Welcome to The Dispatch. This is Vol. 1.
Every Sunday evening you'll get the same thing: the Bond Bro pressure gauge reading for the week ahead, the four components driving it (duration, curve, supply, basis/credit), and the institutional read on the catalysts that will move it. No equity overlay. No "munis are boring." No "consider adding selectively." This is the desk read.
This is also the first weekly published under my own name, free of any institutional compliance gate, in twenty years.
The Hormuz Asymmetry
Three hours before this edition went to press, Reuters ran a Nikkei report citing sources that Iran would reopen the Strait of Hormuz 30 days after a peace deal. Earlier today, Iran's president unilaterally restored international internet access. Earlier still, Trump linked any Iran deal to the Abraham Accords framework.
This is the most consequential set of headlines on the energy tape since the conflict began. Brent finished last week at $103.37, already down 6% on peace-progress signaling. WTI at $96.21. Both are pricing in some probability of a deal. Neither is pricing in the specificity of "30 days after."
The institutional asymmetry for this week is now defined by a binary: does Hormuz traffic actually return, or do we get another April 26 breakdown? If the former, every component of the pressure gauge deflates fast — duration risk drops, supply gets absorbed, basis trade exposure quiets, the commodity inflation thesis develops a counter-narrative. If the latter, the structural bearishness on duration that's been building for four months gets confirmed.
The honest read: Iran has signaled before. The April 26 breakdown — Trump cancelled the Witkoff-Kushner trip to Islamabad, Iran's foreign minister left Pakistan without meeting US officials — is the recent template. Internet reopening is unilateral signaling. Nikkei sources are not a treaty. Hormuz reopening is the only confirmation that matters.
V1 holds the elevated gauge until Hormuz traffic actually returns. The headlines are real. The deal is not, yet.
Pressure Gauge — Week of May 26: 7/10 ELEVATED
Component | Score | Direction |
|---|---|---|
Duration | 8/10 | ↑ |
Curve | 5/10 | → |
Supply | 8/10 | ↑↑ |
Basis / Credit | 7/10 | ↑ |
Duration (8/10). The 30-year Treasury closed Friday at 5.07%, having traded as high as 5.197% intraweek. That's the highest 30-year yield since 2007. The structural story is in the chart — the long end decoupled from the rest of the curve in February and has been writing its own narrative for four months. This is term premium rebuilding in real time, and the macro backdrop demands it: the CRB Index (Commodity Research Bureau — the 19-commodity broad-basket benchmark spanning energy, metals, and agriculture) is up 38% year-over-year. Gasoline has doubled YTD. Silver is up 133% in twelve months. The Baltic Dry Index is up 123%. The 30-year at 5.07% is not stretched. It's catching up.
Curve (5/10). 2s10s sits at 43 basis points. 5s30s at 80 bp. The curve is materially flatter than the public commentary suggests, and the bear-steepener narrative being pushed by sell-side strategists isn't showing up in the data. Friday closed as a bull-flattener day (2Y +4bp, 30Y -2.5bp). The signal: no clean trend. Position for asymmetric PCE risk Friday rather than a directional curve view.
Supply (8/10). $183 billion of coupon supply hits this week: $69B 2-year Tuesday, $70B 5-year Wednesday, $44B 7-year Thursday. All three settle June 1. This is the duration belly — the most rate-sensitive segment of the curve — clearing in a single week with PCE on Friday as punctuation. The complication: the dollar is weakening. EUR/USD +2.5% YoY, AUD/USD +10%, BRL -11% (real stronger), Mexican peso -10%, Rand -9%. Foreign indirect bidders — historically the marginal buyer at long-end auctions — are facing softer-dollar headwinds and, in Japan's case (USD/JPY +11% YoY at ¥158.91), punishing unhedged FX losses on existing US Treasury holdings. The 7-year Thursday is the auction to watch. Historically the worst-clearing auction. The tail could be 3-5 basis points wide.
Basis / Credit (7/10). The MOVE Index — the Merrill Lynch Option Volatility Estimate, the bond market's VIX — closed Friday at 78.43. Off the April high of 115, but bid into the print. Implied rates volatility is being purchased. More importantly, the credit market is dispersing: LQD (iShares IG Corporate Bond ETF) closed regular at $108.37 and printed $105.70 after-hours — a 2.46% gap. HYG (iShares High Yield Bond ETF) closed at $79.91, having grinded higher for six months on spread compression even as IG and Treasuries took duration pain. IG getting hit by duration while HY rallies on spreads is the opposite of textbook credit behavior in a rising-rate regime. This is a stock-pickers credit environment, not a beta-buyers credit environment.
This Week's Catalysts
Tuesday May 26 — Consumer Confidence (Conference Board), $69B 2-year auction. Confidence is the labor-biased indicator; sentiment (the University of Michigan version) is the inflation-biased one. They've been telling different stories — confidence resilient, sentiment near record lows. Read confidence as the answer to "is the labor market still the source of stability the bulls are leaning on." The 2-year auction is the first read on belly demand post-Memorial Day. Weak bid-to-cover (the auction metric comparing total bids submitted to securities offered — anything sub-2.4x signals weak demand) sets the tone for Wednesday and Thursday.
Wednesday May 27 — $70B 5-year auction, New Home Sales, Richmond Fed Manufacturing. The 5-year is the heart of the duration belly. This is the auction that tells you whether the institutional buyer is still showing up. Watch indirect bidders — the foreign + asset manager proxy. Sub-70% indirect take and the curve takes another leg steeper. The dollar weakness story makes this auction more interesting than usual.
Thursday May 28 — Q1 GDP second estimate, $44B 7-year auction, jobless claims. First Q1 release showed 2.0% annualized. Consensus for revision: 2.1%. Personal consumption inside the print is the read worth watching. The 7-year auction is the technical danger zone. Watch for a tail (the difference between the high yield at the auction and the when-issued yield at auction time — a positive tail means the auction cleared worse than expected) of 2 basis points or more. That confirms institutional reluctance to extend duration into PCE Friday.
Friday May 29 — PCE for April, Personal Income/Spending. The print. Core PCE has traveled from 2.8% to 3.2% YoY over the trailing three releases, the largest move since November 2023. Consensus expects another firm number. The asymmetry: with gasoline +101% YTD flowing through to services prices over 60-90 days, a 0.3% MoM core would be a relief print, not a confirmation. The risk is heavy to the upside. Anything 0.4% MoM or higher confirms the rate-hike pricing (CME FedWatch shows 57% probability of at least one Fed hike by December). Anything 0.2% or lower triggers a relief rally that fades by Tuesday because the structural pressure doesn't change with one data point.
Background — The Warsh Era begins. Kevin Warsh was sworn in Friday May 22 at the White House — first Fed Chair sworn in there since Alan Greenspan in 1987. Senate vote 54-45, the narrowest confirmation in modern history. He inherits an FOMC that produced four dissents at its final Powell meeting, the deepest policy split since 1992. In his swearing-in remarks he committed to a "reform-oriented" Fed. First Warsh FOMC: June. The 30-year doesn't care about ceremony — it cares about whether the chair holds the line on inflation or folds for political pressure to cut. The reaction function is unknown. That alone is worth 50 basis points of term premium.
The Read
The setup is asymmetric, and the institutional reader needs to size against the asymmetry. Heavy supply into a Fed transition into a PCE print into month-end extension flow into a Hormuz tape that could break either way. Every component of the pressure gauge points the same direction: pressure rebuilding into PCE.
The cleanest expression of institutional positioning right now is the muni market. MUB closed Friday at $106.17 with $105 million of weekly inflows despite a flat tape. The 30-year muni-Treasury ratio in the high 80s is historically rich. Real money is showing up at these levels, but it isn't bidding aggressively. That tells you supply absorption is neutral-to-negative — clearing prices, not appreciating prices.
This is not a week for hero trades. It's a week for sizing exposure to Friday, watching the 7-year auction Thursday for the institutional bid signal, and being honest about where Warsh actually sits on the hawk-dove spectrum (closer to hawk than the consensus is pricing).
Long-duration exposure into this week is a bet on three things going right at once: PCE prints soft, Hormuz progresses, Warsh leans dovish. That's a triple parlay. The market is offering you 5.07% on the 30-year to take the under.
The next read drops Tuesday morning, 9:00 AM EST. A shorter daily — overnight rates, WTI, Trump statements, anything that moves the gauge between now and Friday.
— Rich Petruzzo, CFA — The Bond Bro
Rich Petruzzo is a CFA charterholder. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute. The Dispatch is not affiliated with or endorsed by CFA Institute. Content is for informational purposes only and is not investment advice.