The Treasury Department announced it will double the size of its debt buyback program. Yields fell. Traders cheered. Nobody asked why the government buying back its own debt with money it doesn't have might present a structural problem.
Here's what happened. The Treasury issues debt. Sells it to you. Takes your money. Then buys some of it back. With what money? Your money. But also new money. From new debt. Which it will eventually buy back. With future money. From future debt.
It's a perpetual motion machine except instead of violating physics it just violates basic accounting principles that would get a lemonade stand shut down by the health department.
Yields pulled back from multi-year highs. Technical analysts everywhere scrambled to draw new lines on their charts. The lines meant nothing yesterday. They mean nothing today. They will mean nothing tomorrow. But they're in different places now so that's progress.
Retail traders saw the headline and immediately began calculating their new positions. Some bought bonds. Some sold bonds. Some bought bond ETFs. Some googled what a bond is. All of them will cite this Treasury announcement in six months when explaining why they're down 40%.
The buyback doubles in size. Yields drop. The financial media calls this news. It's not news. It's the government moving deck chairs on the Titanic except the chairs are made of debt and the iceberg is also made of debt and the ocean is debt and Leonardo DiCaprio never shows up because even he won't touch this script.
The best part? This information changed nothing about your trading edge. You had no edge before the announcement. You have no edge after it. But now you have a reason to pretend the next loss wasn't your fault.
Photo by Markus Spiske on Unsplash
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