Episode summary
5% Rates, Bessent's Failed Gamble & What Comes Next w/ Krishna Guha | The Real Eisman Playbook Ep 78
The Real Eisman Playbook
· · 49 min · Hosts: Steve Eisman · Guests: Krishna Guha
Summary
Krishna Guha argued that the jump in the 10-year yield from about 4.5% to over 5% is mostly a “perfect storm” of fundamentals rather than a single Fed action: heavy debt issuance from AI hyperscalers, a massive U.S. deficit, and higher oil prices tied to Middle East conflict. He said those forces are pushing up the neutral rate and making long-term borrowing costs harder to contain. At the same time, he thinks the current yield level is already putting real strain on the non-AI parts of the economy, especially housing, even if it has not yet clearly damaged the AI investment boom itself.
Key takeaways
- Krishna Guha said the rise in long rates is driven more by AI borrowing, deficits, and oil than by Kevin Warsh alone.
- Guha thinks Warsh is right to limit large-scale quantitative easing to emergencies, but wrong to weaken the Fed’s broader guidance and reaction-function communication.
- Guha said Scott Bessent’s bond buyback effort was too small relative to a $40 trillion Treasury market and may have hurt credibility more than yields.
- Guha sees 5%+ 10-year yields as already pressuring housing and other non-AI activity, while AI spending still looks relatively resilient.
- Guha gave Ben Bernanke the highest marks for crisis management, Janet Yellen credit for supporting the labor-market recovery, and Jay Powell praise for avoiding a pandemic-era financial collapse.
Notable quotes
“there a bunch of things coming together. It's kind of the classic perfect storm, right”
“markets work better, but policy also works better when the markets in particular and also the public understand what the central bank's trying to do”
“it's like bringing a butter knife to a gun battle”
How the episode opens
Hi, this is Steve Eisman. Welcome to another episode of The Real Eisman Playbook. So, one of the most important things going on these days is our oil prices, the Fed, interest rates.
So I thought I would bring in my absolute favorite Fed watcher. Someone who I have known for a very very long time and who I have to say I probably read if not every day maybe every other day and that is Krishna Guha of Evercore who is Evercor's Fed watcher. Krishna welcome to the realizing playbook.
It's great to be here. — So let's start with something simple. — Sounds good. — Which is we have a new Fed chairman. — Yep. He just raised rates. — Why? He just for, you know, my viewers are all different levels. Y — Just explain to the viewers. Okay. He raised rates. Why? Why did he raise rates?
Well, Kevin Walsh came in, you know, as Fed chair early in the summer, looked around, tried to assess, you know, where the economy was. His judgment is that inflation has been above the Fed's 2% target for too long. It's more than 5 years.
5 years.
Yeah. Okay. Now, of course, a lot of things happened over that period of time.
The pandemic, pretty big deal, right? Right. You know, a lot of supply disruptions and of course, also demand stimulus as we tried to get the economy going.
More recently, inflation was moderating, but then we got Trump's trade wars and tariffs. Then we got a shooting war in the Middle East and higher oil prices. So, there's lots of stuff going on, not all of which is by any means under the Fed's control in the short term,
Like oil prices.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed rates
- ten-year yield
- ai debt issuance
- forward guidance
- bond buybacks
Companies and tickers mentioned
- EVR
- Evercore
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Real Eisman Playbook, this episode and its artwork belong to Steve Eisman. Octagon is not affiliated with the show; this page is an independent summary.
