Dear Reader,
The AI story Wall Street isn’t spelling out
AI data centers are now a serious public issue.
Texas officials are warning about the strain they could put on the power grid. ERCOT is projecting huge demand growth. Regulators are being pushed to make sure ordinary people don’t get stuck paying for the infrastructure.
So yes…
The market is finally waking up to the power, land, and water demands behind AI.
But almost nobody is talking about the “29% Account.”
That frustrates me.
Because this little-known setup has reportedly averaged 29% a year over the past 25 years.
It’s been used quietly by wealthy investors and major institutions.
And while regular Americans were told to accept whatever scraps their bank offered, the people with better information had access to something entirely different.
That should bother you.
It certainly bothers me.
Especially now, with AI pushing demand for real assets into overdrive.
I recorded a briefing showing what I found, why I call it the “29% Account,” and why I believe more Americans deserve to know about it.
Good investing,
Marc Lichtenfeld
Chief Income Strategist, The Oxford Club
P.S. In my briefing, I’ll show you why this is not a bank account, not crypto, and not some overhyped AI stock. Go here to learn more.
A Weak Treasury Auction Tuesday Could Hit Homebuilders Fast
The bond market’s most consequential moments this week will not come from a Fed speaker. They will arrive Tuesday at 1 p.m. Eastern, when the Treasury Department auctions $69 billion of 2-year notes, followed by $70 billion of 5-year notes Wednesday. Together, that is $139 billion of fresh coupon supply dropped into a market still digesting the Fed’s first rate hike in three years. The results will move rate-sensitive equities the same afternoon.
The 10-year Treasury closed Friday at about 5.00%, the 2-year at about 4.74%, and the 30-year at about 5.34%, the curve rebuilding a premium for additional tightening after Wednesday’s move. The FOMC approved its first interest rate hike in more than three years, bringing the overnight funds rate to a target range of 3.75% to 4%. That is the backdrop into which Treasury now has to sell short-duration paper at scale.
Kansas City Fed President Jeff Schmid has been supportive of keeping inflation pressure in check, and his recent public remarks have stressed the risk of easing too soon. That language keeps the door open for October or December. Chicago Fed President Austan Goolsbee speaks Monday in London at an OMFIF event titled “Monetary Policy in an Uncertain World.” Any hawkish signals there could lift yields further before the auctions open.
Here is the transmission mechanism traders need to track. More rate hikes are in the pipeline: 16 of 18 FOMC participants project at least one additional hike by year-end, which would push the fed funds rate to a 4% to 4.25% target range. Markets have also leaned toward another hike later this year after Chair Kevin Warsh’s post-meeting press conference, a backdrop that keeps term premium elevated and demand for coupon supply uncertain.
A soft auction, flagged by a wide tail, low bid-to-cover, or weak indirect participation, tells bond managers that the market has not fully cleared the rate reset. Yields push higher. That hits IEF and SHY within the hour. What follows is straightforward but worth stating clearly: the 10-year yield holding above 5% can push mortgage rates higher and squeeze homebuilders, mortgage companies, brokerages, and title insurers. With 30-year mortgage rates potentially approaching 8%, existing homeowners with low-rate mortgages are unlikely to sell, meaning the initial hit becomes a deepening freeze in transactions rather than a wave of defaults, hurting homebuilders, mortgage originators, and home-improvement retailers.
Small-cap stocks are particularly sensitive to rates, since smaller companies tend to have weaker balance sheets and are more at risk when borrowing costs rise. The Russell 2000 has already felt this week’s pressure. A sloppy 2-year auction Tuesday afternoon would extend that pain into the close.
The flip side is worth holding. A strong auction, with demand exceeding supply at levels near the current yield, signals that buyers view 5% as fair value. TLT and IEF would catch a bid. Homebuilder ETFs and small-cap indexes would stabilize. That outcome is possible, but the setup demands caution rather than assumption.
The week’s actual risk events are not on a Fed calendar. They are Tuesday at 1 p.m. and Wednesday at 1 p.m. Watch the bid-to-cover and the tail. The rate-sensitive sectors will answer within the afternoon session.
