Inferam

What two decades in markets changes.
Fewer forecasts.
Longer holding periods.
Smaller positions in anything you cannot explain.
Much more respect for cash.
The fear stays exactly the same.

After the +29K payrolls print, the consensus is that Treasury yields have peaked. So far only the front end has turned. From 28 Sep to 2 Oct the 2Y fell 9bp (4.92% to 4.83%) and the 30Y rose 7bp (5.56% to 5.63%), and it's the long end that AI capex is priced off.

Fed funds futures put October hike odds at ~70% before Williams spoke on 29 Sep and ~25% after Jefferson on 1 Oct (per Bloomberg), and CME FedWatch showed ~17% after payrolls. The 2Y has been tracking that.

Since 22 Sep the long end has moved on term premium instead. The NY Fed's ACM 10Y term premium went from 0.57% on 22 Sep to 0.90% on 1 Oct, its highest since July 2014, while the expected-rate path in the same model slipped from 4.35% to 4.31%. 2s30s, meanwhile, has gone from +53bp on 21 Sep, its 2026 low, to +80bp on 2 Oct.

We think a Fed pause steepens the curve but doesn't lower the hurdle rate for AI capex, because that spending is long-dated. The 10Y real yield was 2.92% on 2 Oct.

We're wrong if, before the 8-9 Dec FOMC: 2s30s closes below +60bp, the 30Y closes below 5.25%, or the NY Fed ACM 10Y term premium falls below 0.60%.

When thinking becomes cheap, conviction becomes expensive.

2007 vs 2026: 30-yr Treasury yield same, everything else different.

Jun 2007 → Aug 2026
30-yr Treasury yield ····· 5.35% → 5.28%
S&P 500 ·················· 1,503 → 7,674
Fed funds rate ··········· 5.25% → 3.50-3.75%
CPI inflation y/y ········ 2.7% → 3.4%
US federal debt ·········· $8.9T → $39.8T

Hard to read this as anything but a supply problem.

AI will never exceed the depth and breadth of human intelligence.