PodcastThe Monetary Matters NetworkDavid Busch

Why The 30-Year Treasury Lost Its Biggest Buyers | David Busch

The discussion links AI's expanding infrastructure needs to rare-earth dependence, energy demand, corporate investment, financial-services adoption, and a potential shift in entry-level employment over the next five to ten years. Busch attributes current inflationary pressure to the conflict with Iran, higher energy prices, and tariffs, while expecting rates to remain higher for longer as Treasury supply and corporate issuance compete for investor demand. He favors shorter- to intermediate-term Treasuries, sees potential value in their renewed hedging role, and expects market volatility if AI-related earnings weaken or a catalyst triggers a major dollar selloff.

AI InfrastructureSemiconductorsEnergy MarketsInflationInterest RatesFixed Income

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Key Takeaways

AI infrastructure spending remains supported by large-cap technology companies, but its broader investment case depends on second- and third-order effects: infrastructure providers and adopters must convert deployment into measurable efficiency and earnings gains. Busch also expects AI to improve financial-services workflows and profitability, while warning that automation of entry-level investment-banking work could reduce labor share and narrow opportunities for new graduates over the next five to ten years.

The buildout of AI infrastructure creates both strategic and physical constraints: China controls roughly 80% of rare earth minerals, while data centers will require a mix of coal, natural gas, oil, wind, solar, and potentially nuclear power. Busch expects the rare-earth response to combine negotiations with China, new mines, recycling, and expanded refining, and is following small nuclear reactors as part of the energy solution.

AI is not expected to affect all software and data businesses equally. Busch argues that Intuit remains discounted as an AI loser because personal tax-planning software may be difficult to replace broadly, whereas Bloomberg and similar platforms retain a moat through embedded messaging, email, analytical tools, and licensed data that an internally built system would not easily replicate.

Busch attributes current inflationary pressure to the Iran conflict, higher oil and gas prices, and tariffs, while noting that energy costs transmit through the broader economy even when excluded from core PCE. Persistent inflation and resilient labor markets could keep rates higher for longer, increasing financing costs and shifting investor focus toward whether corporate capital spending produces sustained earnings growth.

Treasury supply is competing with corporate borrowing for investor demand: roughly $40 trillion of U.S. debt is outstanding, while investment-grade issuance tied partly to AI infrastructure adds further supply. Higher Treasury yields can pressure equity valuations through higher risk-free discount rates, although resilient AI, hyperscaler, and infrastructure earnings could allow stocks to absorb those yields.

GEO-POLITICS

Rare Earth Dependence — China controls roughly 80% of the world's rare earth minerals, creating a strategic dependency for the United States as it builds AI infrastructure. Busch expects the response to combine negotiations with China and alternative supplies from new mines, recycling, and expanded refining capacity.

“The other is access to the rare earth minerals to build all this stuff out because, you know, really we're in a situation where, you know, China controls 80% of…”—

TECHNOLOGY

AI Investment Adoption — Large-cap technology companies are not signaling a slowdown in AI infrastructure spending. Busch frames adoption through first-, second-, and third-order effects: initial entrants, infrastructure providers, and companies that adopt the technology quickly enough to gain efficiencies. The earnings impact should become clearer over the next several quarters.

“I haven't seen that either where any of the recent large cap tech company earnings reports talk about slowing down at all. In fact, it seems to be peddled down…”—

Intuit AI Risk — Intuit remains a software laggard because investors continue to view it as an AI loser rather than a beneficiary. Busch argues that broadly replacing personal tax-planning software will be difficult, which may explain why the stock has not rebounded as much as other software companies.

“Intuit is the classic, like, oh, no. This is quote unquote old school software, and the market still thinks of it as a AI loser, which perhaps it is…”—

Financial Data Moats — Bloomberg and comparable financial-data platforms retain an advantage because their value extends beyond databases to embedded messaging, email, analytical tools, and licensed data. Busch says an internally built system would lack some of those connections and would still require costly data licenses.

“The other real benefit of some of these systems is communication…”—

ECONOMY

Inflation Transmission — Busch attributes current inflationary pressure to the conflict with Iran, higher oil and gas prices, and tariffs that raise the cost of imported goods. Energy costs flow throughout the economy even though core PCE excludes food and energy. A Middle East ceasefire or removal of trade barriers could reduce energy and product costs, though retailers may keep prices elevated to expand margins.

“1 is the conflict with Iran and the subsequent rise in oil and gas prices, and the tariff slash trade wars that we've had with different countries…”—

Higher Rates Financing — Rates are likely to remain higher for longer because inflation persists and resilient labor markets have not given the Federal Reserve a catalyst to resume easing. Higher borrowing costs could compress margins for companies financing expansion, shifting investor attention from capital spending alone to whether it produces sustained earnings growth.

“Having said that, the biggest risk is can these companies that need to finance to expand their operations, what is their borrowing costs gonna look like?…”—

MARKETS

Treasury Supply Crowding — The Treasury market faces a supply problem, with roughly $40 trillion of outstanding U.S. debt having grown substantially over the past 15 to 20 years. New investment-grade corporate issuance tied partly to AI infrastructure spending competes with Treasuries for investor demand. Increased supply and inflationary pressure help keep rates elevated.

“1, we have $40,000,000,000,000 in outstanding US Treasury debt, and that has grown over the last 15, 20 years. But more recently, it's ramped up…”—

Rates Valuations Earnings — Higher Treasury yields provide a stronger fixed-income alternative to equities and pressure stock valuations because equity models discount future cash flows using risk-free rates. Equities can nevertheless absorb higher yields when AI, hyperscaler, and infrastructure-related earnings remain resilient.

“But it also has a tendency because every equity valuation model that's out there discounts future cash flows back to today using the risk free rates…”—

Insurer Treasury Demand — Demand for long-term Treasuries is concentrated among insurance companies, public pension plans, and sovereign wealth funds, while 10-year notes have a broader mutual-fund and money-manager buyer base. Insurers match assets to future liabilities but have reduced duration and convexity exposure, allocating roughly 7% to 15% of assets to private credit and other higher-yielding investments. That shift can reduce demand for long-duration Treasuries.

“So the 30 year, it did cross the 5.3% back in August. We're currently at about a 5.29 yield on the 30 year…”—

FORECASTS

Dollar Selloff Catalyst — A major dollar selloff would likely require sovereign wealth funds to sell Treasuries or investors to shift toward other currencies and global markets. Until such a catalyst appears, Busch views the dollar as relatively strong because it remains the world's reserve currency despite higher rates and economic concerns.

“But my question is, is, you know, what's going be the catalyst that that causes the dollar to sell off dramatically?…”—

Treasury Yield Surge

David Bush attributes elevated yields to Treasury supply, inflation from Iran and tariffs, and corporate borrowing for AI infrastructure competing with government debt.

AI Earnings Versus Rates

Equity markets have tolerated higher rates because AI-related earnings remain strong, though borrowing costs could eventually compress margins and challenge capital spending.

Inflation’s Embedded Costs

Bush sees energy and tariff pressures as potentially transitory but warns retailers may preserve elevated prices, leaving inflation partly embedded in goods and services.

Thirty-Year Treasury Demand

Insurance companies, pensions, and sovereign funds remain natural long-duration buyers, but abundant Treasury issuance now competes with private credit and investment-grade corporate bonds.

Insurance Private-Credit Shift

Insurers are replacing some duration exposure with floating-rate private credit, trading lower interest-rate risk for greater credit, liquidity, and transparency risks.

Duration Matching Changes

Bush explains that insurers can preserve liability matching while allocating a minority of assets to higher-yielding private credit, weakening their traditional bid for long Treasuries.

Bonds As Portfolio Ballast

Despite periods when stocks and bonds fall together, higher current yields restore Treasuries’ potential diversification and safe-haven value during credit or equity shocks.

Treasury Buyback Signal

Treasury buybacks are too small to materially change the market, but their larger significance is the signal that officials are concerned about liquidity and long-term demand.

Debt Management Constraints

Bush argues that the Treasury secretary cannot control spending or taxes and must instead manage issuance, buybacks, and debt maturity while economic growth does the broader work.

Dollar, Gold, And Stocks

A stronger dollar can pressure gold when the Fed tightens, while a major Treasury or sovereign selling wave could eventually create the catalyst for a sharp dollar decline.

Software’s AI Repricing

The speakers view software stocks such as Intuit as potentially oversold because most consumers still need expert systems and human review even as companies adopt AI efficiencies.

AI Infrastructure Bottlenecks

AI expansion will require broad investment across utilities, energy, materials, and industrials, with nuclear power and rare-earth supply emerging as important constraints.

Private Credit Due Diligence

Bush remains skeptical of private credit offerings, emphasizing loan-tape access, redemption limits, underlying credit quality, and the risks of products marketed with equity-like returns.

Loan Tape Transparency

Trajan generally avoids private credit unless its team can assess loan health and strategy details, while public-market disclosure provides more visibility than many private funds.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

No Guarantees: Past performance does not predict future results; investing carries risk.

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