Everyone's trying to cap the cost of money... And everyone is losing (1)

Governments have borrowed too much, inflation will not lie down and the price of money keeps climbing. Regardless of the policies or interventions being thrown at it.

Look at what Washington just tried. Scott Bessent tripled the Treasury's bond buybacks to $6bn, a scheme designed to support prices and push long yields lower. The market took one look and sent the US 10-year to +4.9%, its highest level since late 2023.

Buying your own bonds to lower yields, only to watch them rise, is an unfortunate look.

Bessent dared the market: "I have asymmetric information. I am the house now. You can bet against me if you want."

So they did, and so far, the house is getting rinsed.

This is not an American problem. The average 10-year borrowing cost across the G7 has hit 4% for the first time since 2008. Britain paid its steepest price to borrow in almost 30yrs at last week's gilt auction, with BoE ratesetters warning that a prolonged oil shock could bake inflation back in.

Everyone is reaching for the same lever, but the lever doesn’t seem to be attached to anything.

Jeff Currie, the former Goldman commodities chief, has a blunt name for this: financial repression.

When a government cannot stomach the market-clearing yield, it leans on the market to hold rates artificially low. But the bill comes back through inflation, financial regulation or other ways of quietly transferring wealth from savers to borrowers.

This is where Bessent, along with every other finance minister trying the same trick, could find themselves in tears if they’re not careful.

If capital starts leaving government bonds for other parts of the market, there are lots of places for it to go.

High-grade corporate debt. Hyperscaler bonds. Gold. Bitcoin. Labubus. Fortress-like corporate balance sheets paying 4%+ dividends in industrials, energy and elsewhere.

In other words, the attempt to suppress the cost of government borrowing could end up reigniting the debasement trade and pushing investors further towards real assets, scarce assets and companies with the balance sheets and cash flows to protect purchasing power.

That is the nightmare scenario.

The less bad scenario is that governments simply manage to buy themselves time.

They keep leaning on the bond market, keep yields contained, and hope they can get through to next year before the next inflation wave forces their hand.

But if global inflation rips again, the policy response gets much uglier.

Then we will all get to see the money printers going brrrrrr.

It is also why gold holding at $4.35k/oz, copper near all-time highs and Brent being back at +$100 are worth watching together. They are different markets sending a similar message: investors want assets that can protect them from inflation and the risks attached to government paper.

Buybacks, yield-curve management, jawboning: they can influence the price of money at the margin. But ultimately the market cares about the trajectory of a country's debt, deficit and inflation.

The uncomfortable truth is the one no despatch box wants to say out loud.

If buyers keep demanding more to lend, the message is the one gilts, gold and oil have all been sending.

You can intervene in the price of money. But you cannot manipulate the value of it.

ALSO INTERESTING…

The UK's quiet energy emergency. Brent is touching $105, but the number that should worry Downing Street is UK natural gas at its highest since late 2022. This is the winter energy-bill shock arriving through the back door, and it lands on households and the inflation print, not just on traders' screens. Up nearly 175% YTD, it is enough to make anyone reluctant to switch the heating on…

Pricey oil may be digging its own grave. High prices are driving structural demand destruction, not just the temporary kind. The IEA has Q2 oil demand down some 5mn barrels a day, roughly 5%, while China's clean-tech exports rip: EV shipments more than doubled in the first half and solar panels rose about a quarter. Africa's $2.4bn of Chinese panels reportedly pays back in three months by displacing diesel. That demand does not come back.

Apple wants $2,000 for a folding iPhone. New boss John Ternus opened his account by unveiling the "Duo", the priciest iPhone ever at around $2,000, with the top model reaching roughly $3,200. That is a remarkable proposition in a week when households are swallowing $100 oil and record borrowing costs. Foldables are still a tiny slice of the smartphone market. Apple is betting that the premium will be a feature, not a bug.

HYROX just got a $600m vote of confidence. L Catterton, alongside HYROX's founders and WndrCo, has bought Infront's majority stake in the fitness-racing business in a deal reportedly valuing the company at around €600m. HYROX went from niche fitness challenge to more than 1.4mn participants across 100-plus events last season. The interesting bit isn't just the price. It is what the deal says about where private capital still sees growth: brands with obsessive communities, recurring events and the potential to become global consumer franchises. The founders are back in the driving seat, with Olympic ambitions on the horizon.

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