Plumbing Notes: The Peak-TACO Era

the rates and $ funding playbook for peak escalation

The next phase of the Not War¹ has now commenced. Following a stream of conflicting news, information warfare has grown futile. Markets no longer respect artificial de-escalations. Upon reaching headline fatigue, words have given way to actions. POTUS may have unleashed the largest quasi-TACO yet, but compared to his biggest threats, it was still a relative de-escalation. Trump’s two-week Quasi-Ceasefire™ has subsequently halted the slow burn on risk assets. The mechanism delivering effortless equity market returns has become only partially inhibited. Conks’ excess hikes have also evaporated, not only in the U.S. but globally. As anticipated, risk assets are sniffing out peak escalation, disconnecting from rates markets pricing the aftereffects of Operation Epic Fury. Opening the Strait “that shall not be named”² will only limit, not reverse, global turmoil and inflationary pressures³. Global rates — minus the ultra-short-end — thus resemble what markets believe to be maximum escalation. Welcome to the Peak-TACO era.