treasury yield fair value at 6.18%, significantly higher than market rates, suggesting a positive liquidity supply shock may arrive by 2027. Furthermore, the anticipated secular bear market is expected to be a global phenomenon driven by the interconnected AI infrastructure supply chain involving Taiwan, Silicon Valley, the Netherlands, and Japan. Investors should anticipate a peak in the current bull cycle by late 2027 or early 2028, followed by a volatile period where capital preservation in cash outweighs the risks of attempting to trade sharp, temporary rallies.