April 15, 2022: Transitioning to a New Cycle

MARKET NEWS / CREDIT BUBBLE WEEKLY
April 15, 2022: Transitioning to a New Cycle
Doug Noland Posted on April 15, 2022

Something snapped. Ten-year Treasury yields jumped another 12 bps this week, with a two-week gain of 44 bps. At 2.83%, 10-year yields ended the week at the high since December 2018. Thirty-year Treasuries yields surged 20 bps this week (2-wk gain 48bps) to a three-year high 2.92%. Benchmark MBS yields rose another eight bps this week to 3.98%, with a stunning 191 bps y-t-d spike. Thirty-year mortgage borrowing rates jumped 28 bps this week to reach 5% for the first time since February 2011, having jumped 189 bps so far this year.

The Bloomberg Commodities Index jumped 4.8% this week, boosting y-t-d gains to 33.5%. Crude’s 8.8% weekly surge pushed 2022 gains to 42%. Gasoline rose 8.0% (up 52% y-t-d), and Natural Gas spiked 16% (up 96% y-t-d). Wheat and Corn gained 4.4% and 3.0%, with y-t-d gains of 43% and 32%. As for 2022 gains, Nickel is up 60%, Cotton 26%, soybeans 27%, rubber 28% and zinc 25%.

A month back, I titled a CBB, “Inklings of Secular Change.” It increasingly appears the world has reached a critical historic juncture – the transition away from an unparalleled market, financial and economic up-cycle. While such a momentous development is usually recognized only in hindsight, there is today overwhelming fundamental and market support for The New Cycle Thesis.

For much too long, global policymakers pushed stimulus measures to precarious extremes, monetary inflation that extended the cycle – but at great cost. Some of these costs are being revealed. War rages in Ukraine with no end in sight. Meanwhile, March Consumer Prices were reported up 8.5% y-o-y, the strongest inflation since 1981. And each passing week it seems the world is more deeply divided, with the fraught U.S./China relationship at risk of dissolution.

April 13 – Bloomberg (Christopher Condon and Eric Martin): “Treasury Secretary Janet Yellen… delivered a pointed warning to China on its alignment with Russia, suggesting potential economic consequences from the international community depending on how it approaches President Vladimir Putin’s invasion of Ukraine. ‘China has recently affirmed a special relationship with Russia,’ Yellen said… ‘I fervently hope that China will make something positive of this relationship and help to end this war.’ Yellen used the speech… to lay out the contours of a revitalized international financial and economic architecture. While she said she hopes to avoid a ‘bipolar’ split between U.S.- and China-led systems, her remarks may deepen bilateral tensions. In some of her sharpest comments on China since taking office, the Treasury chief warned that ‘going forward, it will be increasingly difficult to separate economic issues from broader considerations of national interest, including national security.’”

The Bubble analytical framework offers valuable insight. During the up-cycle boom, the economic pie is perceived as robust and expansive. Cooperation, integration and strong alliances are viewed as beneficial – both individually and collectively. But as the cycle ages, strains mount and insecurity increasingly takes hold. Eventually, the backdrop is viewed more in terms of a stagnant or shrinking pie – with a newfound zero-sum game calculus. The downside of the cycle heralds a period of fragmentation, animus and conflict. From this perspective, the world appears well into the transition to a perilous down cycle dynamic.

We can’t overstate the significance and far-reaching ramifications of this secular shift away from the promise and assurances advanced over a multi-decade up-cycle – to today’s ominous down-cycle uncertainties.

Ten-year Treasury yields have surged 85 bps since the February 24th invasion. German bund yields jumped from 17 bps to an almost seven-year high 0.84%. Since the start of war, yields have increased 77 bps in Portugal, 67 bps in Italy, 67 bps in France, and 44 bps in the UK. Yields rose 79 bps in Canada, 70 bps in Australia, 74 bps in South Korea, and 62 bps in New Zealand.

EM yield moves are even more dramatic. Since the invasion, 10-year yields have increased 198 bps in Poland, 164 bps in Hungary, 108 bps in the Czech Republic, 101 bps in Romania, 86 bps in Croatia and 86 bps in Slovenia. Major bond market adjustment has not been limited to Eastern Europe. Yields are up 130 bps in Peru, 98 bps in Mexico, and 74 bps in Brazil.

While Treasury yields are up sharply, it’s worth noting that the last time the U.S. experienced 8.5% y-o-y CPI 10-year yields were at 14%. The yield curve has been gyrating. The 2-/10-yr Treasury yield spread inverted to negative eight bps on April 1st. The 2-/10-year spread was about zero as Lael Brainard dropped her “Fed to Shrink Balance Sheet at Rapid Pace as Soon as May” bomb (front-running by a day FOMC minutes detailing plans for $95bn monthly QT). The curve has steepened 37 bps in nine sessions. Analysts two weeks ago pointed to the inverted curve as foreshadowing recession. There’s now a lot of head scratching.

This beckons for some analytical nuance. When we discuss traditional analysis and market relationships, it’s important to appreciate that so much changed as QE evolved into a primary monetary management tool. How could 10-year yields remain so low in the face of surging inflation and the onset of what is anticipated to be the most aggressive tightening cycle in 28 years? Because the marketplace anticipates tightening measures will prove short-lived. The Fed will surely be forced into additional bond purchases – another round of endless QE.

The bond market’s relative disregard for inflation risk recalls the period heading into the 2008 crisis – a dynamic that worked to prolong excess and deepen the unavoidable crisis. Today’s relatively flat yield curve is indicative of dysfunctional markets, distorted by years of Fed intervention and monetary inflation – with the recent inversion not so much a predictor of recession, but more a reflection of bubble fragilities and the inevitability of additional crisis measures.

Low long-term yields and expectations of Fed intervention have provided critical support for the stock market bubble. Stock and bond markets have been unable to adequately adjust to the rapidly deteriorating fundamental backdrop, and I would contend that resulting wealth effects and loose financial conditions have worked to sustain problematic inflationary dynamics. And the longer bonds and stocks downplay ramifications for an aggressive tightening cycle, the greater the pressure on the Fed to talk hawkish rate hikes and balance sheet liquidation. It appears the bond market adjustment to the New Cycle has commenced.

Even the diehard FOMC doves have found religion, apparently coming to the realization that inflation hurts most those that can least afford it. It’s late in the game for such an epiphany. A cycle of Federal Reserve monetary mismanagement has dangerously weakened the foundations of economic, financial, social and geopolitical stability.

When contemplating secular change, we should think in terms of an extended period of instability. The war has caused a spike in already elevated food prices, with a significant risk of future global grain and food shortfalls. This is a backdrop conducive to social and political instability, with recent unrest in Peru and Sri Lanka surely just the beginning.

The war also further stresses global supply chains. Russia, of course, is a major exporter of energy, materials and commodities. The onset of war saw dislocations in many commodity markets, most notably nickel with its spectacular short squeeze, margin calls and dislocation.

The war will likely mark a secular inflection point for commodities trading, both in spot and derivatives markets. Producers will approach derivative hedging strategies more cautiously, fearing big squeezes and onerous margin calls. Derivative dealers will back away from unstable and dysfunctional markets, while bankers will tighten standards for loans and backup credit facilities. It all points to less liquidity and more price volatility.

Russia will likely restrict the sale of key commodities to the West, leading to price spikes and shortages. There is risk that China eventually follows a similar course. I anticipate households, companies, and countries all moving to build inventories of key resources – only worsening shortages and supply chain issues. Panic buying of many things is a distinct possibility.

It’s worth noting last week’s release of February Consumer Credit data. More than doubling estimates, households expanded non-mortgage borrowings by a record $41.8 billion. For perspective, during the decade 2010 through 2019, Consumer Credit growth averaged less than $14 billion monthly. This is an example of how inflation spurs self-reinforcing credit growth – as we take out larger loans to purchase higher priced vehicles, appliances, home remodels and such, while putting the higher cost of filling gas tanks and shopping carts on credit cards. Recall that Q4 mortgage credit growth was the strongest since 2007 – again highlighting the dynamic of inflating prices, spurring only greater credit expansion. Moreover, rising debt service and huge federal deficits will continue to fan inflationary fires.

We are witnessing the onset of a New Cycle, with inflationary dynamics reminiscent of the seventies and eighties. And the Fed today faces one momentous challenge, as it attempts to get inflation under control. This will prove nothing short of a secular shift in monetary management.

The previous cycle’s subdued consumer price inflation – empowered a Federal Reserve policy regime focused on championing the asset markets – as the key mechanism for economic advancement and prosperity. “Baby step” rate increases were signaled well in advance and implemented gradually, all to ensure that booming securities markets avoided instability. And it went without saying that any so-called “tightening” would be quickly reversed in the event of market anxiety. Importantly, a powerful policymaking regime dynamic took control: no longer was it even necessary for financial conditions to tighten during so-called “tightening” cycles.

And securities markets grew to revolve around loose conditions and the “Fed put” – as confidence in the Fed’s willingness to do whatever it takes to bolster the markets incentivized speculation, leverage and risk-taking more generally. Cash was made trash, with savers then plowing Trillions into the securities markets, most notably in perceived liquid and “money-like” ETF shares.

For the New Cycle of monetary management, the “Fed put” will surely not be completely discarded. But the FOMC will now be forced to think hard before unleashing additional inflationary fuel. Measures to support the markets will not come as quickly – and I expect future QE to at least initially be doled out in moderation. This implies a major shift in the Fed’s willingness, capacity and tactics for backstopping the markets.

A revamped policy doctrine with less predictable and generous central bank market support will require an adjustment in securities and derivatives pricing. Financial assets become riskier, implying greater risk premiums and lower valuations. Derivative markets must also adjust to new realities. If the Fed no longer actively controls “the weather”, the previous cycle’s boom in cheap flood insurance is no longer viable. Said differently, the assumption of liquid and continuous markets – having defined contemporary “dynamically/delta hedged” derivatives markets over the boom cycle – becomes difficult to rationalize.

Selling derivative insurance has become a riskier proposition. This suggests a secular shift to more expensive derivatives protection – with higher-cost market insurance, on the margin, providing less support for risk-taking and speculative excess. I believe the popular strategy of just buying cheap hedges and sticking with risky portfolios through difficult market environments was anomalous to the previous cycle.

Commodities performance provides overwhelming support for the thesis of a new cycle of hard asset outperformance versus financial assets. Interestingly, huge commodities gains unfolded during a period of relative dollar strength. The dollar index is up 5% this year. Moreover, even the industrial commodities have been robust in the face of faltering China. Some commodities are exposed to weakening Chinese demand dynamics. But this risk is at least somewhat offset by Russian sanctions, supply constraints, and the impetus to build rainy day stockpiles.

There has been of late insightful discussion of the potential negative impact sanctions and the bi-polar “iron curtain” new world order might have on the dollar as the world’s reserve currency. Some of this analysis resonates.

But there’s another aspect of dollar vulnerability that goes unrecognized. The previous cycle of well-contained consumer price inflation – that emboldened the Fed’s securities and derivatives market focus – was instrumental in underpinning the dollar. This experimental monetary regime bolstered our currency even in the face of massive monetary inflation, persistently huge trade deficits and deep structural impairment.

Why would the world not recycle excess dollar balances back into U.S. securities markets, confident that the Fed was doing “whatever it takes” to ensure those securities rise in value? Traditional currency fundamentals – prudent monetary and fiscal policies, stable money, a favorable current account position, and sound financial and economic structures – no longer mattered – so long as Federal Reserve policy focus was directed at sustaining booming asset markets.

The world is now experiencing momentous change, with overwhelming evidence supporting the view of a Transition to a New Cycle. Federal Reserve focus has begun the shift to consumer price inflation, leaving the status of the Fed’s market backstop a major open question. Going forward, expect the dollar to be increasingly vulnerable to waning confidence in the Fed’s capacity to underpin the markets. This raises the possibility the next serious bout of de-risking/deleveraging being will be accompanied by destabilizing currency market volatility. This is a looming risk for a financial world dominated by leveraged speculation.

And a final thought on the New Market Cycle. The unfolding crisis of confidence in monetary management and financial assets, more generally, has momentous ramifications. As Hard Assets outperform financial assets, liquidity will now gravitate to real things, working to underpin inflationary pressures even as growth weakens. This will keep pressure on the Fed, with higher cash rates reducing the appeal of risk assets. Moreover, these new inflation dynamics dramatically alter the risk versus reward profile for QE and monetary stimulus more generally. Fed bond purchases will create additional liquidity now likely to gravitate to – and reinforce – commodities and general price inflation.

This implies a major cycle inflection point for the bond market, now faced both with a secular upturn in inflation and diminished QE prospects. And a secular jump in Treasury yields would demand a long overdue downward valuation adjustment for stocks, corporate Credit and other financial assets.

If the view of a secular shift in inflation dynamics is correct, we should expect a new paradigm of tighter monetary policy and tighter financial conditions more generally. This will be highly disruptive to economic and financial structures that overindulged in ultra-loose finance over the previous long cycle. In particular, there is post-bubble vulnerability for scores – literally thousands – of negative cash-flow companies and enterprises. In this regard, I anticipate a difficult and protracted structural adjustment ahead. And when I look at our nation today, I dread how this adjustment will intensify social and political strife.

For the Week:

The S&P500 fell 2.1% (down 7.8% y-t-d), and the Dow declined 0.8% (down 5.2%). The Utilities slipped 1.3% (up 5.3%). The Banks sank 2.6% (down 11.7%), while the Broker/Dealers were little changed (down 8.7%). The Transports rallied 2.6% (down 9.9%). The S&P 400 Midcaps increased 0.4% (down 7.5%), and the small cap Russell 2000 gained 0.5% (down 10.7%). The Nasdaq100 slumped 3.0% (down 14.9%). The Semiconductors dropped 2.9% (down 23.3%). The Biotechs fell 1.5% (down 5.3%). With bullion rising $31, the HUI gold index advanced 2.6% (up 27.3%).

Three-month Treasury bill rates ended the week at 0.7375%. Two-year government yields declined six bps to 2.46% (up 172bps y-t-d). Five-year T-note yields added three bps to 2.79% (up 152bps). Ten-year Treasury yields jumped 12 bps to 2.83% (up 132bps). Long bond yields surged 20 bps to 2.92% (up 101bps). Benchmark Fannie Mae MBS yields gained eight bps to 3.98% (up 191bps).

Greek 10-year yields added two bps to 2.90% (up 159bps y-t-d). Ten-year Portuguese yields surged 20 bps to 1.84% (up 137bps). Italian 10-year yields rose nine bps to 2.48% (up 131bps). Spain’s 10-year yields gained eight bps to 1.78% (up 122bps). German bund yields jumped 14 bps to 0.84% (up 102bps). French yields increased seven bps to 1.33% (up 114bps). The French to German 10-year bond spread narrowed seven to 49 bps. U.K. 10-year gilt yields rose 14 bps to 1.89% (up 92bps). U.K.’s FTSE equities index declined 0.7% (up 3.1% y-t-d).

Japan’s Nikkei Equities Index increased 0.4% (down 5.9% y-t-d). Japanese 10-year “JGB” yields added a basis point to 0.24% (up 17bps y-t-d). France’s CAC40 gained 0.6% (down 7.9%). The German DAX equities index declined 0.8% (down 10.8%). Spain’s IBEX 35 equities index rallied 1.1% (down 0.2%). Italy’s FTSE MIB index increased 0.2% (down 9.1%). EM equities were mostly lower. Brazil’s Bovespa index dropped 1.8% (up 10.8%), and the Mexico’s Bolsa index declined 0.9% (up 1.7%). South Korea’s Kospi index slipped 0.2% (down 9.5%). India’s Sensex equities index fell 1.9% (up 0.1%). China’s Shanghai Exchange lost 1.2% (down 11.8%). Turkey’s Borsa Istanbul National 100 index jumped 4.2% (up 34.3%). Russia’s MICEX equities index sank 6.5% (down 36.0%).

Investment-grade bond funds saw outflows of $4.494 billion, and junk bond funds posted negative flows of $4.030 billion (from Lipper).

Federal Reserve Credit last week increased $6.7bn to $8.906 TN. Over the past 135 weeks, Fed Credit expanded $5.180 TN, or 139%. Fed Credit inflated $6.095 Trillion, or 217%, over the past 492 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt last week rose $2.1bn to $3.461 TN. “Custody holdings” were down $93.0bn, or 2.6%, y-o-y.

Total money market fund assets dropped $29.9bn to $4.530 TN. Total money funds increased $78bn y-o-y, or 1.7%.

Total Commercial Paper added $3.5bn to $1.070 TN. CP was down $137bn, or 11.4%, over the past year.

Freddie Mac 30-year fixed mortgage rates surged 28 bps to 5.00%, back to 5% for the first time since February 2011 (up 196bps y-o-y). Fifteen-year rates jumped 26 bps to a more than three-year high 1.17% (up 182bps). Five-year hybrid ARM rates gained 13 bps to 3.69% (up 89bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up 18 bps to a decade-high 5.01% (up 195bps).

Currency Watch:

For the week, the U.S. Dollar Index gained 0.7% to 100.50 (up 5.0% y-t-d). For the week on the upside, the Singapore dollar increased 0.5%, the Mexican peso 0.4%, the British pound 0.3% and the South African rand 0.1%. On the downside, the Japanese yen declined 1.7%, the Norwegian krone 1.3%, the Swedish krone 1.3%, the New Zealand dollar 1.2%, the Swiss franc 0.9%, the Australian dollar 0.8%, the euro 0.6%, the South Korean won 0.4%, the Canadian dollar 0.3%, and the Brazilian real 0.1%. The Chinese renminbi slipped 0.10% versus the dollar (down 0.24% y-t-d).

Commodities Watch:

April 12 – Wall Street Journal (Ryan Dezember): “A rally in commodities prices more intense than anything seen in the modern trading era is shaking the markets meant to ease the flow of raw materials around the world. Wild swings in futures markets are complicating business for the people and companies who actually produce and use natural gas, zinc or soybeans, to name a few. They are driving speculators and others from the markets, an exodus that has led in turn to even choppier trading and higher prices. Russia’s invasion of Ukraine has added to market disruption… Bouts of inclement weather and supply-chain problems have complicated delivery in some markets. These market increases have filtered through to higher prices for consumers, adding to pressure on the Federal Reserve to raise interest rates.”

The Bloomberg Commodities Index jumped 4.8% (up 33.5% y-t-d). Spot Gold rose 1.6% to $1,978 (up 8.1%). Silver gained 3.1% to $25.55 (up 9.6%). WTI crude surged $8.69 to $106.95 (up 42%). Gasoline jumped 8.0% (up 52%), and Natural Gas surged 16.3% (up 96%). Copper added 0.3% (up 6%). Wheat jumped 4.4% (up 43%), and Corn rose 3.0% (up 32%). Bitcoin dropped $1,915, or 4.5%, this week to $40,525 (down 12.6%).

Russia/Ukraine Watch:

April 13 – Wall Street Journal (David Ljunggren and Ron Popeski): “Ukrainian President Volodymyr Zelenskiy… mocked Moscow’s insistence that the war against his nation was going well, asking how President Vladimir Putin could have approved a plan that involved so many Russians dying. Putin… said Russia would achieve all of its ‘noble’ aims and ‘rhythmically and calmly’ continue what it calls a special operation. read more Moscow said on March 25, its most recent update, that 1,351 soldiers had been killed since the start of the campaign. Ukraine says the real number is closer to 20,000.”

April 13 – Reuters (David Lawder and Andrea Shalal): “Russia… told Ukraine to ‘watch out’ after its former Soviet neighbour captured pro-Kremlin politician Viktor Medvedchuk, turning down Kyiv’s offer of a swap with a warning that those holding him might soon be detained themselves. Medvedchuk, one of President Vladimir Putin’s close allies in Ukraine, was shown handcuffed and wearing the uniform of a Ukrainian soldier on Tuesday in a picture tweeted by President Volodymyr Zelenskiy.”

April 15 – Reuters (Pavel Polityuk and Oleksandr Kozhukhar): “Russia said its lead warship in the Black Sea sank on Thursday after an explosion and fire that Ukraine claimed was caused by a missile strike, dealing a blow to Moscow as it readied for new attacks that were likely to determine the conflict’s outcome. The Moskva, Russia’s flagship in its Black Sea fleet, sank as it was being towed to port in stormy weather, Russian news agencies quoted the defence ministry as saying. Russia said earlier that over 500 crew aboard the Soviet-era missile cruiser were evacuated after ammunition on board exploded. Ukraine said it hit the warship with a Ukrainian-made Neptune anti-ship missile.”

April 15 – Bloomberg: “Kyiv is bracing for retaliation after it claimed to have destroyed the Moskva, flagship vessel of Russia’s Black Sea Fleet, and residents were warned not to rush back. Moscow hasn’t acknowledged a Ukrainian strike on the vessel.”

April 12 – Reuters (Guy Faulconbridge): “President Vladimir Putin said… peace talks with Ukraine had hit a dead end, using his first public comments on the conflict in more than a week to vow his troops would win and to goad the West for failing to bring Moscow to heel. Addressing the war in public for the first time since Russian forces retreated from northern Ukraine after they were halted at the gates of Kyiv, Putin promised that Russia would achieve all of its ‘noble’ aims in Ukraine.”

April 10 – Reuters (Pavel Polityuk, Elizabeth Piper, William Schomberg and Natalia Zinets): “Britain’s Boris Johnson, one of Ukraine’s staunchest backers, flew to Kyiv on Saturday to pledge tighter sanctions on Russia and offer President Volodymyr Zelenskiy more defensive arms… At a meeting shrouded in secrecy until Johnson appeared in the Ukrainian capital, the two leaders cemented the close ties they have nurtured since Russia invaded Ukraine on Feb. 24. The move caps weeks of lobbying by Johnson to meet Zelenskiy.”

April 11 – Financial Times (Sam Jones): “Austrian chancellor Karl Nehammer said he had ‘no positive impression’ of his talks with Russian leader Vladimir Putin, after a last-ditch trip to Moscow on Monday to try to broker an end to the country’s brutal invasion of Ukraine. Nehammer said he had held ‘direct, open and tough’ talks with the Russian president that lasted for 75 minutes… The talks were held in Russian, with the aid of an interpreter, despite Putin being a fluent German speaker.”

April 10 – Reuters (Lidia Kelly and Ronald Popeski): “Ramzan Kadyrov, the powerful head of Russia’s republic of Chechnya, said… that there will be an offensive by Russian forces not only on the besieged port of Mariupol, but also on Kyiv and other Ukrainian cities. ‘There will be an offensive … not only on Mariupol, but also on other places, cities and villages,’ Kadyrov said… ‘Luhansk and Donetsk – we will fully liberate in the first place … and then take Kyiv and all other cities.’”

Economic War/ Iron Curtain Watch:

April 15 – Reuters (Guy Faulconbridge): “Moody’s said Russia may be in default because it tried to service its dollar bonds in roubles, which would be one of the starkest consequences to date of Moscow’s exclusion from the Western financial system since President Vladimir Putin’s invasion of Ukraine. If Moscow is declared in default, it would mark Russia’s first major default on foreign bonds since the years following the 1917 Bolshevik revolution…”

April 8 – Reuters (Lidia Kelly): “S&P… lowered Russia’s foreign currency ratings to ‘selective default’ on increased risks that Moscow will not be able and willing to honor its commitments to foreign debtholders. Facing waves of sanctions over its invasion of Ukraine, Russia could face its first sovereign external default in over a century after it made arrangements to make an international bond repayment in rubles this week, even though the payment was due in dollars.”

April 10 – Financial Times (Sam Fleming, Henry Foy and Guy Chazan): “EU member states are at loggerheads over demands for an immediate blockade on Russian oil imports as the soaring cost of living weighs heavily on politicians… Momentum is growing in the EU for fresh curbs on Russian fossil fuels as evidence mounts of atrocities against Ukrainian civilians. But while the European Commission is working on oil sanctions, there is scepticism about the idea of a rapid clampdown among some member states. Viktor Orban’s government in Hungary, which has cultivated strong ties with President Vladimir Putin’s regime, has said measures targeting Russia’s lucrative oil and gas exports were a ‘red line’. This is an effective veto on a measure that requires unanimity among the 27 member states.”

April 14 – Bloomberg (Christopher Condon and Eric Martin): “Treasury Secretary Janet Yellen has sketched out her vision for a new era of economic cooperation among nations that share key values and principles, in a sweeping speech that laid down a stern challenge to China. Yellen, speaking a week before global finance chiefs meet in Washington, called Beijing to account for its ever-closer relationship with Moscow and blasted China for practices that ‘unfairly damage’ the national-security interests of others. She alluded to the use of market positions — China is a key provider of crucial rare-earth metals — for ‘geopolitical leverage.’ While she said she didn’t want the evolution of a ‘bipolar’ global system between U.S.-led and China-led elements, the Treasury chief said that Russia’s invasion of Ukraine marked a moment where nations need to decide where they sit. ‘The future of our international order, both for peaceful security and economic prosperity, is at stake,’ she said. ‘The key section for me was the ‘fence-sitting’ section calling out China — that they should not be helping Russia economically in this moment,’ said Josh Lipsky, director of the GeoEconomics Center at the Atlantic Council…”

April 12 – Bloomberg (Bryce Baschuk): “Russia’s war with Ukraine will slow the world economy’s nascent rebound from the pandemic, reduce goods trade and potentially lead to a broader splintering of global commerce, the World Trade Organization said. The… trade body lowered its projection for growth in merchandise trade this year to 3%, down from its previous projection of 4.7%. The WTO also said… it expects trade growth of 3.4% in 2023 and cited a number of downside risks to its assessment, including food insecurity and a possible resurgence of the virus.”

April 14 – Wall Street Journal (Joe Parkinson, David Luhnow and Juan Forero): “Western leaders seeking to build a global coalition to isolate Russia over its war on Ukraine are facing pushback from the world’s largest developing nations, including the democracies of India, Brazil and South Africa. The resistance, much of it from economic self-interest, limits the pressure on President Vladimir Putin and spotlights factions in the global community that recall the Cold War, when many countries tried to steer clear of the rivalry between the U.S. and Soviet Union… Yet even after the massacre of civilians in Bucha, Ukraine, 24 countries of the 141 United Nations member states voted last week against removing Russia from the United Nations Human Rights Council; 58 member states abstained, including India, Brazil, Mexico, Indonesia and South Africa.”

April 12 – Reuters (Andrea Shalal and David Lawder): “Countries around the world are working to diversify their supply chains and reduce their dependence on China, which is ‘probably good for everyone,’ World Bank President David Malpass said… Malpass said cross-border trade would remain important to the global economy, and China – already the world’s second largest economy and likely to become the largest – had a big role to play as both a consumer and producer of goods. But… he said China also needed to be part of a value system shared by other countries in the global trading system, and added, ‘I don’t know that that will happen.’”

U.S./Russia Watch:

April 13 – Reuters: “Russia will view U.S. and NATO vehicles transporting weapons on Ukrainian territory as legitimate military targets, Deputy Foreign Minister Sergei Ryabkov told the TASS news agency… Any attempts by the West to inflict significant damage on Russia’s military or its separatist allies in Ukraine will be ‘harshly suppressed,’ he added. ‘We are warning that US-NATO weapons transports across Ukrainian territory will be considered by us as legal military targets,’ TASS quoted Ryabkov…”

April 14 – Wall Street Journal (Courtney McBride): “As Ukraine prepares to resist a new Russian military assault in the east, it likely will be doing so with weapons and equipment the U.S. once considered too risky to provide to Kyiv, highlighting how the line between offensive and defensive assistance has blurred in recent weeks. The shift in weaponry comes as Kyiv has made increasing pleas for military assistance in recent days, warning of potential Russian escalation and the potential for mass civilian casualties amid Russia’s expected offensive in the Donbas area. It also follows President Biden’s allegation that Russia was conducting ‘genocide’ in Ukraine.”

April 13 – Wall Street Journal (Michael R. Gordon, Warren P. Strobel and Vivian Salama): “The Biden administration is moving to significantly expand the intelligence it is providing to Ukraine’s forces so they can target Moscow’s military units in Russian-occupied Donbas and Crimea, part of a shift in U.S. support that also includes a new security assistance package with heavier weaponry. The new intelligence guidance comes as the White House said that it will send $800 million in additional weapons to Kyiv, including artillery, armored personnel carriers and helicopters… The decision to share more intelligence and provide artillery marks a shift in the Biden’s administration’s approach to the conflict…”

April 13 – Associated Press (Robert Burns): “Western weaponry pouring into Ukraine helped blunt Russia’s initial offensive and seems certain to play a central role in the approaching, potentially decisive, battle for Ukraine’s contested Donbas region. Yet the Russian military is making little headway halting what has become a historic arms express. The U.S. numbers alone are mounting: more than 12,000 weapons designed to defeat armored vehicles, some 1,400 shoulder-fired Stinger missiles to shoot down aircraft and more than 50 million rounds of ammunition, among many other things. Dozens of other nations are adding to the totals.”

April 12 – Reuters (Mike Stone): “The Pentagon will host leaders from the top eight U.S. weapons manufacturers… to discuss the industry’s capacity to meet Ukraine’s weapons needs if the war with Russia lasts years… Demand for weapons has shot up after Russia’s invasion on Feb. 24 spurred U.S. and allied weapons transfers to Ukraine. Resupplying as well as planning for a longer war is expected to be discussed at the meeting, the sources told Reuters…”

April 14 – Reuters (Jonathan Landay and Michael Martina): “The threat of Russia potentially using tactical or low-yield nuclear weapons in Ukraine cannot be taken lightly, but the CIA has not seen a lot of practical evidence reinforcing that concern, CIA Director William Burns said… Burns’ most extensive public comments since Russia invaded Ukraine on Feb. 24 underscored concerns that the biggest attack against a European state since 1945 risks escalating to the use of nuclear weapons… Burns spoke… of the ‘potential desperation’ and setbacks dealt Putin, whose forces have suffered heavy losses and have been forced to retreat from some parts of northern Ukraine after failing to capture Kyiv.”

April 13 – Reuters (Ron Bousso and Chen Aizhu): “China’s top offshore oil and gas producer CNOOC Ltd. is preparing to exit its operations in Britain, Canada and the United States, because of concerns in Beijing the assets could become subject to Western sanctions, industry sources said. Ties between China and the West have long been strained by trade and human rights issues and the tension has grown following Russia’s invasion of Ukraine, which China has refused to condemn. The United States said last week China could face consequences if it helped Russia to evade Western sanctions that have included financial measures that restrict Russia’s access to foreign currency and make it complicated to process international payments.”

April 14 – Reuters (Christopher Bing and Raphael Satter): “Advanced hackers have shown they can take control of an array of devices that help run power stations and manufacturing plants, the U.S. government said in an alert on Wednesday, warning of the potential for cyber spies to harm critical infrastructure. The U.S. Cybersecurity and Infrastructure Security Agency and other government agencies issued a joint advisory saying the hackers’ malicious software could affect a type of device called programmable logic controllers made by Schneider Electric and OMRON Corp.”

China/Russia/U.S. Watch:

April 11 – New York Times (Paul Mozur, Steven Lee Myers and John Liu): “When Twitter put up a warning message atop a Russian government post denying civilian killings in Bucha, Ukraine, last week, China’s state media rushed to its defense. ‘On Twitter @mfa_russia’s statement on #Bucha got censored,’ wrote Frontline, a Twitter account associated with China’s official English-language broadcaster, CGTN. In a Chinese Communist Party newspaper, an article declared that Russians had offered definitive evidence to prove that the lurid photos of bodies in the streets of Bucha… were a hoax. A party television station in Shanghai said Ukraine’s government had created the grisly tableaux to win sympathy in the West… Only a month ago, the White House warned China not to amplify Russia’s campaign to sow disinformation about the war in Ukraine. The Chinese efforts have intensified anyway, contradicting and disputing the policies of NATO capitals…”

April 15 – Reuters (Josh Horwitz and Sarah Wu): “China said it conducted military drills around Taiwan… as a U.S. Congressional delegation visited the island in a show of support to a fellow democracy, with Beijing blaming the lawmakers for raising tensions with their ‘provocative’ trip. China’s military sent frigates, bombers and fighter planes to the East China Sea and the area around Taiwan… ‘This operation is in response to the recent frequent release of wrong signals by the United States on the Taiwan issue,’ it said… ‘The U.S. bad actions and tricks are completely futile and very dangerous. Those who play with fire will burn themselves,’ it said.”

April 15 – Bloomberg (Cindy Wang and Samson Ellis): “A group of senior U.S. senators delivered a message of support for Taiwan during a visit Friday, a move that China answered with a display of military force. Members of the delegation, including Republican Lindsey Graham, told Beijing that the U.S. will start making China account for bullying Taiwan and supporting Russian President Vladimir Putin’s invasion of Ukraine. ‘Here is my promise to you and the Taiwanese people: We are going to start making China pay a greater price for what they are doing all over the world,’ Graham said during a meeting with President Tsai Ing-wen… ‘The support for Putin must come with a price. The never-ending cyberattack on your economy and people by the Communist Chinese needs to come with a price.’”

April 14 – Bloomberg (Se Young Lee): “China urges the U.S. to end all forms of official interactions with Taiwan and lodged a complaint over U.S. lawmakers’ visit to the island, a spokesman for the Chinese Embassy in the U.S. says… Spokesman urges the U.S. to ‘avoid sending wrong signals to the ‘Taiwan independence’ separatist forces, lest it should further undermine China-US relations and peace and stability across the Taiwan Strait’”

April 9 – Wall Street Journal (Alastair Gale): “China has accelerated an expansion of its nuclear arsenal because of a change in its assessment of the threat posed by the U.S., people with knowledge of the Chinese leadership’s thinking say… The Chinese nuclear effort long predates Russia’s invasion of Ukraine, but the U.S.’s wariness about getting directly involved in the war there has likely reinforced Beijing’s decision to put greater emphasis on developing nuclear weapons as a deterrent… Chinese leaders see a stronger nuclear arsenal as a way to deter the U.S. from getting directly involved in a potential conflict over Taiwan.”

April 10 – Associated Press (Dusan Stojanovic): “Russian ally Serbia took the delivery of a sophisticated Chinese anti-aircraft system in a veiled operation this weekend, amid Western concerns that an arms buildup in the Balkans at the time of the war in Ukraine could threaten the fragile peace in the region. Media and military experts said Sunday that six Chinese Air Force Y-20 transport planes landed at Belgrade’s civilian airport early Saturday, reportedly carrying HQ-22 surface-to-air missile systems for the Serbian military.”

April 12 – Bloomberg (Tony Capaccio): “China and Russia continue to develop and deploy weapons that can attack U.S. satellites even as they increase their own fleets of intelligence, surveillance and reconnaissance space vehicles, according to the Pentagon’s intelligence agency… ‘China has multiple ground-based laser weapons of varying power levels to disrupt, degrade, or damage satellites that include a current limited capability to employ laser systems against satellite sensors,’ the intelligence agency said.”

April 12 – Reuters (Eric Beech and Martin Quin Pollard): “The U.S. State Department… ordered non-emergency U.S. government workers to leave the consulate in Shanghai due to a surge in COVID-19 cases and China’s measures to control the virus. On Friday, the State Department announced that non-emergency personnel could voluntarily leave the consulate.”

Europe/Russia/China Watch:

April 14 – Reuters (Guy Faulconbridge): “One of Russian President Vladimir Putin’s closest allies warned NATO on Thursday that if Sweden and Finland joined the U.S.-led military alliance then Russia would deploy nuclear weapons and hypersonic missiles in a European exclave. Finland, which shares a 810-mile border with Russia, and Sweden are considering joining the NATO alliance. Finland will decide in the next few weeks, Prime Minister Sanna Marin said… Dmitry Medvedev, deputy chairman of Russia’s Security Council, said that should Sweden and Finland join NATO then Russia would have to strengthen its land, naval and air forces in the Baltic Sea. Medvedev also explicitly raised the nuclear threat by saying that there could be no more talk of a ‘nuclear free’ Baltic…”

Market Instability Watch:

April 14 – Bloomberg (Allan Lopez): “Funds that invest in U.S. high-yield bonds recorded an outflow of $4 billion for the week ended April 13, according to Refinitiv Lipper…, the largest withdrawals since March 2021… Investment-grade bond funds, meanwhile, also saw investors pull significant amounts with $4.5 billion of outflows following last week’s exits totaling $1.7 billion.”

April 14 – Bloomberg (Finbarr Flynn): “Goldman Sachs… is revising up its forecast for credit spreads, saying risk premiums are set to build as central banks withdraw stimulus and slower economic growth impacts corporate profitability. The Wall Street bank expects yield premiums on investment-grade dollar notes to hit 140 bps by end-2022, compared with a previous forecast of 123 bps.. Spreads were at 123 bps on Wednesday… ‘A further rebuilding of risk premium lies ahead,’ strategists including Lotfi Karoui wrote…”

Mania Watch:

April 14 – Wall Street Journal (Charley Grant and David Benoit): “Wall Street was expected to return to normal in 2022 after the pandemic sent it on a wild ride two years ago. It didn’t. Major U.S. banks reported double-digit drops in first-quarter profit this week, from an 11% decline at Morgan Stanley to a 46% drop at Citigroup Inc. Those banks, along with Goldman Sachs… JPMorgan… and Wells Fargo…, all reported lower revenue as well… ‘The macro outlook for the rest of the year can only be described as complex and uncertain,’ Citigroup Chief Executive Jane Fraser said. Investment banking fees were down 43% at Citigroup, 37% at Morgan Stanley and 36% at Goldman.”

April 13 – Wall Street Journal (David Benoit): “JPMorgan Chase & Co.’s pandemic boom ended with a 42% drop in profits and a warning: Rising inflation and the war in Ukraine pose big threats to the U.S. economy. Chief Executive Jamie Dimon said the economy is strong and growing, citing double-digit growth in card spending, low delinquencies and healthy household and consumer balance sheets. But the bank surprised Wall Street by setting aside $900 million in new funds to prepare for economic turmoil; a year ago, it freed up $5.2 billion it had reserved for potential loan losses in the pandemic’s early months.”

April 13 – Bloomberg (Patrick McHale): “The nonfungible token of Jack Dorsey’s first tweet, which sold for $2.9 million last year to Sina Estavi, failed to garner much in the way of interest when it was recently put up for resale, Coindesk reports. The auction for the NFT closed with only seven offers ranging from just 0.0019 Ether to 0.09 ETH, or about $6 to about $280. A far cry from the $48 million sought by the owner.”

April 14 – Bloomberg (Paulina Cachero): “As top firms shell out millions in the battle for Wall Street’s best and brightest, even interns are seeing their compensation soar. Top global investment banks boosted intern pay by 37.2% for the current internship season from a year earlier, while other large banks are paying 36.9% more, according to… Wall Street Oasis.”

Inflation Watch:

April 12 – Bloomberg (Olivia Rockeman): “U.S. consumer prices rose in March by the most since late 1981… The consumer price index increased 8.5% from a year earlier following a 7.9% annual gain in February… The widely followed inflation gauge rose 1.2% from a month earlier, the biggest gain since 2005.”

April 13 – CNBC (Jeff Cox): “The prices that goods and services producers receive rose in March at the fastest pace since records have been kept… The producer price index… increased 11.2% from a year ago, the most in a data series going back to November 2010. On a monthly basis, the gauge climbed 1.4%, above the 1.1% Dow Jones estimate and also a record.”

April 11 – CNBC (Jeff Cox): “Worries are increasing over inflation, with new Federal Reserve data showing a record-high fear over surging prices. Consumers now see inflation hitting 6.6% over the next year, according to the New York Fed’s survey… That’s a 10% increase in the median expectation just over the past month and the highest level in a series that dates to 2013.”

April 12 – Reuters (Howard Schneider and Lindsay Dunsmuir): “Prices for online goods continued to surge in March at a record pace, data released… from Adobe Inc showed, adding a potentially troubling dimension to the Federal Reserve’s battle to slow the overall pace of price increases. Adobe’s digital price index increased by 3.6% from a year earlier, the same as in February, with costs for apparel… up 16.3% from a year before and online grocery prices up 9%.”

April 9 – Bloomberg (Megan Durisin): “Harvests of some of Ukraine’s most important crops could be cut in half this year, threatening its position as a major exporter and exacerbating already tight global supplies. Russia’s invasion is happening at a crucial time for crops. Ukrainian farmers have just started planting corn and sunflowers, progress of which is being hobbled by field mines and a lack of fuel and fertilizers. For wheat that was sown months before the war, a chunk of the area is occupied by troops.”

April 12 – Associated Press (Geoffrey Kaviti, Chinedu Asadu and Paul Wiseman): “Higher fertilizer prices are making the world’s food supply more expensive and less abundant, as farmers skimp on nutrients for their crops and get lower yields. While the ripples will be felt by grocery shoppers in wealthy countries, the squeeze on food supplies will land hardest on families in poorer countries. It could hardly come at a worse time: The U.N. Food and Agriculture Organization said last week that its world food-price index in March reached the highest level since it started in 1990.”

April 15 – Wall Street Journal (Matt Grossman): “American drivers are feeling the pain of rising gasoline prices. Airlines and their customers have had it even worse. Jet fuel, a kerosene-based product akin to diesel fuel, has roughly doubled in price since last April across the U.S…, while gasoline has risen about 45%… Rising jet-fuel costs threaten to strain airlines’ profitability just as resurgent travel demand promised relief from the pandemic’s toll on the industry. They are also frustrating passengers who face eye-watering ticket prices as airlines pass on high fuel prices to their customers.”

April 9 – Bloomberg (Aysha Diallo): “Highly pathogenic avian influenza has been found in a non-commercial backyard poultry flock in Colorado, the USDA confirmed in a statement on Saturday, amid the worst U.S. outbreak of the virus in seven years.”

April 14 – Bloomberg (Zijia Song): “The prices for processed eggs, which go into everything from salad dressings to cake mix, are soaring to record highs due to bird flu outbreaks in the midwestern U.S. Avian influenza is spreading in flocks around the country at a pace that could make it the worst outbreak in U.S. history. The virus has already taken out 20 million birds and it’s hitting the market for breaker eggs, mostly produced in states like Iowa.”

April 12 – Wall Street Journal (Bob Tita): “Pig-iron prices are surging… Pig iron, a raw form of the metal used in the production of steel, has grown scarce in the weeks following Russia’s invasion of Ukraine, industry executives said. Two-thirds of the 6 million metric tons of pig iron imported by the U.S. last year came from those two countries…, but the fighting brought Ukrainian shipments to a halt and importers have stopped ordering from Russia, steel executives said.”

April 11 – Bloomberg (Michael Hirtzer and Brian K. Sullivan): “Breakfast is getting more expensive with prices for the staple grain oats jumping to an all-time high on Monday amid persistent dry weather in the Canadian Prairies. Oat futures in Chicago jumped 1.6% to a record $8.075 a bushel. Drought last year shrank the oats crop to a decade-low in Canada, the top supplier to the U.S. A late-winter storm this week will miss western portions of the prairies while snowfall in the Great Plains in the U.S. delays spring sowing of crops including wheat.”

April 13 – Associated Press (Haleluya Hadero): “Amazon is taking a step to offset its rising costs, announcing… it will add a 5% ‘fuel and inflation surcharge’ to fees it charges third-party sellers who use the e-commerce giant’s fulfillment services… The latest fee hike follows one announced in November and went into effect in January.”

April 13 – Reuters (Nichola Groom and Isla Binnie): “Prices for wind and solar power in major global markets have climbed nearly 30% in a year as developers have struggled with chaotic supply chains and surging costs for everything from shipping to parts to labor, according to a report… Contract prices for renewables jumped 28.5% in North America and 27.5% in Europe in the last year, according to a quarterly index by LevelTen Energy…”

Biden Administration Watch:

April 13 – Reuters (Patricia Zengerle, Idrees Ali and Mike Stone): “U.S. President Joe Biden announced an additional $800 million in military assistance to Ukraine on Wednesday, expanding the scope of the systems provided to include heavy artillery ahead of a wider Russian assault expected in eastern Ukraine. The package, which brings the total military aid since Russian forces invaded in February to more than $2.5 billion, includes artillery systems, artillery rounds, armored personnel carriers and unmanned coastal defense boats, Biden said…”

April 14 – Reuters (Ben Blanchard): “A group of six U.S. lawmakers, including chairman of the U.S. Senate Foreign Relations Committee Bob Menendez, landed in Taiwan… for a previously unannounced visit, in a show of support to the island in the face of Chinese pressure. The United States has no formal relations with Chinese-claimed Taiwan, but is its most important international backer and arms supplier. Taiwan has been heartened by the continued U.S. support offered by the Biden administration, which has repeatedly talked of its ‘rock-solid’ commitment to the democratically governed island.”

April 15 – CNBC (Thomas Franck): “President Joe Biden will nominate Michael Barr, a former Treasury Department official, to be the Federal Reserve’s top regulator in charge of big banks… It would make the leading financial laws author perhaps the most powerful U.S. bank regulator: the Fed vice chair of supervision. Barr served as assistant Treasury secretary for financial institutions during the Obama administration, where he helped design the 2010 Dodd-Frank Act.”

Federal Reserve Watch:

April 13 – Reuters (Ann Saphir): “Federal Reserve Governor Christopher Waller… said the U.S. central bank needs to raise rates aggressively to fight inflation, but not so abruptly as to stress markets, destroy jobs and push the economy into recession. ‘I don’t see value in trying to shock the markets; we are not in a Volcker kind of moment,’ Waller told CNBC… In the early 1980s, when inflation was last as high as it is now, Fed Chair Paul Volcker jacked up rates as much as four percentage points at a time. But Volcker, Waller noted, had to battle inflation that had been building for six or seven years; the current Fed is dealing with a surge in inflation that only began early last year.”

April 14 – Bloomberg (Matthew Boesler and Jonnelle Marte): “Speeding up the pace of interest-rate increases to include hikes in increments of a half-percentage point is a ‘reasonable option’ for the Federal Reserve given how low rates are now, New York Fed President John Williams said. ‘I think that’s a reasonable option for us because the federal funds rate is very low,’ Williams said… ‘We do need to move policy back to more neutral levels.’”

April 12 – Bloomberg (Jonnelle Marte and Olivia Rockeman): “The Federal Reserve should raise interest rates to the neutral range as quickly as possible and can move above that should price pressures persist, Richmond Fed President Thomas Barkin said. ‘The best short-term path for us is to move rapidly to the neutral range and then test whether pandemic-era inflation pressures are easing, and how persistent inflation has become,’ Barkin said…, referring to level of rates that neither speed up nor slow down the economy. ‘If necessary, we can move further,’ he said…”

U.S. Bubble Watch:

April 14 – Yahoo Finance (Emily McCormick): “U.S. jobless claims held near multi-decade lows last week as companies worked to keep employees on their payrolls amid ongoing labor shortages. Initial jobless claims, week ended April 9: 185,000 vs. 170,000 expected and a revised 167,000 during prior week…”

April 12 – Bloomberg (Vince Golle): “Sentiment among U.S. small businesses slid for a third month in March to the one of the lowest levels of the pandemic as soaring cost pressures induced the worst economic outlook on record. The National Federation of Independent Business optimism index declined to 93.2, the lowest since April 2020, from 95.6… The net share of owners expecting better business conditions in the next six months plunged to minus 49%, the lowest in monthly data back to 1986. Some 31% of respondents reported that inflation was their biggest operating challenge in March, up from 26% a month earlier and also the largest share since the mid-1980s. The report showed more firms are having greater success raising selling prices — 72% in March after 68% in the prior month.”

April 14 – MarketWatch (Xavier Fontdegloria): “Consumer sentiment in the U.S. unexpectedly rose at the beginning of April as expectations for the economy and personal finances improved, but it remained at decade-low levels. The preliminary estimate… by the University of Michigan stood at 65.7 in April, up from 59.4 in March and beating the 59.0 consensus forecast… Americans’ inflation expectations were unchanged in April compared with March. For the year-ahead, consumers expect prices to rise 5.4%…”

April 14 – Wall Street Journal (Matt Grossman): “The interest rate on America’s most popular mortgage hit 5% for the first time in more than a decade, extending a sharp rise that has yet to significantly slow the red-hot housing market. Interest on the average 30-year fixed-rate mortgage climbed from 4.72% a week ago to its highest level since early 2011… Fifteen months ago, mortgage rates were at all-time lows… Rates’ fastest three-month increase since 1987 has made the housing market ground zero for the Federal Reserve’s efforts to tame inflation.”

April 13 – CNBC (Diana Olick): “The nation’s mortgage bankers are scaling back their expectations for the year as rapidly rising rates make it even more expensive to buy a home. The Mortgage Bankers Association now calls for overall mortgage originations, which include refinancing loans, to total $2.58 trillion in 2022, a 35.5% decline from 2021. The previous forecast was for $2.61 trillion.”

April 13 – Wall Street Journal (Jean Eaglesham and Thomas Gryta): “Global businesses are tallying up tens of billions in losses from their Russian operations as they grapple with the impact of asset sales, shutdowns and sanctions, according to public statements and securities filings. The cost to shareholders of Western companies’ exodus from Russia will become clearer in coming weeks, as companies make their first earnings announcements since the invasion of Ukraine. More than 6oo Western companies have said they would exit or cut back operations in Russia, according to researchers at Yale University.”

Fixed-Income Bubble Watch:

April 11 – Wall Street Journal (Matt Grossman and Matt Wirz): “Investors are growing more skittish about bonds backed by consumer debt, worried that inflation and slowing growth will increase the number of low-income borrowers falling behind on car payments or credit-card bills. Buyers of bonds backed by subprime car loans or credit cards are demanding the highest premiums over interest-rate benchmarks since mid-2020. Meanwhile, investors have punished shares of some financial-technology companies that helped fuel a recent surge in consumer borrowing, such as Affirm Holdings and Upstart Holdings.”

April 13 – Bloomberg (Adam Tempkin and Carmen Arroyo): “There have never been so many leveraged loans on the cusp of the lowest tier of ratings, and the biggest buyers of the debt could be clobbered by any wave of downgrades. Around a quarter of the loans in the S&P LSTA Leveraged Loan Index are rated B-, the lowest level that many money managers can easily buy. That’s the highest proportion on record… If those loans are downgraded by at least one notch in another downturn, their prices could plunge, as the biggest buyers of the debt are effectively forced to sell their holdings… But Barclays called the growing percentage of B- loans ‘worrisome’ for CLOs in a report late last week, and said the market isn’t paying enough attention to tail risk… CLOs, which buy about two thirds of the $1 trillion loan market, are often contractually obliged to keep no more than 7.5% of their money in debt rated CCC or lower.”

April 11 – Wall Street Journal (Heather Gillers): “Rising interest rates are threatening the municipal-bond boom on Wall Street, leaving governments less willing to borrow and households less willing to invest in the $4 trillion market. Bond issuance by state and local governments dropped 8% in the first quarter from a year earlier… At the same time, spooked investors yanked their money from municipal-bond funds, which suffered their biggest quarterly outflows since 2013. States and cities have been forced to cut prices to sell their bonds to banks and insurance companies because muni bond funds are no longer offering top dollar, dealers said.”

April 11 – Bloomberg Lisa Lee): “There’s a part of the global credit market defying war, inflation and recessionary fears to forge a new record for mergers and acquisitions. And its dealmakers don’t seem done yet. The buying frenzy is over collateralized loan obligations, the $1 trillion market that purchases leveraged loans and repackages them into bonds of varying risks. Carlyle Group Inc. nabbed Todd Boehly’s CBAM Partners last month to become the biggest manager of CLOs, while Blue Owl Capital Inc. purchased Wellfleet Credit Partners in April to jump start an entry into the space.”

Economic Dislocation Watch:

April 14 – Bloomberg (Andrea Navarro and Jordan Fabian): “Mexican semi-truck exports to the U.S. have slumped 80% in a matter of days as a border blockade to protest Texas Governor Greg Abbott’s stepped-up vehicle inspections drags on. U.S.-bound cargoes are backed up for almost 9 miles at some border crossings, strangling shipments of the tractor units that power 18-wheelers, said Miguel Elizalde, head of the Association of Heavy Vehicle Producers.”

April 13 – Reuters (Zhang Yan, Josh Horwitz, Martin Quin Pollard and Yimou Lee): “China’s race to stop the spread of COVID-19 is clogging highways and ports, stranding workers and shutting countless factories – disruptions that are rippling through global supply chains for goods ranging from electric vehicles to iPhones. While some factory owners try to tough it out through ‘closed loop’ management that keeps workers isolated inside, some said that is becoming harder to sustain given the extent of local COVID-19 curbs aimed at heading off the Omicron variant, complicating efforts to procure materials or ship products.”

April 14 – Bloomberg: “China’s network of delivering everything from electronic parts to raw materials to the nation’s factories has nearly ground to a halt as Covid-19 restrictions leave hundreds of thousands of truck drivers caught in a web of quarantine controls. The country relies on its 17.3 million truckers to keep store shelves full while also connecting the nation’s ports with its manufacturing hubs. The logjam is preventing crucial deliveries from reaching companies, stalling production in key industrial regions, with the impact likely to continue rippling across the economy even as cities move to loosen lockdowns.”

April 15 – Reuters (Josh Horwitz and Sarah Wu): “Shipments of some Apple products, as well as Dell and Lenovo laptops are likely to face delays if China’s COVID-19 lockdowns persist, analysts said, as curbs force assemblers to shut down and closed-loop arrangements get harder to maintain. China’s race to stop the spread of COVID-19 has jammed highways and ports, stranded workers and left countless factories awaiting government approval to reopen – disruptions that are rippling through global supply chains.”

April 12 – Financial Times (Kathrin Hille and Thomas Hale): “One of the world’s largest electronics manufacturing hubs near Shanghai is grinding to a halt, aggravating China’s economic worries and exacerbating disruption to global supply chains. Dozens of producers of crucial electronic components… halted production at their factories in Kunshan, a city close to Shanghai. Companies and analysts said the shutdown was unavoidable after lockdown rules initially applied only in Shanghai were extended to Kunshan… Economists at Nomura estimated that 45 cities and 373mn people in China were under full or partial lockdown, compared with 23 cities and 193mn people a week ago.”

April 13 – Bloomberg (Jill Disis): “China’s lockdowns to contain the country’s worst Covid outbreak since early 2020 have battered the economy, stalling production in major cities like Shanghai, and halting spending by millions of people shut in their homes… China posted sluggish commodities imports in March, as elevated prices due to the war in Ukraine and tightening virus restrictions took their toll on demand. Natural gas purchases were worst affected… The number of daily flights in China… has fallen below the lowest level seen in 2020… The number of passenger trains has also dropped to about 3,000 a day, which is only 30% of the normal level…”

China Watch:

April 11 – Bloomberg: “China’s Premier Li Keqiang issued a third warning about economic growth risks in less than a week, suggesting heightened concern about the outlook as widespread Covid lockdowns disrupt production and spending. Authorities should ‘add a sense of urgency’ when implementing existing policies, Li told local authorities… China will study and adopt stronger economic policies as needed to support the economy, he said.”

April 12 – Bloomberg: “China’s central bank is struggling to drive up lending in the economy despite cutting interest rates and giving banks a cash boost. With a worsening Covid outbreak locking down mega cities Shanghai and Shenzhen, worries about jobs and incomes mean businesses and consumers are unwilling to take on more debt. Banks are reluctant to extend more loans too as a property downturn drives up bad debts and squeezes profits. That creates a challenge for the People’s Bank of China…”

April 14 – Reuters (Stella Qiu and Kevin Yao): “China said… it would cut the amount of cash that banks must hold as reserves for the first time this year, releasing about 530 billion yuan ($83.25bn) in long-term liquidity to cushion a sharp slowdown in economic growth. The People’s Bank of China (PBOC) said… it would cut the reserve requirement ratio (RRR) for all banks by 25 bps, effective from April 25, but analysts said it might not yet be enough to reverse the slowdown.”

April 15 – Bloomberg: “China’s central bank gave lenders a modest cash boost on Friday and refrained from cutting interest rates, taking a cautious approach with monetary easing despite the worst Covid outbreak in two years taking a toll on the economy. The People’s Bank of China reduced the reserve requirement ratio for most banks by 25 bps, lower than economists had expected, and dropped it by 50 bps for smaller banks. It kept the one-year policy interest rate unchanged, disappointing the majority of economists who predicted a cut.”

April 12 – New York Times (Keith Bradsher): “For much of last year, China’s top leader, Xi Jinping, waged a fierce campaign to rein in private capital and narrow social inequalities. Regulators cracked down on tech giants and wealthy celebrities. Beijing demanded that tycoons give back to society. And the Communist Party promised that a new era of ‘common prosperity’ was on the horizon. Now, the Communist Party is putting its campaign on the back burner. In doing so, Beijing is tacitly acknowledging that Mr. Xi’s push to redistribute wealth has unnerved the private sector — a pillar of growth and job creation — at a time when China’s economic outlook is increasingly clouded.”

April 11 – Reuters (Meg Shen and Ella Cao): “China is encouraging long-term investors to buy more equities and major shareholders of listed firms to increase their holdings when stocks slump, in a bid to stabilise a stock market rocked by a worsening COVID-19 outbreak. The government will also facilitate corporate financing in COVID-hit areas and urge state shareholders of listed firms to actively buy undervalued stocks, the country’s securities watchdog said…”

April 12 – Bloomberg: “China’s government granted provinces their full allocation of special bonds to be used for infrastructure investment, a sign it’s stepping up stimulus to boost an economy overshadowed by a worsening Covid outbreak. ‘We will waste no time to match the newly granted quota with eligible projects,’ Deputy Finance Minister Xu Hongcai said… ‘We will ensure that special bond proceeds will be used to drive investment up significantly.’”

April 10 – Reuters (Liangping Gao, Ellen Zhang and Ryan Woo): “China’s factory-gate and consumer prices rose faster than expected in March as Russia’s invasion of Ukraine, persistent supply chain bottlenecks and production snags caused by local COVID flare-ups added to commodity cost pressures… China’s producer price index (PPI) increased 8.3% year-on-year…”

April 13 – Bloomberg (Stella Qiu, Ellen Zhang and Ryan Woo): “China’s imports unexpectedly fell in March as COVID-19 curbs across large parts of the country hampered freight arrivals and weakened domestic demand, while export growth slowed, prompting analysts to expect a worsening in trade in the second quarter… Inbound shipments fell 0.1% in March from a year earlier, marking the first decline since August 2020… That compared with a 15.5% gain in the first two months of the year…”

April 11 – Wall Street Journal (Liza Lin and Joyu Wang): “China’s strict Covid-19 lockdowns in Shanghai and other industrial hubs are beginning to weigh on its economy… Car sales in China dropped 10.5% year-over-year in March to 1.58 million vehicles as measures to contain the coronavirus outbreaks halted auto factories, slowed down car shipments and kept consumers from visiting car dealerships, the China Passenger Car Association said…”

April 15 – Wall Street Journal (Joyu Wang and Liyan Qi): “Localized Covid-19 lockdowns are proliferating across China, suggesting Shanghai’s struggle to contain the virus might be the prelude to a broader battle that threatens to hobble the world’s second-largest economy. Chinese health authorities on Thursday reported more than 29,000 new infections, the highest daily tally since the pandemic began… Strict measures appear to be working in China’s far Northeast… Yet localized lockdowns are being newly imposed, expanded or extended elsewhere in the country, including the northern industrial city of Taiyuan, and the southern megacities of Guangzhou and Shenzhen.”

April 10 – Bloomberg (Alfred Cang): “Chinese farmers in the country’s most important region for corn, soybeans and rice are facing a myriad of challenges as the spring planting season kicks off, endangering the nation’s ability to secure enough grains for this year. Already hit by soaring fertilizer and fuel costs, growers in some areas of the northeast have had to contend with strict Covid curbs that prevent them from plowing their fields and sowing seeds. The region produces more than a fifth of China’s national grain output.”

April 12 – Bloomberg: “Chinese developer Sunac China Holdings Ltd. has missed its first payment on a dollar bond since worries about the firm’s financial health emerged late last year… China’s fourth-largest developer by sales in the first quarter of this year faces $1.6 billion of other offshore and local bond payments due through June…”

April 10 – Bloomberg (Lorretta Chen): “Zhenro Properties Group Ltd. defaulted for the first time after the debt-laden Chinese developer said it was unable to pay interest on two dollar bonds… The builder, which in February asked holders of about $1 billion of bonds set to mature this year for more time to repay, said… it didn’t pay a combined $20.4 million of interest on two dollar bonds.”

April 13 – Reuters (David Stanway, Winni Zhou, Stella Qiu and David Kirton): “China’s commercial capital, Shanghai, warned… that anyone who violates COVID-19 lockdown rules will be dealt with strictly, while also rallying citizens to defend their city as its tally of new cases rebounded to more than 25,000. The city police department spelled out the restrictions that most of the 25 million residents are facing and called on them to ‘fight the epidemic with one heart … and work together for an early victory’.”

April 15 – Bloomberg: “It’s a sign of the times when even the rich have trouble buying food. In this case, Kathy Xu — a venture capitalist whose $2.5 billion firm has invested in a range of grocery businesses including Meituan and DingDong Maicai — resorted to joining a neighborhood food-buying group on WeChat to feed her family. Xu became an inadvertent poster child for Shanghai residents struggling to find food during a weeks-long lockdown that has led to protests and severely tested the Chinese government’s Covid Zero strategy. Rich or poor, group buying — in which a residential compound coordinates bulk purchases and distribution — has become a lifeline for Shanghai’s 25 million residents. Bartering has also started to take hold.”

April 14 – Financial Times (Eleanor Olcott in Taipei and Sun Yu): “China has intensified propaganda efforts to drum up support for its ‘dynamic zero-Covid’ policy just as experts and companies warn of the heavy economic blow from extended lockdowns. On Thursday, China’s official Xinhua news agency published an article warning that the country’s medical system risked ‘breaking down’ in the event of a mass Covid outbreak. It echoed President Xi Jinping’s comments a day earlier, calling for citizens to ‘overcome complacency’ in ‘response to the virus’s mutation’. ‘The global pandemic is still severe, so we cannot relax the controls now,’ Xi said… Bo Zhuang…, analyst at Loomis Sayles, said local governments were ‘hugely underestimating’ the economic damage caused by lockdowns, which have disrupted logistics networks and frozen intercity connections that enable the flow of goods. ‘China’s economy relies on supply chains,’ said Zhuang, pointing to how several electric-vehicle makers… have suspended production because they could not source components.”

April 13 – New York Times (Li Yuan): “Long before the ‘zero Covid’ policy, China had a ‘zero sparrow’ policy. In the spring of 1958, the Chinese government mobilized the entire nation to exterminate sparrows, which Mao declared pests that destroyed crops. All over China, people banged on pots and pans, lit firecrackers and waved flags to prevent the birds from landing so they would fall and die from exhaustion. By one estimation, nearly two billion sparrows were killed nationwide within months. The near extinction of sparrows led to insect infestations, which ruined crops and contributed to the Great Famine, which starved tens of millions of Chinese to death in the next three years. The fear in China now is that the ‘zero Covid’ policy has become another Mao-style political campaign that is based on the will of one person, the country’s top leader, Xi Jinping — and that it could end up hurting everyone.”

April 12 – Wall Street Journal (Rachel Liang): “As Shanghai battles the country’s worst Covid-19 outbreak in two years, people across the rest of China are stockpiling necessities as they brace for the prospect of similar lockdowns. In Beijing, where some residential districts have been closed in recent weeks…, supermarket shelves in some parts of the city have been picked clean of toilet paper, canned foods, instant noodles and rice in recent days. In Suzhou… residents swarmed supermarkets to fill their grocery baskets with instant noodles and other food on Tuesday morning, hours after local officials said they would conduct districtwide testing in one section of the city.”

April 15 – Bloomberg: “Residents of a Shanghai area that hosts research centers for major tech firms fought with police over plans to open quarantine facilities near them, underscoring burgeoning anger over the Chinese government’s handling of its worst Covid outbreak since Wuhan… People living at the Nashi community in the financial hub’s east… tried to stop workers in hazmat suits from erecting fencing around several buildings that have units similar to serviced apartments…”

April 10 – South China Morning Post (Pheobe Zhang): “Stockpiling has become a hot topic on Chinese social media as news spreads of the plight of Shanghai residents who are struggling to secure food supplies under lockdown. Over the past week multiple survivors’ guides have been published by media outlets and bloggers. These include a well-known medical site called Doctor Clove, which published a list of what items people will need if they are suddenly quarantined and advice on storing food for the long term.”

Central Banker Watch:

April 11 – Financial Times (Martin Arnold): “Like many Germans, Otmar Issing is alarmed by the surge in inflation to 40-year highs in his country and worried by the ‘misguided’ response of the European Central Bank. But, as one of the founding fathers of the euro, Issing’s complaints carry more weight than most of his countrymen. The ECB’s first chief economist when it was created in 1998 said the central bank was suffering from a ‘misdiagnosis’ of the factors behind the surge in prices, having ‘lived in a fantasy’ that played down the danger of inflation spiralling out of control. ‘The ECB has contributed massively to this trap in which it is now caught because we are heading towards the risk of a stagflationary environment,’ said the 86-year-old, who is credited with shaping the central bank’s use of money supply measures to decide interest rate policy.”

April 14 – Wall Street Journal (Martin Arnold and Tommy Stubbington): “The war in Ukraine is driving inflation higher and hitting the economy harder in the eurozone than most other regions, European Central Bank president Christine Lagarde said…, as it stuck to its gradual timetable for removing monetary stimulus. Some investors had expected the ECB to go further by bringing forward its plan for ending net bond purchases and raising interest rates. When it announced a continuation of its plans, the euro fell to its lowest level against the dollar since May 2020. Policymakers on the central bank’s governing council… are grappling with how drastically to tighten monetary policy to tackle record inflation while assessing the risk of a sharp economic downturn caused by Russia’s invasion of Ukraine.”

April 12 – Bloomberg (Tracy Withers): “New Zealand’s central bank delivered its biggest interest-rate increase in 22 years, signaling that policy makers around the world may need to step up efforts to get inflation under control. The Reserve Bank’s Monetary Policy Committee lifted the official cash rate by half a percentage point to 1.5%…”

Global Bubble and Instability Watch:

April 13 – Reuters (Michelle Nichols): “Poor countries face economic ruin from simultaneous crises of food, energy and finance due to supply disruptions caused by Russia’s invasion of Ukraine, U.N. Secretary-General Antonio Guterres said… Russia is the world’s top exporter of combined oil and gas, and Russia and Ukraine are both major producers of grain, together accounting for around a third of global exports. World commodity prices have hit records, hurting countries that rely on imports. ‘The war is supercharging a three-dimensional crisis – food, energy and finance – that is pummeling some of the world’s most vulnerable people, countries and economies,’ Guterres told reporters…”

April 12 – Bloomberg (Enda Curran, Michelle Jamrisko and Anup Roy): “The world is now facing a synchronized inflation outbreak as food and energy prices surge in Asia, a shift from just a few months ago when the region appeared to avoid the price fever gripping the U.S. and parts of Europe. Inflation readings across the region — China, India, Indonesia, Philippines, Thailand and South Korea — recently rose more than forecast…”

Europe Watch:

April 10 – Reuters (Layli Foroudi, Tassilo Hummel and Ingrid Melander): “French leader Emmanuel Macron and challenger Marine Le Pen qualified on Sunday for what promises to be a very tightly fought presidential election runoff on April 24, pitting a pro-European economic liberal against a far-right nationalist. With partial results putting Macron in first place ahead of Le Pen after the first-round voting… But after five years in power in which his abrasive style has upset many, while Le Pen succeeded in softening her image, Macron will have to fight hard to win back disgruntled voters.”

April 13 – Reuters (David Milliken and William Schomberg): “British consumer price inflation leapt to its highest level in three decades last month, intensifying the pressure on embattled Prime Minister Boris Johnson and his finance minister Rishi Sunak… The annual inflation rate climbed to 7.0% in March from 6.2% in February, its highest since March 1992 and by more than expected by most economists…”

Japan Watch:

April 14 – Bloomberg (Chikako Mogi): “The yen’s relentless drop continued Friday, as it weakened for an 11th straight day against the dollar on bets further divergence between U.S. and Japanese interest rates are inevitable.”

Covid Watch:

April 13 – The Hill (Peter Sullivan): “Nearly 90% of new COVID-19 cases in the United States are now a more transmissible subvariant of omicron known as BA.2… The data… shows that 86% of cases were the BA.2 variant, showing how the variant has risen in the United States to now make up almost all new cases. The BA.2 variant is estimated to be about 30% more transmissible than the original omicron variant, which already spread more easily than earlier variants.”

April 10 – Financial Times (Delphine Strauss and Jamie Smyth): “When Katie Lazell-Fairman returned to work after recovering from a Covid-19 infection, she quickly discovered that the virus had taken a much heavier toll on her body than she initially realised. ‘I woke up suddenly feeling incredibly exhausted, dizzy. My heart rate was 135 beats per minute standing, 140-150 walking,’ says the 35-year-old, a data scientist from New York. ‘I couldn’t think straight and struggled to code on my laptop.’…Lazell-Fairman is one of an estimated 100mn people worldwide suffering from long Covid, a debilitating condition where Covid symptoms linger for 12 weeks or more, frequently leaving them unable to return to their previous working lives.”

Social, Political, Environmental, Cybersecurity Instability Watch:

April 13 – Reuters (Mrinalika Roy): “Life expectancy in the United States fell by nearly two years in 2020 to about 77 years amid the COVID-19 pandemic, the sharpest drop compared to 21 other high-income countries… Americans on average are now expected to live for 76.99 years from 78.86 years in 2019, according to the study, which looked at national death and population counts in 2019 and 2020 to calculate the mortality rate ratio. The decline of 1.87 years in life expectancy for 2020 was far higher than the mean reduction of 0.58 years in 21 peer countries, including Canada, France, Germany, Denmark and South Korea. No country experienced a decrease as steep as that of the United States…”

April 13 – Associated Press: “A Federal officials say it may be necessary to reduce water deliveries to users on the Colorado River to prevent the shutdown of a huge dam that supplies hydropower to some 5 million customers across the U.S. West. Officials had hoped snowmelt would buoy Lake Powell on the Arizona-Utah border to ensure its dam could continue to supply power. But snow is already melting, and hotter-than-normal temperatures and prolonged drought are further shrinking the lake.”

April 12 – Associated Press (Seth Borenstein): “Climate change made the record-smashing deadly 2020 Atlantic hurricane season noticeably wetter, a new study says. And it will likely make this season rainier, too, scientists said. Human-caused climate change made the entire season — 30 named storms — drop 5% more rain. During the 14 storms that reached hurricane status the rainfall was 8% heavier, according to… Nature Communications.”

Leveraged Speculation Watch:

April 9 – Financial Times (Brooke Masters, Eric Platt, Joe Rennison and Laurence Fletcher): “Market turmoil driven by Russia’s invasion of Ukraine and rising inflation has sharply divided the hedge fund industry, with macro hedge funds celebrating one of their best-ever starts to a year while technology and growth funds rack up double-digit losses. The top 10% of hedge funds gained an average of 24.3% in the first quarter, while the bottom decile dropped by 15.4%, according to HFR… The dispersion is one of the widest since the financial crisis. The industry as a whole suffered losses of 0.3% for the first quarter, as measured by the HFRI fund-weighted index…”

Geopolitical Watch:

April 12 – Newsweek (John Feng): “NATO’s attempt to draw China away from Russia’s orbit has failed. The West’s warnings against siding with Moscow have not only fallen on deaf ears, they have also led to an almighty backlash out of Beijing. When Secretary-General Jens Stoltenberg recently expressed his dismay at China’s unwillingness to condemn Russia’s war against Ukraine, he described Beijing’s posture as a ‘serious challenge’ to the North Atlantic Alliance, which would have to ‘take account of how China’s growing influence and coercive policies affect our security.’ Chinese diplomats immediately fired back. On Monday, Zhao Lijian, a spokesperson for the Chinese Foreign Ministry, offered a lengthy retort to Stoltenberg… ‘For some time, the NATO head has disregarded facts and confounded black with white when making groundless accusations, smears and attacks against China… He has made irresponsible comments on China’s foreign policies, touted the ‘China threat’ and even used coercion on China recently… NATO should immediately stop spreading disinformation and provocative remarks targeting China, and abandon the confrontational approach of drawing ideological lines… NATO has disrupted Europe. It should stop trying to destabilize Asia and the whole world.’”

April 11 – Reuters (Maria Ponnezhath): “NATO is working on plans for a full-scale military presence on its border in an effort to battle future Russian aggression, The Telegraph reported, citing NATO Secretary-General Jens Stoltenberg. NATO was ‘in the midst of a very fundamental transformation’ that will reflect ‘the long-term consequences’ of Russian President Vladimir Putin’s actions, Stoltenberg said… ‘What we see now is a new reality, a new normal for European security. Therefore, we have now asked our military commanders to provide options for what we call a reset, a longer-term adaptation of NATO,’ it cited Stoltenberg as saying.”

April 15 – Financial Times (Tony Barber): “Two months before its armies invaded Ukraine, Russia published a set of security demands that aimed at a drastic revision of Europe’s post-cold war order. Above all, the Kremlin wanted far-reaching restrictions on Nato’s presence in central and eastern Europe, a region where 14 countries joined the US-led alliance between 1999 and 2020. Two months after its invasion, Russia is learning the historical lesson that wars of choice often bring unexpected and undesirable consequences… Far from crippling Nato, Moscow’s truculent diplomacy and military aggression are making it increasingly plausible that the alliance’s membership will expand from 30 to 32 countries with the admission of Finland and Sweden.”

April 12 – Reuters (Josh Smith): “The USS Abraham Lincoln strike group is operating in waters off the Korean peninsula, the U.S. Navy said…, amid tensions over North Korea’s missile launches and concerns that it could soon resume testing nuclear weapons… This is the first time since 2017 that a carrier group has deployed to the waters between South Korea and Japan, and comes as U.S. officials are increasingly concerned that North Korea could carry out an underground nuclear test in the coming days.”

April 10 – Reuters (Parisa Hafezi): “Iranian President Ebrahim Raisi said… Tehran would not give up its right to develop its nuclear industry for peaceful purposes, and all parties involved in talks to revive the 2015 nuclear accord should respect this… ‘For more than the one-hundredth time, our message from Tehran to Vienna is that we will not back off from the Iranian people’s nuclear rights… not even an iota,’ state media quoted Raisi as saying…”

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