Marines deployed to Los Angeles. A U.S. Senator wrestled to the ground and handcuffed. Israel executing a surprise decapitation attack on Iran’s military leadership and nuclear capabilities, with retaliatory missile launches forcing citizens across Israel into emergency shelters. One more unnerving week with that ominous feeling things could spiral out of control. A tense weekend awaits, with new war developments, a Washington military parade, and millions of protestors spread across the country.
Not as conspicuous, but finance is beset with its own precariousness. During the mortgage finance Bubble period, I occasionally referenced a long-term chart of total system Credit. Total Credit was expanding exponentially, in the most vertical rise since the “Roaring Twenties.” Most economists and analysts have issues with total system Credit, arguing that it double counts actual debt levels. System Credit, after all, combines non-financial and financial debt, with financial debt basically comprising borrowings within the financial sector to hold debt originated in the real economy (i.e., government, household, and corporate).
For example, Fannie Mae borrows (issues financial debt) to finance holdings of household mortgages (non-financial debt). Conventional analysis focuses on non-financial (real economy) debt, dismissing the relevance of financial sector borrowings.
Analyzing new Q1 Z.1 Credit data, my thoughts returned to my “real economy sphere versus financial sphere” analytical construct from the early CBB years. Differing dynamics of the two “spheres” require distinct analytical frameworks. Total system Credit absolutely provides valuable insight, capturing growth dynamics from both. Basically, the mortgage finance and “Roaring Twenties” Bubbles experienced historic financial sector expansions, largely explaining the two periods’ corresponding exponential growth in total system Credit.
Importantly, major financial sector expansions are part and parcel of financial excess. In simple terms, financial sector booms are typically fueled by aggressive lending, speculative leveraging, and risk intermediation. Banks, brokers, and finance and insurance companies might lend aggressively. They could also borrow excessively to speculate in bonds and other financial assets, in the process distorting market pricing and liquidity dynamics.
Less straightforward, yet fundamental to major Bubble inflations, rapid financial sector expansion is indicative of aggressive risk intermediation. Especially late in the mortgage financial Bubble period, financial institutions (i.e., banks, brokers, the GSEs, insurance companies…) were intermediating huge amounts of risky mortgage Credit into perceived safe and liquid money-like instruments (i.e., “AAA” securities, repos, CDOs, myriad derivatives…). This “Wall Street alchemy” was instrumental in extending both financial and economic booms – precariously prolonging “terminal phase excess.” The colossal divergence between actual and perceived risk – coupled with deep economic structural maladjustment – came home to roost in 2008.
It’s not that I simply forgot about “real economy sphere versus financial sphere” analysis. For the most part, global government finance (as opposed to mortgages) Bubble excess didn’t require aggressive financial sector intermediation. After all, Treasuries (and sovereign debt generally) are perceived as safe and liquid “money” (benefiting from insatiable demand). “Wall Street alchemy” not required, or more accurately, WAS not required.
Analyzing the latest Z.1, there’s evidence of a financial sector increasingly challenged to intermediate massive (risky) Treasury issuance into perceived money-like instruments (chiefly repo and money funds deposits). The first quarter was notable for a slowing of non-financial (“real economy”) debt concurrent with extraordinary ongoing inflation in “repo”, the Wall Street firms, and the money market fund complex.
Non-Financial Debt expanded at a 2.82% rate during Q1, down from Q4’s 4.46% and Q1 ‘24’s 4.57%. Most of the decline is explained by an anomalous drop in federal borrowings to 1.95% from Q4’s 8.41% and Q1 ‘24’s 6.20%. But Household debt growth slowed to 1.85% from Q4’s 3.34% (Q1 ’24’s 3.01%). Corporate debt growth accelerated to 6.30% from negative 0.55% (Q1 ‘23’s 5.18%).
Domestic Financial Sector debt growth surged to 6.08%, from 0.67% (1.91%). Even more interesting, Rest of World (ROW) borrowings surged to 12.22%, from 6.12% (4.52%).
In seasonally-adjusted and annualized (SAAR) dollars, NFD expanded $2.162 TN during the quarter, down from $3.404 TN – for the second weakest quarterly growth since before the pandemic. Meanwhile, Financial Sector debt expanded SAAR $1.230 TN, up from $134 billion (Q1 ’24’s $376bn). For perspective, over the past 17 years, annual Financial Sector debt growth exceeded $1.0 TN only once (2023’s $1.60 TN).
Recall that “risk off” was gathering momentum into the end of Q1, with a serious bout of deleveraging erupting during the first week of April. CDS prices (investment-grade, junk, bank) ended March at the highs since early-August market instability.
Broker/Dealer Assets expanded (nominal) $490 billion, or 37.2% annualized, during Q1 to $5.759 TN. This was the strongest quarterly growth since Q1 2007 – to the highest level since Q3 2008. One-year growth was boosted to $614 billion, or 11.9%, the strongest annual expansion since 2007 ($619bn).
For Q1, Broker/Dealer Repo Assets surged a quarterly record $240 billion, or 56.8% annualized, surpassing (banking crisis) Q1 2023’s $199 billion – to a record $1.930 TN. Over 10 quarters, Repo Assets have ballooned $600 billion, or 45%. For some perspective, broker/dealer Repo Assets jumped $303 billion, or 21%, over 10 quarters for a September 2008 cycle peak of $1.778 TN.
Broker/Dealer Loan Assets increased $11 billion, or 5.6% annualized, to a 10-quarter high of $764 billion (1-yr growth $75bn, or 10.9%). Loans were up $334 billion, or 78%, over 21 quarters. Debt Securities holdings surged $145 billion, or 56% annualized, surpassing Q1 2008’s $1.111 TN to a record $1.174 TN (1-yr $233bn, 24.7%). Debt Securities were up $523 billion, or 82%, over 21 quarters.
Broker/Dealer Agency Securities holdings ballooned $105 billion (91% ann.) during Q1 and an unprecedented $407 billion (255%) over one year – to a record $566 billion. Prior to 2024 ($340bn), 2008’s $100 billion increase in Agency holdings held the annual record. Treasury holdings gained $33 billion (29% ann.) during Q1 and $97 billion (25%) y-o-y to a record $488 billion. Treasury holdings ballooned $260 billion, or 114%, over 21 quarters. Miscellaneous Assets expanded $88 billion, or 23% annualized, during Q1 to $1.616 TN. Misc. Assets surged $381 billion, or 31%, over 21 quarters.
So how did Wall Street finance this remarkable balance sheet expansion? Repo Liabilities ballooned $361 billion, or 61.8% annualized, during Q1 to $2.697 TN – the high since Q3 2008. Repo Liabilities inflated $1.083 TN, or 67%, over 10 quarters. For comparison, Broker/Dealer Repo Liabilities expanded $989 billion, or 46%, over 10 quarters to a Q3 2007 cycle peak of $3.132 TN.
Sticking with Repos, total system Repo Assets surged (second only to Q1 ‘23’s $724bn) $717 billion, or 41% annualized, to a record $7.779 TN. One-year growth of $1.074 TN compares to peak mortgage finance Bubble 2007’s $655 billion (to $4.541 TN). Repo Assets ballooned $2.965 TN, or 62%, over 21 quarters. ROW Repo Assets surged $141 billion during Q1 to a record $1.480 TN. ROW Repo holdings were up $350 billion, or 31%, over 10 quarters
Money Market Funds (MMF) are the largest holder of Repos. MMF Assets rose $155 billion, or 8.5%, during Q1 to a record $7.398 TN – with incredible one-year growth of $957 billion, or 14.9%. MMF Assets ballooned $2.314 TN (46%) over 10 quarters and an astounding $3.395 TN, or 85%, over 21 quarters – for one of history’s great monetary inflations. MMF Repo holdings surged $201 billion, or 31% annualized, during Q1 to $2.821 TN – with one-year growth of $440 billion, or 19%, and 21-quarter ballooning of $1.579 TN, or 127%. MMF Treasury holdings declined $114 billion during Q1 to $2.881 TN, though holdings were up $1.624 TN, or 129%, over 10 quarters.
The banking system (“Depository Institutions”) is certainly part of the booming financial sector. Bank Assets jumped $581 billion, or 8.4% annualized, during Q1 to a record $28.388 TN – the largest quarterly growth since Q4 2021 ($702bn). Bank Assets ballooned $6.988 TN, or 33%, over 21 quarters.
For Q1, Bank Loans increased (a measly) $52 billion, or 1.4%, to a record $14.926 TN, with one-year growth of $479 billion (3.3%). At $18 billion, or 1.0% annualized, Mortgages grew at the slowest pace in two years, with Consumer Credit contracting $65 billion. Meanwhile, Repo Assets surged $84 billion, or 48% annualized (strongest since Q4 ‘18), to a record $782 billion – with one-year growth of $147 billion, or 23%. Bank Debt Securities holdings jumped $172 billion, or 11.2% annualized, to $6.342 TN. Debt Securities ballooned $1.660 TN, or 35.4%, over 21 quarters. Agency Securities holdings jumped $91 billion, or 11.9% annualized, with Corporate Bonds up $71 billion, or 31.9% annualized.
The Wall Street securitization machine still runs hot. Debt Securities expanded $805 billion during Q1 to a record $62.655 TN – with one-year growth of $2.632 TN. Over 23 quarters, Debt Securities ballooned $19.625 TN, or 45.6%. With stocks posting Q1 losses, Equities Securities declined $3.655 TN to $90.522 TN, though Equities were still up $39.754 TN, or 78%, over 23 quarters. Total (Debt and Equities) Securities ended Q1 at $153.176 TN, or 511% of GDP. This compares to cycle peaks 375% (Q3 ’07) and 357% (Q1 2000).
Throughout the mortgage finance Bubble, I highlighted the quarterly ballooning of Wall Street “Funding Corps” – name since changed to “Other Financial Business” (“Includes funding subsidiaries, custodial accounts for reinvested collateral of securities lending operations…). From Q2 2004 to peak Q4 2008, Funding Corps inflated 50% to $1.504 TN – before post-Bubble contraction shrank assets to $450 billion by the end of 2011. Well, they’re back. Other Financial Business assets surged $136 billion, or 46% annualized, during Q1 to $1.327 TN – the high since Q4 2008. Assets ballooned $210 billion y-o-y, or 18.8%, and $694 billion, or 110%, over 21 quarters.
Money Market Funds ($530bn) and Debt Securities ($384bn) are the largest Other Financial Business holdings, with Securities Lending ($793bn) the largest liability. Interestingly, Open Market (“Commercial”) Paper was the fastest growing individual holding, expanding an unprecedented $69 billion (184% ann.) to a record $219 billion.
Curiously, the category Open Market Paper expanded $140 billion, or 46% annualized, during the quarter (high since Q1 ’09) to $1.355 TN – with 21-quarter growth of $317 billion, or 31%. Brings back memories of the $479 billion, or 37%, ballooning over 13 quarters to a Q4 2007 peak of $1.789 TN. But I digress…
Declining stocks took a nick out of the grossly inflated Household Balance Sheet. With Assets dipping $1.657 TN to $190.083 TN, and Liabilities slipping $62 billion to $20.776 TN, Household Net Worth declined $1.595 TN to $169.307 TN. Still, Net Worth was up $6.123 TN y-o-y, $16.819 TN over three years, and $58.304 TN, or 53%, over 20 quarters. Net Worth ended the quarter at 565% of GDP, compared to previous cycle peaks 488% (Q1 ’07) and 444% (Q1 2000).
Combined Household Equities and Mutual Funds slipped $1.801 TN during Q1 to $49.948 TN, while Real Estate dipped $227 billion to $51.987 TN. Household “money” holdings continue their historic inflation. Total bank Deposits jumped $259 billion to a record $14.760 TN, with Money Market Deposits rising $119 billion to a record $4.837 TN. Meanwhile, Treasury holdings jumped $132 billion to $2.859 TN, while Agency Securities dropped $86 billion to $1.018 TN. Total Household Holdings of Deposits, Money Market Funds, Treasuries, and Agencies rose $423 billion during the quarter to a record $23.474 TN, with one-year growth of $1.317 TN, and 20-quarter growth of an incredible $6.314 TN, or 37%.
Rest of World holdings of U.S. financial assets slipped $475 billion during Q1 to $56.432 TN, though the quarter’s weaker stock market (total equities down $716bn) was entirely to blame. Meanwhile, Debt Securities holdings jumped a notable $635 billion (17.5% ann.) to a record $15.177 TN, with one-year growth of $1.188 TN, or 8.5%. Treasury holdings surged $500 billion during the quarter to a record $9.013 TN
I remember writing about the same dynamic late in the mortgage finance Bubble. Roads full of cars and retail centers bustling with shoppers. For the most part, the economic data looks okay. Stock prices are only a short distance from record highs.
But there is a serious smoldering issue: finance is malfunctioning. Excessive leverage is increasingly destabilizing. Risk intermediation is struggling to keep pace with over-issuance of debt of deteriorating quality. The widening chasm between the perception of moneyness (safety and liquidity) and the actual quality of underlying debt is untenable. Tens of Trillions of perceived wealth lack sufficient backing from underlying economic wealth-producing assets. It’s uncomfortably reminiscent of early 2008, except only a lot more ominous. Bubbles are so much bigger – and the world frighteningly more precarious.
For the Week:
The S&P500 dipped 0.4% (up 1.6% y-t-d), and the Dow declined 1.3% (down 0.8%). The Utilities recovered 0.9% (up 7.8%). The Banks dropped 2.6% (down 0.2%), and the Broker/Dealers fell 2.1% (up 13.9%). The Transports lost 1.3% (down 7.6%). The S&P 400 Midcaps fell 1.5% (down 3.7%), and the small cap Russell 2000 declined 1.5% (down 5.8%). The Nasdaq100 slipped 0.6% (up 2.9%). The Semiconductors gained 1.5% (up 2.7%). The Biotechs declined 1.2% (down 1.7%). With bullion surging $122, the HUI gold index jumped 3.1% (up 56.7%).
Three-month Treasury bill rates ended the week at 4.245%. Two-year government yields fell nine bps to 3.95% (down 29bps y-t-d). Five-year T-note yields dropped 12 bps to 4.00% (down 38bps). Ten-year Treasury yields fell 11 bps to 4.40% (down 17bps). Long bond yields dipped eight bps to 4.90% (up 11bps). Benchmark Fannie Mae MBS yields dropped 12 bps to 5.72% (down 13bps).
Italian 10-year yields slipped two bps to 3.48% (down 4bps y-t-d). Greek 10-year yields added a basis point to 3.28% (up 6bps). Spain’s 10-year yields increased one basis point to 3.16% (up 10bps). German bund yields declined four bps to 2.54% (up 17bps). French yields added a basis point to 3.25% (up 6bps). The French to German 10-year bond spread widened five to 71 bps. U.K. 10-year gilt yields fell nine bps to 4.55% (down 2bps). U.K.’s FTSE equities index was little changed (up 8.3% y-t-d).
Japan’s Nikkei 225 Equities Index increased 0.2% (down 5.2% y-t-d). Japanese 10-year “JGB” yields declined four bps to 1.41% (up 31bps y-t-d). France’s CAC40 fell 1.5% (up 4.1%). The German DAX equities index sank 3.2% (up 18.1%). Spain’s IBEX 35 equities index slumped 2.4% (up 20%). Italy’s FTSE MIB index dropped 2.9% (up 15.4%). EM equities were mixed. Brazil’s Bovespa index increased 0.8% (up 14.1%), while Mexico’s Bolsa index declined 1.1% (up 16.0%). South Korea’s Kospi jumped 2.9% (up 20.6%). India’s Sensex equities index declined 1.3% (up 3.3%). China’s Shanghai Exchange Index slipped 0.2% (up 0.8%). Turkey’s Borsa Istanbul National 100 index fell 1.8% (down 5.3%).
Federal Reserve Credit increased $1.5 billion last week to $6.628 TN. Fed Credit was down $2.262 TN from the June 22, 2022, peak. Over the past 300 weeks, Fed Credit expanded $2.901 TN, or 78%. Fed Credit inflated $3.817 TN, or 136%, over the past 657 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $17.1 billion last week to an eight-year low of $3.233 TN. “Custody holdings” were down $98 billion y-o-y, or 2.9%.
Total money market fund assets declined $9 billion to $7.007 TN. Money funds were up $914 billion, or 15.0%, y-o-y.
Total Commercial Paper added $1 billion to a new 16-year high $1.471 TN. CP has expanded $383 billion y-t-d and $202 billion, or 15.9%, y-o-y.
Freddie Mac 30-year fixed mortgage rates slipped a basis point to 6.84% (down 11bps y-o-y). Fifteen-year rates declined two bps to 5.97% (down 20bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates unchanged at 6.99% (down 37bps).
Currency Watch:
For the week, the U.S. Dollar Index declined 1.1% to 98.138 (down 9.5% y-t-d). For the week on the upside, the Norwegian krone increased 2.0%, the Swedish krona 1.6%, the Swiss franc 1.3%, the euro 1.3%, the Mexican peso 0.8%, the Canadian dollar 0.8%, the Singapore dollar 0.6%, the Japanese yen 0.5%, the British pound 0.3%, and the Brazilian real 0.3%. On the downside, the South African rand declined 0.9%, the South Korean won 0.6%, and the Australian dollar 0.1%. The Chinese (onshore) renminbi increased 0.13% versus the dollar (up 1.62% y-t-d).
Commodities Watch:
June 11 – Financial Times (Olaf Storbeck and Leslie Hook): “Gold has overtaken the euro as the world’s second most important reserve asset for central banks, driven by record purchases and soaring prices, according to the European Central Bank. Bullion accounted for 20% of global official reserves last year, outstripping the euro’s 16% and second only to the US dollar at 46%… ‘Central banks continued to accumulate gold at a record pace,’ the ECB wrote, adding that central banks for the third year in a row acquired more than 1,000 tonnes of gold in 2024, a fifth of the total global annual production and twice the annual amount in the decade of the 2010s.”
June 11 – Financial Times (Leslie Hook): “Investors are pouring into silver and platinum as they seek ‘gold alternatives’ and hedges against the US dollar, sending prices for both metals soaring. With the US dollar’s status as a safe haven for global capital under threat, gold has enjoyed a historic rally, surging 25% since the beginning of the year as investors use it as a hedge against uncertainty.”
The Bloomberg Commodities Index gained 1.9% (up 6.6% y-t-d). Spot Gold jumped 3.7% to $3,432 (up 30.8%). Silver increased 0.9% to $36.3029 (up 25.6%). WTI crude surged $8.40, or 13.0%, to $72.98 (up 2%). Gasoline rallied 7.3% (up 10%), while Natural Gas dropped 5.4% to $3.581 (down 1%). Copper added 0.4% (up 21%). Wheat dropped 2.0% (down 1%), while Corn increased 0.5% (down 3%). Bitcoin gained $500, or 0.5%, to $105,750 (up 12.8%).
Middle East War Watch:
June 13 – Financial Times (James Shotter, Najmeh Bozorgmehr, Andrew England and Demetri Sevastopulo): “Israeli Prime Minister Benjamin Netanyahu vowed to attack Iran for ‘as long as necessary’ after his forces launched devastating air strikes against Tehran’s nuclear programme and military facilities, triggering a new war in the Middle East. The assault… struck facilities long at the heart of Iran’s nuclear ambitions, killed Iran’s top three military commanders, as well as leading scientists, and sought to disable the country’s air defences. Iran retaliated on Friday night, launching waves of ballistic missile strikes at Israel. A US official told the Financial Times that the US was helping to shoot down Iranian missiles… Iran’s state news agency said several senior military figures including Major General Hossein Salami, head of the elite Revolutionary Guards, were killed. Iran’s armed forces chief of staff, Major General Mohammad Bagheri, was also killed, state television reported, while Israel said it had killed the IRGC air force commander. Mohammad Mehdi Tehranchi, a prominent physics professor, and Fereydoon Abbasi, a former head of Iran’s atomic organisation, also died…”
June 13 – Bloomberg (Julian Lee): “The Strait of Hormuz, a narrow waterway at the mouth of the Persian Gulf, handles around 26% of the world’s oil trade and is rarely far from the center of global tensions. Iran has targeted merchant ships traversing the choke point in the past, and has even threatened to block the strait. The route’s vulnerability was back in focus after Israel launched airstrikes targeting Iran’s nuclear facilities and killed senior military commanders, raising the risk of a wider regional conflict.”
June 13 – Bloomberg: “‘China opposes infringement upon Iran’s sovereignty, security and territorial integrity, and opposes heightening tensions and expanding conflicts,’ Foreign Ministry spokesman Lin Jian said… Lin said his nation ‘is deeply concerned about the grave consequences that the operations’ by Israel may cause…”
June 12 – Reuters (Parisa Hafezi): “Iran will not abandon its right to uranium enrichment because of mounting frictions in the region, a senior Iranian official told Reuters…, adding that a ‘friendly’ regional country had alerted Tehran over a potential military strike by Israel. The official said the tensions were intended to ‘influence Tehran to change its position about its nuclear rights’ during talks with the United States on Sunday… ‘We don’t want tensions and prefer diplomacy to resolve the (nuclear) issue, but our armed forces are fully ready to respond to any military strike,’ the Iranian official said.”
June 12 – New York Times (Michael Crowley, David E. Sanger, Farnaz Fassihi, Eric Schmitt and Ronen Bergman): “Israel appears to be preparing to launch an attack soon on Iran, according to officials in the United States and Europe, a step that could further inflame the Middle East and derail or delay efforts by the Trump administration to broker a deal to cut off Iran’s path to building a nuclear bomb… It is unclear how extensive an attack Israel might be preparing. But the rising tensions come after months in which Prime Minister Benjamin Netanyahu of Israel has pressed President Trump to seize on what Israel sees as a moment of Iranian vulnerability to a strike.”
June 12 – Bloomberg (Kate Sullivan and Mario Parker): “President Donald Trump said Israel ‘could very well’ strike Iran but that he had advised against an attack while negotiations over Tehran’s nuclear program were ongoing, as the departure of US staff from the region fans concerns about a coming strike. ‘I don’t want to say imminent, but it looks like it’s something that could very well happen,’ Trump told reporters… ‘Look, there’s a chance of massive conflict… We have a lot of American people in this area, and I said, we’ve got to tell them to get out, because something could happen soon, and I don’t want to be the one that didn’t give any warning and missiles are flying.’”
Market Instability Watch:
June 9 – Reuters (Takaya Yamaguchi): “Japan is considering buying back some super-long government bonds issued in the past at low interest rates, two sources with direct knowledge… said…, underscoring its focus on reining in any abrupt rises in bond yields. The move would come on top of an expected government plan to trim issuance of super-long bonds — such as those with 20-, 30- or 40-year maturities — in the wake of sharp rises in their yields.”
June 11 – Bloomberg (Amanda Cantrell, Katie Greifeld and Matthew Miller): “Paul Tudor Jones said President Donald Trump is likely to appoint an ‘uber dovish’ Federal Reserve chair to accommodate his growth agenda, contending that Treasury Secretary Scott Bessent would likely be his pick when Jerome Powell’s term ends next year. Jones, 70, said… that two people being floated for the appointment — Bessent and Kevin Warsh, a former member of the Fed Board of Governors — are ‘fabulous names.’ But Trump’s focus on growth and loyalty make Bessent a stand-out candidate…”
June 10 – Bloomberg (Lu Wang and Justina Lee): “Credit trading is increasingly migrating to the end of the Wall Street day, echoing a long-term trend in equities that has fueled a debate over how index funds are reshaping the market. About 9% of daily trading volume in US investment-grade corporate debt occurred within one minute of the close of key indexes in the first nine months of last year, according to academic researchers… Less than a decade ago, that figure was below 0.6%. The shift is a result of the rapid proliferation of passive funds in fixed-income, the researchers argue in a paper titled The Growing Index Effect in the Corporate Bond Market.”
June 10 – Bloomberg (Miaojung Lin, Betty Hou, and Chien-Hua Wan): “Losses at Taiwan’s biggest insurers almost doubled in May from a month earlier as historic gains in the local currency dented the value of their foreign investments. Losses for four of the largest reached a combined NT$35.4 billion ($1.2bn)… Among them, Shin Kong Life Insurance Co. posted the largest loss at NT$15.4 billion. Cathay Life Insurance Co. posted a small profit, citing appropriate hedging operations, as did Nan Shan Life Insurance Co.”
Global Credit and Financial Bubble Watch:
June 9 – Bloomberg (Vinícius Andrade and Zijia Song): “Strong demand from yield-hungry investors is driving a surge in developing-world bond sales as borrowers race to secure financing ahead of any further wobbles in global markets. Since the beginning of the year, emerging-market governments and companies have sold $331 billion in debt denominated in hard currencies like the dollar and euro… That is the fastest pace in four years and already surpasses the total in the first half of 2024.”
June 9 – Bloomberg (Kevin Kingsbury): “The repricing of US junk-rated borrowers’ syndicated loans that closed in 2024 and a surge in high-yield bond sales shows the sick patient that was the leveraged-finance market has healed. Last week saw the most junk-note issuance in 13 months at $13.3 billion. At the same time, the number of leveraged-loan borrowers was the highest since late February.”
June 8 – Financial Times (Will Schmitt): “US companies with risky credit ratings are rushing to sell junk bonds ahead of an expected resurgence of trade tensions in July that could depress demand for corporate debt. Companies with weaker credit ratings tapped the high-yield bond market for $32bn in May, the most since October… Junk bond sales in the first week of June already have surpassed April’s $8.6bn total. Bankers and investors say they expect a steady flow of new debt sales during the rest of the month and into July while demand remains high and market uncertainty stays relatively low.”
June 12 – Bloomberg (Aaron Weinman and Lisa Abramowicz): “America’s debt burden and interest expense have become ‘untenable,’ a situation that may lead investors to move out of dollar-based assets, according to DoubleLine Capital’s Jeffrey Gundlach. ‘There’s an awareness now that the long-term Treasury bond is not a legitimate flight-to-quality asset,’ the veteran bond manager said… A ‘reckoning is coming’… Gundlach, 65, likened today’s market to the environment in 1999, just before the dot-com bust, as well as 2006 and 2007 before the global financial crisis. Going further, he said the booming private credit sector is analogous to the market for collateralized debt obligations, or CDOs, in the mid-2000s, ‘where there’s just tremendous issuance, there’s tremendous acceptance.’ The investor noted that public credit markets have outperformed their private counterparts in recent months, and sees ‘overinvestment’ — and a risk of forced selling — in the latter.”
Trump Administration Watch:
June 11 – Reuters (Andrea Shalal and Doina Chiacu): “U.S. President Donald Trump warned people… against protesting at the weekend military parade in Washington marking the U.S. Army’s 250th anniversary. ‘For those people that want to protest, they’re going to be met with very big force,’ Trump told reporters in the White House’s Oval Office.”
June 11 – Bloomberg (Josh Wingrove and Skylar Woodhouse): “President Donald Trump said a trade framework with China has been completed, with Beijing supplying rare earths and magnets ‘UP FRONT’ and the US allowing Chinese students into its colleges and universities. The US and China will maintain tariffs at their current, lower levels following the two nations’ agreement this week in London, Trump said… That number is still higher than before the president took office. Trump said Chinese President Xi Jinping and he must still formally sign off on the agreement… ‘OUR DEAL WITH CHINA IS DONE, SUBJECT TO FINAL APPROVAL WITH PRESIDENT XI AND ME,’ Trump posted on social media. ‘WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%. RELATIONSHIP IS EXCELLENT!’”
June 9 – Axios (Barak Ravid): “President Trump and his entire top foreign policy team huddled in Camp David for hours on Sunday to discuss U.S. strategy on the Iran nuclear crisis and the war in Gaza… Trump’s missions to reach a nuclear deal that averts war with Iran and a hostage and ceasefire deal that could end the war in Gaza have both faced recent setbacks. A senior U.S. official told Axios the president sees both crisis as intertwined and part of a broader regional reality he is trying to shape.”
June 11 – Bloomberg (Enda Curran): “Treasury Secretary Scott Bessent refrained from arguing that the tax legislation Republicans are working to finalize in Congress will avoid adding to the debt burden. ‘It remains to be seen,’ Bessent said… At least for this year, Bessent sees no progress on the US fiscal trajectory. The deficit for the current tax year will come in between 6.5% and 6.7% of gross domestic product, he said. That would mark a third straight year in excess of 6% relative to GDP. The Treasury’s 2024 fiscal-year figures showed a 6.4% deficit, after 6.2% in 2023… ‘What we are seeing here is a blowout in the spending,’ Bessent said. ‘The last fiscal year is something we have never seen before. We have never seen a deficit to GDP this large’ outside of wars, a pandemic or a recession, he said. ‘I find it very difficult to be lectured to by people who created the largest deficit in history,’ Bessent said…”
June 11 – Bloomberg (Ari Natter): “The Trump administration revealed plans for repealing mandates that force power plants to curb greenhouse gas emissions, representing its most significant action yet to reverse policies combating climate change. The proposal by the Environmental Protection Agency, which could be finalized later this year, is being coupled with a plan to ease limits on mercury and other toxic air pollution from the facilities… ‘Rules were enacted seeking to suffocate our economy in order to protect the environment, seeking to make all sorts of industries including coal and more disappear,’ EPA Administrator Lee Zeldin said…”
June 11 – Wall Street Journal (Gareth Vipers, Jennifer Calfas and Elizabeth Findell): “Texas Gov. Greg Abbott said he would deploy the National Guard across parts of the state as protests against ICE raids have gripped Los Angeles and resulted in hundreds of arrests spread across the country. ‘Texas is a law and order state, and we will use every tool that we can to ensure order across our state,’ Abbott said… San Antonio Mayor Ron Nirenberg, a Democrat, said that he hadn’t been consulted about Abbott’s decision to dispatch members of the National Guard ahead of a planned protest at the Alamo.”
China Trade War Watch:
June 11 – Wall Street Journal (Jon Emont and Gavin Bade): “China’s chokehold on supplies of minerals essential to high-tech goods from electric vehicles to jet fighters has become a formidable advantage in trade negotiations with the U.S. President Trump said… the U.S. and China had agreed on terms for a truce on trade. The framework for the deal… hinged on access to China’s exports of rare-earth magnets, coin-size components that are indispensable for powering car motors, industrial robots and missile-guidance systems. Trump and Chinese leader Xi Jinping need to approve the agreement, which would lift some U.S. export restrictions in exchange for speeding the flow of rare earths.”
June 11 – Wall Street Journal (Lingling Wei, Brian Schwartz and Gavin Bade): “China is putting a six-month limit on rare-earth export licenses for U.S. automakers and manufacturers, according to people familiar…, giving Beijing leverage if trade tensions flare up again while adding to uncertainty for American industry. Beijing’s agreement to temporarily restore rare-earth licenses was one of the key breakthroughs in the latest round of intense trade talks in London, but the six-month limit illustrated how each side is retaining the tools to easily escalate tensions again. In exchange for the Chinese easing rare-earth curbs for now, the people said, U.S. negotiators agreed to relax some recent restrictions on the sale to China of products such as jet engines and related parts, as well as ethane, a byproduct of natural gas and oil drilling important in manufacturing plastics. Details of the framework to uphold an interim agreement forged in Geneva last month are still being worked out, the people said… According to people who consult with Chinese officials, Beijing wants to retain its chokehold on the critical minerals to give it valuable ammunition for future negotiations.”
June 11 – Reuters (David Lawder): “U.S. Treasury Secretary Scott Bessent… called on China to uphold its commitments under an initial U.S. trade agreement reached in Geneva last month… Bessent said in testimony before the House of Representatives Ways and Means Committee that China has a ‘singular opportunity’ to stabilize its economy by shifting away from excess manufacturing production for export to greater domestic consumption. ‘But the country needs to be a reliable partner in trade negotiations,’ Bessent said… ‘If China will course-correct by upholding its end of the initial trade agreement we outlined in Geneva last month, then a big, beautiful rebalancing of the world’s two largest economies is possible’.”
June 11 – Wall Street Journal (Jason Douglas): “A key lesson from the latest skirmish in the U.S.-China trade war: The era of weaponized supply chains has arrived. Earlier this week, Washington and Beijing ended a standoff involving the most potent new tool in superpower statecraft—export controls. As part of a monthslong trade fight, the two sides choked off the supply of such exports as rare earths or semiconductor technology in a bid to gain an edge. So when Chinese and American negotiators finally met in London to discuss a truce, the talks focused far more on dialing back supply-chain curbs than they did on tariffs, market access and other standard trade-negotiation topics. That shift highlights how the rivalry between the U.S. and China is increasingly about who controls the levers of global economic power.”
June 11 – Bloomberg (Martin Ritchie, Alberto Nardelli, and Laura Curtis): “For months Donald Trump pushed tariffs and trade restrictions on China to unprecedented levels, part of a strategy to force Xi Jinping into talks the US president expected would help cut the trade deficit and boost American manufacturing. With US tariffs soaring to 145% and the Trump administration boasting that it had the upper hand with China, Beijing turned the tables, essentially shutting down exports of one thing the modern world can’t function without: rare earth magnets. As slowing deliveries of products with obscure elements like dysprosium and terbium began to pinch industries from autos to defense, the US and other nations quickly hit their pain threshold. Ford Motor Co. and Suzuki Motor Corp. idled some production, Elon Musk said shortages were hurting his robotics business and governments rushed to secure the few suppliers outside of China. A two-way trade spat became a global crisis.”
June 7 – Financial Times (Edward White and Joe Leahy): “China’s success in snarling global supply chains by stemming the flow of rare earths has piled pressure on Washington and made clear Beijing’s power to weaponise export controls on a wider range of critical goods… China dominates the supply chain for key minerals and its commerce ministry started requiring licences for exports of rare earths and related magnets in early April. The slow approval process has rocked global supply chains and given Beijing leverage… However, Xi’s recent deployment of export controls has shifted the balance of power in US-China trade talks back to Beijing, experts said. Andrew Gilholm, head of China analysis at consultancy Control Risks, said export controls had helped Xi’s administration push back against not only the US, but also third countries under pressure from Washington to take a harder line on China. ‘The simple truth is we don’t have a lot of precedent for this. The export controls are a dream tool for Beijing; they can tweak, tighten, loosen, make it apply to all countries or to one country,’ Gilholm said.”
June 12 – New York Times (David Pierson and Berry Wang): “If China’s top leader, Xi Jinping, wrote a book titled ‘The Art of Dealing With Trump,’ it would most likely call for exploiting the American president’s greatest weaknesses to exert maximal pressure, and then using the time gained to strengthen one’s position. That appears to be the strategy Beijing has adopted since President Trump ramped up tariffs on Chinese goods in April… Rather than yield, China has leaned on a trump card, its control of critical minerals — which the United States depends on — while steering the focus to protracted talks instead of concrete results.”
June 11 – Bloomberg: “China cheered a new framework to defuse trade tensions with the US after two days of intense negotiation, calling on both countries to adhere to the agreement and maintain dialogue to stabilize ties. ‘As a next step, the two sides should follow the important consensus and requirements reached by the two heads of state on the phone call, further play a good role in the China-US economic and trade consultation mechanism,’ Vice Premier He Lifeng said… The two sides should ‘show the spirit of good faith in abiding by their commitments and jointly safeguard the hard-won results of the dialogue,’ he added.”
June 11 – Financial Times (Ryan McMorrow, Joe Leahy and Kana Inagaki): “Western companies say China is demanding sensitive business information to secure rare earths and magnets, raising concerns about potential misuse of data and exposure of trade secrets. Beijing’s commerce ministry is asking for production details and confidential lists of customers as part of its export approval process for critical minerals and magnets… China dominates the processing of rare earths and manufacturing of the magnets in which they are used. These magnets are widely used in electronics, electric vehicle motors, wind turbines and defence applications such as fighter jets, giving Beijing a significant point of leverage with its trading partners.”
June 10 – Bloomberg: “Donald Trump brought many of the same grievances to his second trade war against China, but the economic battleground that’s emerged since then is making it harder to avoid a rupture this time around… From higher education to jet engines, the scope of connections between the world’s two biggest economies that they are weaponizing — or threatening to use as leverage in negotiations — is also much broader than last time… ‘The US side has bundled together too many problems with the trade and economic agenda,’ said Sun Chenghao, a fellow at the Center for International Security and Strategy at Tsinghua University in Beijing. ‘I don’t believe that achieving a comprehensive package agreement through just one or two rounds of dialogue is realistic.’”
June 13 – Bloomberg (Keith Naughton and Matthew Miller): “Ford Motor Co. continues to struggle to obtain rare earth magnet supplies that are essential to car production and have already forced a temporary shutdown of one of its factories. The supply of the critical components has been trickling out of China, which has instituted a new approval process for exports of rare earths that continues to slow supply lines, Ford Chief Executive Officer Jim Farley said. ‘It’s day to day,” Farley said… ‘We have had to shut down factories. It’s hand-to-mouth right now.’”
June 9 – New York Times (Keith Bradsher): “China’s strict controls on the export of heat-resistant magnets made with rare earth minerals have exposed a major vulnerability in the U.S. military supply chain. Without these magnets, the United States and its allies in Europe will struggle to refill recently depleted inventories of military hardware. For more than a decade, the United States has failed to develop an alternative to China’s supply of a specific kind of rare earth crucial for the manufacture of magnets for missiles, fighter jets, smart bombs and a lot of other military gear.”
June 11 – New York Times (Keith Bradsher): “In its high-stakes trade talks with the United States, China has been trying to strike a balance in how it wields its market clout. It controls the world’s supply of rare earth metals and magnets. And it has withheld supplies of the materials, which are crucial ingredients in everything from cars to fighter jets, as leverage. At the same time, Beijing knows it must not overplay its hand by pushing Washington so hard that the United States feels compelled to make the long-term investments needed to break its dependence on China. This delicate dynamic was underlined in an apparent compromise the countries reached on Tuesday…”
Trade War Watch:
June 11 – Axios (Ben Berkowitz): “The U.S. will send take-it-or-leave-it trade offers to dozens of countries within the next two weeks, President Trump said… Trump is suggesting time is running out for nations to make trade deals, even as both he and his Treasury secretary indicate existing deadlines are also fungible… ‘At a certain point we’re just going to send letters out, and I think you understand that, saying ‘this is the deal, you can take it or you can leave it, you don’t have to use it, you don’t have to shop in the United States,’’ Trump told reporters… ‘We’re going to be sending letters out in about a week-and-a-half, two weeks.’”
June 10 – Bloomberg (Alberto Nardelli and Jorge Valero): “The European Union believes trade negotiations with the US could extend beyond President Donald Trump’s July 9 deadline, even as the speed of the talks has increased over the past week. The EU sees reaching an agreement on the principles of a deal by July 9 as a best-case scenario, which would allow further talks to work out the details, according to people familiar… The US is expected to respond to the latest round of negotiations in the coming days and provide clarity on the next steps.”
June 12 – Reuters (David Shepardson and Jeff Mason): “U.S. President Donald Trump… warned he may soon hike auto tariffs, arguing that could prod automakers to speed U.S. investments. ‘I might go up with that tariff in the not too distant future, Trump said… ‘The higher you go, the more likely it is they build a plant here.’”
June 11 – Reuters (Dan Burns): “U.S. Treasury Secretary Scott Bessent… said the Trump administration is prepared to ‘roll the date forward’ with trading partners negotiating in good faith if the deadline marking the end of the 90-day pause on President Donald Trump’s reciprocal tariffs is reached with no deal. ‘It is highly likely that those countries – or trading blocs as is the case with the EU – who are negotiating in good faith, we will roll the date forward to continue the good-faith negotiations,’ Bessent told the House Ways and Means Committee. ‘If someone is not negotiating, then we will not.’”
June 11 – Bloomberg (Zoe Schneeweiss): “There’s no longer-term advantage to being a bully on global commerce, according to European Central Bank President Christine Lagarde. ‘Coercive trade policies are not a sustainable solution to today’s trade tensions’ she said… ‘To the extent that protectionism addresses imbalances, it is not by resolving their root causes, but by eroding the foundations of global prosperity… And with countries now deeply integrated through global supply chains — yet no longer as geopolitically aligned as in the past — this risk is greater than ever. Coercive trade policies are far more likely to provoke retaliation and lead to outcomes that are mutually damaging.’”
Budget Watch:
June 11 – New York Times (Andrew Duehren): “Even before the House passed the sweeping bill carrying President Trump’s domestic policy agenda, Senate Republicans made it clear that they hoped to make major changes to the legislation before the G.O.P. was done muscling it through Congress. Several have wanted to pare back the cuts to Medicaid, the health care program for the poor, that House Republicans envisioned in the version of the legislation that they approved late last month. A handful have sought to salvage tax credits incentivizing clean energy projects that the House measure would repeal. Many have pushed to grant companies prized tax breaks for the long run, not just for a few years, as their colleagues across the Capitol opted to do. The problem senators face is that each of these changes would be expensive. At $2.4 trillion, the cost of the legislation that barely passed the House is already huge.”
June 9 – Bloomberg (Jarrell Dillard): “The US government could run out of enough funds to meet its financial obligations in a timely manner between mid-August and the end of September, the Congressional Budget Office said… The updated estimate from the nonpartisan CBO pushes back the so-called X date by at least two weeks from what it previously projected in March.”
June 11 – Reuters (David Lawder): “The U.S. government posted a $316 billion budget deficit for May, down 9%, or $31 billion, from a year earlier, as customs receipts nearly quadrupled to a record $23 billion… Gross customs receipts jumped last month from $6 billion in May 2024 as Trump’s tariffs on goods from nearly all trading partners began showing up in significant volumes… Fiscal year-to-date customs receipts were up nearly 60% to $86 billion. The customs duties helped boost receipts for May to $371 billion, which were up 15%, or $48 billion from May 2024. Outlays last month reached $687 billion, or $16 billion… For the first eight months of the 2025 fiscal year, the deficit reached $1.365 trillion, up $162 billion, or 14%, from the $1.202 trillion in the year-ago period. Fiscal year-to-date receipts reached $3.482 trillion, a record high for the period and up 6%, or $194 billion, from the same period a year earlier. Year-to-date outlays were also a record high at $4.846 trillion, up $356 billion, or 8%, from the year-ago period.”
Constitution Watch:
June 8 – Financial Times (Joe Miller in Washington and Christopher Grimes): “By calling on federal troops to suppress protests in Los Angeles, Donald Trump has shown he is willing to put the country on a war footing — and test the boundaries of executive power — to achieve his goals. For the first time in decades, the National Guard was deployed on Sunday against citizens on domestic soil against the wishes of a state’s governor, using a rarely invoked law designed to help the US fight off a foreign invasion. A US president last deployed a state’s National Guard without being asked by its governor in 1965, when Lyndon Johnson sent troops to protect civil rights demonstrators in Selma, Alabama. The deployment of the National Guard in the second-largest US city, one that is largely liberal, was ‘clearly done as an authoritarian show of strength’, said Ryan Enos, a professor of government at Harvard University.”
June 10 – Axios (Zachary Basu): “The Insurrection Act of 1807, which allows the deployment of U.S. troops to quell domestic unrest, is among the most extreme emergency powers available to a sitting president. Trump already has broken decades of precedent by federalizing California’s National Guard without the state’s consent… He’s now openly telegraphing his willingness — even eagerness — to invoke the law, telling reporters… ‘The people that are causing the problem are professional agitators. They’re insurrectionists.’ More than 700 Marines were mobilized Monday to respond to the protests in LA, joining up to 4,000 National Guardsmen.”
June 11 – Associated Press (Paul Wiseman): “A federal appeals court agreed… to let the government keep collecting President Donald Trump’s sweeping import taxes while challenges to his signature trade policy continue on appeal… Noting that the challenges to Trump’s tariffs raise ‘issues of exceptional importance,’ the appeals court said it would expedite the case and hear arguments July 31. The case involves 10% tariffs the president imposed on almost every country in April and bigger ones he imposed and then suspended on countries with which the United States runs trade deficits. It also involves tariffs Trump plastered on imports from China, Canada and Mexico to pressure them to do more to stop the illegal flow of immigrants and synthetic opioids… In declaring the tariffs, Trump had invoked emergency powers under a 1977 law. But a three-judge panel of the U.S. Court of International Trade ruled he had exceeded his power.”
June 11 – Bloomberg (Todd Gillespie and Janet Lorin): “The US Treasury Department is considering changing rules to revoke tax-exempt status for colleges that consider race in student admissions, scholarships and other areas — potentially threatening the financial stability of hundreds of institutions. The proposals would bar private, nonprofit schools from remaining tax exempt if they favor any racial groups in matters such as financial assistance, loans, use of facilities or other programs, according to people with knowledge of the deliberations…”
U.S./Russia/China/Europe/Iran Watch:
June 11 – Financial Times (Henry Foy, Alice Hancock and Andy Bounds): “The EU is preparing sanctions against two Chinese banks that allegedly enabled banned trade with Russia, the first attempt by Brussels to target a third-country lender for supporting Moscow’s full-scale invasion of Ukraine… They require the unanimous support of EU member states to be adopted. Such a step would mark a significant escalation in the bloc’s efforts to punish China over its alleged role in facilitating Moscow’s evasion of existing trade restrictions, which are designed to limit foreign supplies to Moscow’s military-industrial complex.”
Ukraine War Watch:
June 10 – Financial Times (Fabrice Deprez): “Russia has launched a mass drone and missile attack on Kyiv for the third night in four days… Ukraine’s air force said Russia had launched 315 kamikaze drones, two ballistic missiles and five cruise missiles towards Ukraine, with Kyiv as the main target. All the cruise and ballistic missiles and 220 of the drones were reportedly shot down.”
AI Bubble Watch:
June 9 – Axios (Jim VandeHei and Mike Allen): “The wildest, scariest, indisputable truth about AI’s large language models is that the companies building them don’t know exactly why or how they work. Sit with that for a moment. The most powerful companies, racing to build the most powerful superhuman intelligence capabilities — ones they readily admit occasionally go rogue to make things up, or even threaten their users — don’t know why their machines do what they do. With the companies pouring hundreds of billions of dollars into willing superhuman intelligence into a quick existence, and Washington doing nothing to slow or police them, it seems worth dissecting this Great Unknown. None of the AI companies dispute this. They marvel at the mystery — and muse about it publicly. They’re working feverishly to better understand it. They argue you don’t need to fully understand a technology to tame or trust it.”
June 12 – Bloomberg (Naureen S Malik): “Big data centers connecting to power grids is now one of the greatest near-term risks to reliability, according to a rare warning by the US agency charged with overseeing the sector. The sprawling campuses responsible for AI and cryptocurrency mining are being developed at a faster pace than the power plants and transmission lines needed to support them, ‘resulting in lower system stability,’ said the North American Electric Reliability Corp… That’s because data centers require tremendous amounts of power at unpredictable intervals, and are also sensitive to swings in grid voltage — making them a major wild card in a electricity system that’s unprepared for such energy use.”
June 11 – Bloomberg (Amanda Cantrell, Katie Greifeld, and Matthew Miller): “Paul Tudor Jones said he’s concerned about potential societal fallout from artificial intelligence-driven job losses and urged politicians to consider how to best regulate the technology. Jones… said that technology-driven productivity gains have in recent decades overwhelmingly favored the rich and contribute…”
Bubble and Mania Watch:
June 10 – New York Times (Maureen Farrell and Lauren Hirsch): “Yale University’s famed endowment has been trying to offload one of the largest portfolios of private equity investments ever in a single sale… The Ivy League school has sought buyers for up to $6 billion in stakes in private equity and venture funds… Yale is now close to completing a sale of roughly $3 billion of the portfolio and is selling the assets at a slight discount, one of the people said. ‘This is a big deal,’ said Sandeep Dahiya, a professor of finance at Georgetown University who has conducted research on the performance of endowments. ‘The investor that was the lead architect of investing in the private equity markets is pulling in its horns.’”
June 7 – Financial Times (Alexandra Heal and Ivan Levingston): “Private equity groups are overhauling their exit strategies after accepting that a years-long downturn in initial public offerings is unlikely to end soon. Buyout executives at the industry’s annual European conference this week said they were prioritising other options for exiting their investments, including breaking up businesses to sell them off in smaller parts or selling companies to themselves via ‘continuation funds’. ‘I can’t remember in my 20 years of growth equity investing, not having an IPO window open for this kind of long period of time,’ said General Atlantic co-president Gabriel Caillaux… ‘That is obviously calling us to rethink not strategy, but some tactical aspects.’ Buyout firms have a record backlog of ageing and unsold assets, as higher interest rates and market turmoil have made it harder to float companies or sell at acceptable prices, putting pressure on them to find other ways to return cash to their investors.”
June 12 – Bloomberg (Joel Leon): “The US stock market is back on track and within spitting distance of February’s all-time highs. Yet corporate executives are dumping shares at the fastest clip since November. A gauge of insider sentiment, which tracks the numbers of buyers versus sellers, shows that 200 insiders bought shares this month through June 11, while 778 sold shares… That puts the buy to sell ratio at around 0.26, the lowest since November when Trump’s reelection triggered a months-long rally.”
June 12 – Reuters (Manya Saini and Niket Nishant): “New listings in the U.S. have bounced back sharply in recent weeks, with some eye-popping debuts stoking hopes of a sustained revival after a dry spell since April. On Thursday, fintech firm Chime climbed 59% in its debut, extending a winning streak for the latest U.S. stock market entrants. ‘If Chime trades well in the first few weeks, boardrooms at a dozen other ‘waiting room’ candidates may move from paper-testing S-1s to pressing the ‘file’ button,’ said Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors. The packed IPO calendar for the rest of 2025 includes high-profile names such as Klarna, Gemini and Cerebras.”
June 13 – Bloomberg (Shawna Kwan): “Jane Street Group has signed for six floors in an upcoming tower developed by Henderson Land Development Co. in Hong Kong’s central business district, marking the biggest office deal in the area in decades.”
Inflation Watch:
June 11 – CNBC (Jeff Cox): “Consumer prices rose less than expected in May… The consumer price index… increased 0.1% for the month, putting the annual inflation rate at 2.4%. Excluding food and energy, the core CPI came in respectively at 0.1% and 2.8%, compared with forecasts for 0.3% and 2.9%… Continued weakness in energy prices helped offset some of the increases, and a handful of other key items expected to show tariff-related jumps, vehicle and apparel prices in particular, actually posted declines.”
June 13 – Wall Street Journal (Jennifer Hiller): “America’s power bills are rising even faster than the cost of groceries. Higher natural-gas prices are partly to blame. Utilities investing billions of dollars to stabilize the aging electric grid are passing those costs on to customers, too. And in some states, huge data centers are pushing power prices higher as electricity supplies tighten. Electricity prices across the country have increased 4.5% in the past year… Electric bills are expected to keep climbing this summer along with the temperatures.”
June 8 – Wall Street Journal (Ryan Dezember): “Americans can expect to pay more to stay cool this summer thanks to forecasts for above-average temperatures across the country and natural-gas prices that are heading into air-conditioning season 37% higher than last year. On average, Americans should count on their electricity bills in June, July and August rising 4% from last year, mostly due to more expensive natural gas, according to the Energy Information Administration. That would bring the nationwide summertime average to $186 a month, up from $180 last year and $148 four years ago, the EIA said.”
June 8 – Financial Times (Stephanie Stacey): “US restaurants are bracing for staff shortages as the Trump administration’s immigration crackdown threatens to squeeze an already-tight labour market. Restaurant operators nationwide said they were coming under greater scrutiny as immigration officials conduct enforcement sweeps to verify the employment status of workers… This ‘very public’ enforcement by immigration officials, including the presence of armed officers at recent site visits in Washington, had left some people afraid to come to work, said Tony Foreman, the owner of five restaurants… Foreman said an imminent labour shortage was ‘absolutely going to put wage pressure on’ the hospitality industry, and added that some restaurateurs might struggle to find enough qualified staff. ‘There’s no surge of people wanting to take up these jobs,’ he said.”
Federal Reserve Watch:
June 12 – Reuters (Jeff Mason and Trevor Hunnicutt): “U.S. President Donald Trump… said he would not fire Federal Reserve Chair Jerome Powell, adding that he ‘may have to force something’ as part of his ongoing push for the central bank to lower rates. ‘Raise your rates. You don’t have to keep them up here. If it’s going to go up, I’m okay with you raising—but it’s down, and we’re going out to financing, and I may have to force something,’ he said… Trump last week had said that a decision on the next Fed chair would come very soon.”
June 12 – CNBC (Kevin Breuninger): “President Donald Trump ripped Federal Reserve Chair Jerome Powell as a ‘numbskull’… as he turned up the heat on the central bank chief to lower interest rates. Trump claimed at the White House that lowering rates by 2 percentage points would save the U.S. $600 billion per year, ‘but we can’t get this guy to do it.’ ‘We’re going to spend $600 billion a year, $600 billion because of one numbskull that sits here [and says] ‘I don’t see enough reason to cut the rates now,’’ Trump said.”
June 11 – Bloomberg (Maria Luiza Rabello): “‘The refusal by the Fed to cut rates is monetary malpractice,’ Vice President JD Vance says…”
U.S. Economic Bubble Watch:
June 10 – Reuters (Lucia Mutikani): “U.S. small-business confidence improved in May… The National Federation of Independent Business said… its Small Business Optimism Index increased three points to 98.8 last month, rising for the first time since December… ‘Congress hasn’t passed the big beautiful bill yet, and Trump is still messing with tariffs, the uncertainty level is rising,’ said NFIB Chief Economist Bill Dunkelberg. ‘While tariffs might be a bumpy road while countries negotiate trade deals, Congress can do their part by passing the BBB sooner rather than later to take that piece of uncertainty off the table.’”
June 12 – Reuters (Lucia Mutikani): “The number of Americans filing new applications for unemployment benefits was unchanged at higher levels last week… Initial claims for state unemployment benefits held steady at a seasonally adjusted 248,000 for the week ended June 7…”
June 12 – Bloomberg (Jarrell Dillard): “Recurring applications for US unemployment benefits rose to the highest since the end of 2021, adding to evidence that it is taking unemployed Americans longer to find a new job. Continuing claims… advanced to 1.96 million in the week ended May 31… Meanwhile, a measure of new filings that smooths volatility climbed to the highest since August 2023.”
June 10 – Axios (Emily Peck): “It’s a high-anxiety moment for entry-level workers — a report from Glassdoor… shows they have record-low confidence in their employers. The hiring market has slowed considerably from a few years ago, and that’s especially troubling for those at the start of their careers. The share of entry-level workers who said they were feeling positive about their employers’ business prospects fell to 43.4% in May, the lowest level since Glassdoor, a workplace review platform, began tracking it in 2016.”
June 11 – CNBC (Diana Olick): “Mortgage interest rates barely moved at all last week, but demand from homebuyers as well as those looking to refinance a current home loan increased… Applications for a mortgage to purchase a home climbed 10% for the week and were 20% higher than the same week one year ago. Much of that may be due simply to the increase in available listings. Supply is now about 31% higher than it was at this time last year, according to Realtor.com. Home prices are also starting to ease.”
June 10 – Financial Times (Akila Quinio and Martin Arnold): “Citigroup is poised to increase provisions for potential bad loans by hundreds of millions of dollars for the second quarter, in a sign of growing financial stress among US consumers and businesses. ‘Given the macro environment [and] cost of credit compared to last quarter, we expect to be up a few hundred million dollars,’ Citi’s head of banking Vis Raghavan told investors… The increase comes amid concerns that Donald Trump’s tariffs will slow US economic growth or even cause a recession. The US president’s levies may also raise the prices of some products… hitting consumers.”
China Watch:
June 13 – Bloomberg: “A big jump in Chinese government bond sales drove credit growth in May, compensating for weak borrowing by households. The People Bank of China said… there were almost 1.5 trillion yuan ($204bn) worth of government bonds sold last month. That was almost 20% above the level a year ago, marking the third month in 2025 that the tally has been higher than 1 trillion yuan. Meanwhile households only took on 54 billion yuan worth of new loans, taking the total amount issued to them this year to 572 billion yuan — the lowest since at least 2009… Aggregate financing, the broad measure of credit, increased 2.29 trillion yuan in May… That compares with an expansion of 2 trillion yuan recorded a year ago…”
June 8 – CNBC (Anniek Bao): “China’s exports growth missed expectations in May, dragged down by a sharp decline in shipments to the U.S… Chinese exports to the U.S. plunged 34.5% from a year ago, marking the sharpest drop since February 2020… Imports from the U.S. dropped over 18%, and China’s trade surplus with America shrank by 41.55% year on year to $18 billion. Overall exports rose 4.8% last month in U.S. dollar terms from a year earlier… Imports plunged 3.4% in May from a year earlier, a drastic drop compared to economists’ expectations of a 0.9% fall.”
June 9 – Reuters (Qiaoyi Li, Tian Qiao and Ryan Woo): “China’s producer deflation deepened to its worst level in almost two years in May while consumer prices extended declines, as the economy grappled with trade tensions and a prolonged housing downturn… The producer price index fell 3.3% in May from a year earlier, worse than a 2.7% decline in April and the deepest contraction in 22 months…”
June 12 – Financial Times (Gloria Li and Haohsiang Ko): “Chinese carmakers’ price war is putting the industry’s balance sheet under strain, a Financial Times analysis has revealed, as Beijing demands more action to protect suppliers in the world’s largest car market. Current liabilities exceeded current assets at more than a third of publicly listed car manufacturers at the end of last year… The weakening liquidity picture highlights how China’s leading carmakers are being forced to squeeze suppliers to maintain working capital and fund their fight for market share amid heavy discounting. The dominant electric-vehicle maker BYD is deepest in negative territory with its working capital, followed by rivals Geely, Nio, Seres and state-backed BAIC and JAC…”
Europe Watch:
June 7 – Financial Times (Leila Abboud): “France’s high national debt threatens to curb its defence ambitions, raising the risk that one of Europe’s strongest militaries will not be able to keep up with an expected wave of spending. President Emmanuel Macron has called for the annual military budget to rise to between 3 and 3.5% of national output from about 2% now… Such an effort would bring France in line with new targets for direct military spending that Nato is expected to set at a June summit as the alliance responds to US pressure for Europe to do more on security.”
Emerging Market Watch:
June 9 – Bloomberg (Maya Averbuch): “Mexico’s annual inflation accelerated more than expected in May and breached the top of the target range… Annual inflation sped up to 4.42% last month, above the 4.38% median estimate… and higher than April’s 3.93% print. The core reading, which excludes volatile items such as food and fuel, rose to 4.06% from 3.93% a month prior… The central bank targets inflation at 3%, plus or minus one percentage point.”
Leveraged Speculation Watch:
June 11 – Bloomberg: “China’s efforts to support the economy by keeping funding costs low are increasing lending among banks, in a sign they may be borrowing cheaply to buy bonds for a profit. The daily volume of overnight repurchase contracts, a popular funding tool for such leveraged bond purchases among financial institutions, rose to the highest since December on Wednesday…”
Social, Political, Environmental, Cybersecurity Instability Watch:
June 10 – Financial Times (Attracta Mooney and Steven Bernard): “The world’s ocean temperatures reached the second-highest level on record for May, capping an ‘alarming’ two-year streak of rapid warming and fuelling concerns about the seas’ ability to absorb rising levels of carbon dioxide. The EU’s Earth observation service Copernicus said the global average sea surface temperature in May was 20.79C, 0.14C below the record in the same month in 2024. The findings follow an alert from the US National Oceanic and Atmospheric Administration in recent days that atmospheric concentrations of carbon dioxide had hit their highest seasonal peak since records began.”
June 10 – Reuters (Kate Abnett): “The world experienced its second-warmest May since records began this year, a month in which climate change fuelled a record-breaking heatwave in Greenland, scientists said… Last month was Earth’s second-warmest May on record – exceeded only by May 2024 – rounding out the northern hemisphere’s second-hottest March-May spring on record, the EU’s Copernicus Climate Change Service (C3S) said…”
June 11 – Bloomberg (Yinka Ibukun): “More than a third of global fish stocks are being depleted at a pace that’s driving down populations, marking a trend that’s been getting worse in recent years, according to… the Food and Agriculture Organization. The Rome-based United Nations agency found that 35.5% of marine stocks are subject to overfishing, based on the most recent catch data… The findings… make clear that continuing current levels of fishing would have dire consequences, FAO said.”
Geopolitical Watch:
June 10 – Bloomberg (Alastair Gale and Mari Kiyohara): “Japan said it observed two Chinese aircraft carriers and supporting warships operating simultaneously near remote Japanese islands in the Pacific Ocean for the first time, a new demonstration of Beijing’s advancing naval capabilities… On Saturday the carrier Liaoning was seen inside the EEZ of the uninhabited Japanese island of Minamitori, more than 1,800 km southeast of Tokyo, and remained in the region with other warships on Sunday… ‘This is the first time we’ve identified two Chinese aircraft carriers operating in the Pacific Ocean at the same time,’ Japanese Defense Minister Gen Nakatani said…”
June 12 – Bloomberg (Sakura Murakami and Philip Glamann): “Tokyo has complained to Beijing after a Chinese fighter jet tailed a Japanese patrol aircraft over the weekend, flying as close as 45 meters from the aircraft… The Chinese J-15 fighter jet tailed a Japanese P-3C patrol aircraft for about 40 minutes last Saturday over international waters of the Pacific Ocean… A Chinese jet also followed a patrol craft for over 80 minutes the following day, it added. The Chinese fighter jet on Saturday made an ‘unusual maneuver,’ flying as close as 45 meters away at the same altitude”
