--- title: "BofA's Hartnett Warns: If Bessent Fails to Contain Long-End Rates, Dollar Plunge and Asset Sell-Off Will Follow" type: "News" locale: "en" url: "https://longbridge.com/en/news/296722912.md" description: "Hartnett warns that if Bessent cannot push the 30-year Treasury yield below 5%, the dollar will fall sharply, and the market will turn to shorting risk assets, leverage (AI hyperscale computing, private credit), and cyclical assets (financial stocks). Hartnett holds a bullish stance on gold and neglected long-duration assets, describing the current policy bet as extreme with the phrase, \"Success is expected; failure is unimaginable.\"" datetime: "2026-08-24T01:43:04.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296722912.md) - [en](https://longbridge.com/en/news/296722912.md) - [zh-HK](https://longbridge.com/zh-HK/news/296722912.md) generator: "portal-rs" --- # BofA's Hartnett Warns: If Bessent Fails to Contain Long-End Rates, Dollar Plunge and Asset Sell-Off Will Follow Last week, U.S. Treasury Secretary Bessent announced a doubling of the scale for long-end Treasury buybacks. In his latest Flow Show report, Bank of America’s Chief Investment Strategist Michael Hartnett characterized this move as “quasi-QE.” Meanwhile, the total size of U.S. national debt has surpassed $40 trillion for the first time and continues to climb at a rate of $1 trillion per quarter. Hartnett stated bluntly that all three targets of Bessent’s “3-3-3” economic framework have currently been missed, with policy credibility eroding as reflected in the dual weakness of the bond and currency markets— **“Rising yields and a weakening currency signal declining credibility.”** He judges that while this round of “quasi-QE” may temporarily suppress interest rates, it cannot truly lower Treasury yields. **If the 30-year Treasury yield fails to drop below 5%, the dollar will face a significant decline, and the market will experience a systemic sell-off of risk assets. The market will shift to shorting risk assets, shorting AI hyperscale computing and private credit, and shorting financial stocks. Meanwhile, Hartnett maintains a bullish stance on gold and neglected long-duration assets.** ## The “3-3-3” Plan: Three Arrows Fired, All Missed At the beginning of his term in late 2024, Bessent proposed the “3-3-3” economic framework with 2028 as the target horizon. **The three core objectives are: an average annual real GDP growth rate of 3%, reducing the federal fiscal deficit to 3% of GDP, and increasing domestic daily oil production by 3 million barrels.** According to data disclosed by Hartnett in the report, all three indicators have currently fallen short: - GDP Growth: The average growth rate over the past six quarters has been less than 2% - Fiscal Deficit: Currently accounts for approximately 6% of GDP, double the target value - Oil Production: Has increased by only about 300,000 barrels per day since 2024, achieving just one-tenth of the target Hartnett pointed out that policy credibility has historically been measured by the bond and foreign exchange markets. The collective failure of these three targets is the underlying reason for the current high U.S. Treasury yields and pressure on the dollar. ## Three “Maginot Lines”: $4 Oil, 160 USD/JPY, and 5% Treasury Yields Hartnett described the current policy focus as defending three “Maginot Lines”: **gasoline prices not exceeding $4 per gallon, the USD/JPY exchange rate not exceeding 160, and 10-year and 30-year Treasury yields not exceeding 5%. He believes that if these three lines are breached, it will pose a direct threat to economic growth, the AI investment boom, and asset bubbles.** However, the reality is not optimistic. Hartnett noted in the report that U.S. gasoline prices have risen above $4 per gallon again (a significant increase from the pre-war level of $3 per gallon). Against the backdrop of the ongoing “economic war” between the U.S. and Iran, and with U.S. crude oil inventories and the Strategic Petroleum Reserve at 40- to 50-year lows, there is very limited room for oil prices to decline. Regarding exchange rates, Hartnett believes that U.S.-Japan currency intervention requires the Bank of Japan to cooperate with a substantive interest rate hike on September 18 to stabilize Japan’s long-end interest rates and reduce the risk of Japan selling off U.S. Treasuries. The most critical line of defense is keeping long-end U.S. Treasury yields below 5%—this is directly related to avoiding a U.S. government credit event (first, a downgrade by rating agencies; second, potential failed Treasury auctions) and also determines whether AI financing costs can remain at a manageable level. ## Why “Quasi-QE”: Dual Pressure from $40 Trillion Debt and AI Financing In the report, Hartnett outlined the triple logic forcing the Treasury Department to act: **First, debt levels have hit a historical threshold.** The total U.S. national debt has just exceeded $40 trillion and continues to expand at a rate of approximately $1 trillion per quarter. **Second, net Treasury issuance is squeezing corporate financing.** The net issuance of U.S. Treasuries in 2026 and 2027 is expected to reach $2 trillion each year, which will directly crowd out space in the corporate bond market. Meanwhile, AI-related bond issuance has reached $200 billion to $300 billion year-to-date, and the AI arms race has been listed as the U.S. government’s top national security and macroeconomic priority. **Third, divergence between data and markets has triggered a crisis of confidence.** Hartnett pointed out that with zero growth in non-farm payrolls and zero inflation data, the 30-year Treasury yield has risen to a 20-year high. This indicates that market trust in fiscal sustainability has cracked, and “credibility must be rebuilt immediately.” It is against this background that Bessent’s series of “put option”-style policy interventions have rolled out one after another: signing dollar swap agreements with Asian and Gulf countries, intervening in the foreign exchange market regarding the yen, and now, with the Fed’s tacit approval, doubling the scale of long-end Treasury buybacks. Hartnett characterized these moves as “policy panic to repair the fixed-income market.” He also cautioned that this panic-driven fiscal intervention requires Federal Reserve Chair Walsh to deliver a “just-right hawkish” statement at the Jackson Hole meeting on August 28—neither too dovish, which would put further pressure on the dollar, nor too hawkish, which would suppress the market. ## “Success Is Expected; Failure Is Unimaginable” Hartnett summarized the extremity of the current situation in one sentence: “Success is expected; failure is unimaginable.” His logic is that QE was the starting point of the post-Lehman bull market and the foundation of Wall Street’s “too big to fail” narrative. The unconventional monetary stimulus of the past 20 years has created unconventional gains in asset prices. Therefore, the new round of “quasi-QE” should reasonably be expected to succeed. However, he then provided a clear roadmap for a failure scenario: “If Bessent’s ‘panic-driven Operation Twist’ fails to push the 30-year yield below 5%, **it will mean a sharp drop in the dollar and a shift in asset allocation—shorting risk assets, shorting leverage (AI hyperscale computing companies, private credit), and shorting cyclical assets (financial stocks) until the midterm elections.**” In this context, **Hartnett’s bullish positions are concentrated in gold and long-duration assets neglected by the market**, including REITs, biotech ETFs, regional banks, small-cap stocks, and Hong Kong real estate. ### Related Stocks - [UGL.US](https://longbridge.com/en/quote/UGL.US.md) - [GLD.US](https://longbridge.com/en/quote/GLD.US.md) - [USDU.US](https://longbridge.com/en/quote/USDU.US.md) - [UUP.US](https://longbridge.com/en/quote/UUP.US.md) - [SGOL.US](https://longbridge.com/en/quote/SGOL.US.md) - [GLDW.US](https://longbridge.com/en/quote/GLDW.US.md) - [GLDM.US](https://longbridge.com/en/quote/GLDM.US.md) - [IAU.US](https://longbridge.com/en/quote/IAU.US.md) - [518850.CN](https://longbridge.com/en/quote/518850.CN.md) - [GOLD.AU](https://longbridge.com/en/quote/GOLD.AU.md) - [DULL.US](https://longbridge.com/en/quote/DULL.US.md) - [SHNY.US](https://longbridge.com/en/quote/SHNY.US.md) ## Related News & Research - [PRECIOUS-Gold holds steady with Fed minutes in focus](https://longbridge.com/en/news/296310600.md) - [Why is your gold waiting on a speech?](https://longbridge.com/en/news/296733808.md) - [Japanese bond ETFs attract a record $1.5 billion in net inflows in 2026 so far, Morningstar say](https://longbridge.com/en/news/296877740.md) - [PRECIOUS-Gold slips on firmer Treasury yields, oil prices; Fed minutes in focus](https://longbridge.com/en/news/296177333.md) - [PRECIOUS-Gold drops after sharp gains as inflation concerns come to the fore](https://longbridge.com/en/news/296506502.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**