Bank of America Chief: US Treasuries Approaching $40 Trillion, Going Long on Gold is the Optimal Solution at the Moment, AI Bonds Become Anti Intuitive Targets for Short Selling BlockBeats reported that on August 17, Michael Hartnett, the chief investment strategist of Bank of America, identified the imminent breakthrough of US treasury bond bonds to 40 trillion dollars as the core narrative theme of the current market in the latest Flow Show report, and expressed his opinion on the topic of "trouble at the beginning of the forties". In the past 12 months, US debt interest expenditure has reached 1.4 trillion US dollars, which is approaching to surpass social security as the largest single expenditure of the federal government. The 30-year US debt issued last week hit a 25 year high with a yield of 5.126%. Hartnett pointed out that unless the 5-year US Treasury yield falls below 3.25%, the worsening trend of interest expenses will not reverse, which is almost impossible to happen without significant deflationary shocks or recessions. He summarized the absurdity of reality in one sentence: 'The US stock market hit a historic high on the same day, and US bonds were issued at their highest yield in 25 years on the same day.' Under the asset allocation framework of staying away from bonds, the US dollar, and fully investing in AI, Hartnett explicitly listed long gold as the optimal solution to combat US dollar depreciation, bond collapse, and asset inflation. At the same time, a counterintuitive trade was proposed - short selling AI bonds, with the logic of over $1 trillion in capital expenditures combined with negative free cash flow. AI companies must continue to issue large-scale bonds for financing, and this trade will be much more profitable than doing more AI stocks. Nomura strategist data confirms the pressure in the bond market: the issuance scale of AI and data center related bonds has reached about 12 times the average annual level from 2015 to 2024, with a total of $269 billion since the beginning of the year, which is twice the amount for the entire year of 2025. The influx of corporate bonds has pushed forward the yield curve of US bonds and squeezed out buyers of long-term treasury bond bonds. Hartnett also noticed that long neglected assets such as REITs, biotechnology, regional banks, and small cap stocks are quietly outperforming, and the market is pricing itself as' yield peaks'. Key milestones in the future market include the Federal Reserve Chairman's speech at Jackson Hole on August 28th, the September FOMC meeting, and the Bank of Japan meeting. The final judgment is that if the Republican Party holds the Senate and the governor of Texas, the stock market, especially the AI sector, will further rise to the foam level in 2027; If the Democratic Party wins on November 3rd, the stock market, US dollar, and bond yields will face a significant drop of over 10% by the end of the year. [Original link]