Forward Guidance Sep 25, 2026 1h 2m · 43m saved
With DCP, 40-Year Rates Trading Veteran who started on the trading floor in 1983
Treasury bond futures have fallen almost 10 full points in two and a half months, and the 10-year yield closed at 5.22% on the day of the recording.
Much of the market is waiting for the Treasury or the Fed to stop the selling. DCP said neither can, and that bonds will not turn until the Fed signals it is done hiking, AI spending slows, fuel refining margins fall, or stocks drop hard.
"I'll stick with my thesis that until I see something materially change, it's still the pain trade with higher yields."
DCP, a 40-year rates trading veteran, on Forward Guidance, started on the floor in the summer of 1983 and has spent his career in fixed income and short-term interest rate futures, first eurodollars and now SOFR. He has also run a brewery and a school catering business, and he used both to show what higher rates and diesel prices are doing to small companies.
The full interview is covered here so you can skip it. 62 minutes of audio, 19 minutes of reading.
Here are the 15 calls that matter.
Key Takeaways
The 30-year yield may have to reach 6% to offset AI spending and diesel-driven inflation
He would also want fed funds at 5% to 5.5%
Treasury buybacks cannot stop the selloff, he said, against about half a trillion dollars of new issuance
Hiking rates will not fix an oil supply shock, in his view
No Fed cut is priced into SOFR futures until December 2029
AI, probably through private credit, is the most likely thing to break first and turn yields lower
The four-decade fall in interest rates is over, and bond futures below 103 have no chart from the last 20 years
A break through 103 on bond futures could take them to par, which is where he expects capitulation
The lower-income half of the economy will be squeezed hard in the next six to nine months
About 100bps of rate hikes priced into 2027–2028 SOFR contracts is "free money" if something breaks
He would short the weakest AI leader, not the laggards, because he sees AI as leverage and greed like 2008 and the dot-com bubble
1. Ten Points in Ten Weeks
The hosts opened by noting that the 10-year Treasury yield had closed at 5.22%, and that the 30-year had been rising 10 basis points a day. DCP said he began trading as a young man.
He has traded rates since 1983
"I started on the floor the summer of 1983." — DCP
He described himself then as a kid in cheap polyester pants who was not sure he could afford the train fare to work.
Bond futures have fallen almost 10 points
ZB is the CME's Treasury bond futures contract.
"If you take a look at ZB in the last two and a half months, it's down almost 10 full Big Boy points" — DCP
He said that was striking, since the market had been pricing rate cuts before the fall. A host asked whether the bottom in yields on 27 February, just before the Iran war began, now looked strange.
