Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

Will Rising US Yields Spoil World Equities?

Biden's Fiscal Bazooka Raises Risks of Significant Bond Portfolio Losses for Commercial Banks

Congenial Treasury-Fed Nexus Under Yellen Places Spotlight on Fiscal Policy Outlook

US Fiscal Outlook: Good for the Economy, but Profligacy Could Usher Return of Bond Vigilantes

Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Cross Asset Strategy

The magnitude of anticipated borrowing by the US Treasury in H1 has been dramatically reduced compared to estimates released in November, partly due to the looming expiration of legislation that suspended the debt ceiling in 2019. Currently, the Treasury's cash balance is forecast to fall by $1.5 trillion by the end of June, thereby imparting significant consequences for the level of reserves in the banking system and, consequently, financial market conditions.
Despite the continuation of uncertainty about the magnitude of supplementary fiscal stimulus, continued quantitative easing by the Fed and a lower Treasury cash balance will be supportive for risky assets. The aggressive expansion of the Fed's balance sheet in the aftermath of the arrival of the COVID-19 pandemic was able to offset large Treasury borrowing demands, thereby helping to support easy financial conditions and, therefore, US equities.
The arrival of quantitative easing heralded the onset of a new era, whereby reserve and deposit growth both consistently outstrip loans. Given the likelihood of extremely large increase in reserves, banks could become an even more important source of demand for Treasury securities, an outcome that could potentially create problems for the Fed if the risk of portfolio losses on bond holdings rises significantly.
Continued strong demand for Treasuries from banks will suppress the term premium embedded in yields, thereby boosting financial accommodation. Potentially lower capital buffers after 31 March could temporarily impact banks' ability to expand deposits and repo financing.

The magnitude of anticipated borrowing by the US Treasury in H1 has been dramatically reduced compared to estimates released in November, partly due to the looming expiration of legislation that suspended the debt ceiling in 2019. Currently, the Treasury's cash balance is forecast to fall by $1.5 trillion by the end of June, thereby imparting significant consequences for the level of reserves in the banking system and, consequently, financial market conditions.
Despite the continuation of uncertainty about the magnitude of supplementary fiscal stimulus, continued quantitative easing by the Fed and a lower Treasury cash balance will be supportive for risky assets. The aggressive expansion of the Fed's balance sheet in the aftermath of the arrival of the COVID-19 pandemic was able to offset large Treasury borrowing demands, thereby helping to support easy financial conditions and, therefore, US equities.
The arrival of quantitative easing heralded the onset of a new era, whereby reserve and deposit growth both consistently outstrip loans. Given the likelihood of extremely large increase in reserves, banks could become an even more important source of demand for Treasury securities, an outcome that could potentially create problems for the Fed if the risk of portfolio losses on bond holdings rises significantly.
Continued strong demand for Treasuries from banks will suppress the term premium embedded in yields, thereby boosting financial accommodation. Potentially lower capital buffers after 31 March could temporarily impact banks' ability to expand deposits and repo financing.  

Dramatically Rising US Bank Liquidity in 2021: Supportive for Treasuries and Risky Assets