Bonds Bludgeoned

It was rough. And I’m not referring to Iran war negotiations or President Trump’s Beijing trip. The bond rout was global.

“Treasury Buyers Get 5% Long Bond for First Time Since 2007.” Treasury long bond (30yr) yields jumped 18 bps this week to 5.12%, surpassing the October 2023 gilt crisis spike to the highest yield all the way back to (“still dancing”) July 2007. Ten-year Treasury yields surged 24 bps this week to a one-year high of 4.59%, the largest weekly rise since the Treasury market “liberation day” dislocation the week of April 11th, 2025. Two-year Treasury yields jumped 18 bps to 4.07% - the highest level since February 25, 2025. Benchmark Fannie Mae MBS yields spiked 27 bps to a 10-month high of 5.57% - the largest weekly jump since “liberation day.”

May 15 – Bloomberg (James Hirai): “UK government bonds tumbled after Manchester Mayor Andy Burnham secured a pathway to potentially challenge Keir Starmer as prime minister, threatening political instability that investors fear could result in more expansive fiscal policy. The yield on 30-year gilts, the most sensitive maturity to political risk, surged as much as 20 bps to 5.86%, the highest since 1998. Concerns about high energy costs and inflation also contributed to the move. Burnham’s announcement that he intends to run for Parliament — a prerequisite to challenge Starmer — put the pound on track for its worst week since 2024 against the dollar.”

It's a formidable list of issues bedeviling the UK bond market. Thirty-year gilt yields jumped 27 bps this week to close Friday trading at 5.85%, the high back to May 1998 (a few months prior to the Russia/LTCM crisis). Ten-year gilt yields surged 26 bps this week to 5.17% - the high back to June 2008 (shortly before all hell broke loose).

United Kingdom government debt has expanded to a dismal 150% of GDP – up from 2019’s 85%. The UK almost appears fiscally responsible these days compared to Japan’s 210% (other sources have Japan debt/GDP as high as 250%).

“Japan Yields Rise to Record Highs on Global Inflation Fears.” Thirty-year JGB yields traded Friday to 4% for the first time (first issued in 1999) – after a year ago trading to a never before experienced 3% yield. It was the largest weekly yield spike since the infamous week of April 11th, 2025 (40bps). Ten-year JGB yields jumped 23 bps this week to 2.72%, the high since June 10th, 1997, and the largest weekly rise since August 22, 2003. It’s worth noting that the BOJ was compelled to intervene with aggressive bond purchases on August 27th, 2003, after yields spiked from 0.44% in June to 1.44% on August 20th. Twenty-year JGB yields this week surged to the high since 1996.

In a sign of the times, markets have been fretting UK, Japan, and US bonds more than even Italy, Greece, and France. But worries increasingly appear systemic. Yields this week jumped 22 bps in Italy (3.95%), 21 bps in Greece (3.89%), and 20 bps in France (3.86%). French yields ended the week about a basis point from highs back to 2008. German yields rose 16 bps to 3.17%, the high back to May 2011 (European debt crisis).

In a curiously atypical dynamic, instability (“contagion”) in the big (“Core”) bond markets gravitated to “developing” (“Periphery”) bonds – especially late in the week. Local currency 10-year Brazilian yields surged 55 bps this week to 14.44%. Yields surged 42 bps in Colombia (multiyear high 13.99%); 33 bps in Poland (near multiyear high 6.00%); 30 bps in South Korea (4.21% - high since Nov. ’23); 25 bps in Mexico (9.35%); 20 bps in the Philippines (multiyear high 7.48%); and 124 bps in Turkey (near multiyear high 32.39%).

Cracks even surfaced Friday in what has been of late a rock-solid dollar-denominated EM bond market. For the week, Colombia dollar bond yields surged 34 bps (7.20%), Brazil 29 bps (6.15%), Mexico 25 bps (6.16%), Turkey 25 bps (7.25%), Philippines 21 bps (5.39%), Indonesia 22 bps (5.41%), and Qatar 23 bps (4.73%). The iShares Emerging Bond ETF (EMB) lost 1.5% this week, the largest decline since the start of the war.

“Emerging Markets Cap Worst Week Since March on Inflation Fears.” The South Korean won was slammed 2.4% this week. The Hungarian forint lost 3.4%, the Brazilian real 3.3%, the Chilian peso 2.1%, the South African rand 1.9%, the Philippine peso 1.8%, the Colombian peso 1.7%, the Polish zloty 1.6%, and the Indian rupee 1.6%. The rupee’s decline pushed y-t-d losses to 6.4%.

Major EM equities indices were down 5.2% in Indonesia, 4.6% in Turkey, 3.8% in Brazil, 3.1% in Chile, and 2.7% in India. The iShares Emerging Market Equities ETF (EEM) dropped 4.2% this week, the largest decline since the start of the war. Friday’s 3.4% was the largest one-day drop since March 3rd.

Panic selling in “Core” U.S. equities it was not. For the week, Nvidia gained 4.7%, Apple 2.4%, Microsoft 1.6%, and Meta 0.8%. Amazon did drop 3.1%, with Oracle down 1.5% and Alphabet/Google slipping 1.0%. After rallying 30% off March 30th lows, the Nasdaq100 slipped only 0.4% this week. Similar for the Semiconductors: a 70% rally versus this week’s 1.6% decline.

Big tech (equities more generally) would traditionally be sensitive to inflation risk and rising market yields. Deeply entrenched manias tend to be irrepressible. Yet it’s no mystery that equities would be content to disregard inflation risk.

The market’s implied Fed policy rate for the December 9th meeting jumped another 13 bps this week to 3.78%, up from the 3.03% level on February 27th. This implies just over 50% probability of a 25 bps rate increase by the end of the year. Even 100% odds of a hike would be easily dismissed. And this is exactly the problem.

The stock market is 100% convinced the Fed would again avoid an actual tightening of financial conditions. After all, conditions remained loose throughout the Fed’s measured rate increases to 5.25% (to 5.5%). And despite booming Credit, stock prices, and stubbornly above-target inflation, the Fed reversed course starting in September 2024 – slashing rates 175 bps in 15 months. Speculative blow-off dynamics were unleashed.

It’s worth noting that most risk/financial conditions indicators moved only marginally this week. The VIX added just over a point to 18.43, down from a 31.05 March 27th close. Even more remarkable, high yield CDS dropped nine this week to 315 bps, trading Thursday at the low (304) prior to the start of the war. This CDS traded to 411 bps on March 31st. High yield spreads (to Treasuries) closed the week little changed at 267 bps, 10 bps below the pre-war February 25th level.

Again, zero fear of the Fed resorting to so-called “slamming on the brakes” – the type of monetary policy management required to quash well-entrenched inflationary biases. Instead, it’s more the expectation that inflation and economic overheating will remain constructive for risk assets.

It all appears late-super cycle irrational exuberance. In a world of liquidity overabundance, these big short squeezes and unwind of hedges stoke liquidity excess. And with an energized retail trading universe like never before (loving options and leverage), it’s “buy the dip” on steroids. Throw in the booming leveraged speculating community, and market excess is further fueled by history’s most powerful FOMO (fear of missing out) dynamic. In short, these are anything but typical speculative melt-up and liquidity dynamics.

From the January 29th high to the March 30th low, the MAG7 index dropped 17.8%. The index then rallied 29.6% to Thursday’s intraday high – a speculative run for the history books.

May 13 – Bloomberg (Davide Barbuscia, Tasos Vossos and Aaron Weinman): “Bankers were still putting the final touches on Alphabet Inc.’s blockbuster $17 billion of bond sales when word started to spread Monday morning on Wall Street: the company is already hawking more debt. This time, it was in yen. Alphabet’s executives had stayed up through the night to get on with Tokyo investors and pitch the deal. The week prior it had been in euros and Canadian dollars, and, a few months before that, dollars, pounds and Swiss francs. In all, Alphabet will have raised close to $60 billion by the time the yen sale is finalized, a four-month run that ranks as one of the greatest corporate borrowing binges ever. Both the sheer scale of the fundraising — quadruple the amount of bonds Alphabet had sold in its first 26 years in business — and the span-the-globe approach it took to pull it off has put the tech giant at the forefront of a race to fund an artificial intelligence buildout expected to cost nearly $5 trillion by the end of 2030. All told, tech companies have already sold more than $300 billion of debt to US investors to fund AI spending.”

“$300 Billion AI Debt Binge Spreads From Wall Street to Tokyo.” “Big Tech’s AI Debt Binge.” “Alphabet Sells Biggest Yen Bond on Record by Foreign Issuer.” “Big Tech Goes Beyond Wall Street for Huge AI Borrowing.” “SoftBank $40 billion Refinancing to Lean on Debt, Derivatives.” “Why Meta’s AI Debt Binge May Enhance, Not Diminish, Bond Value.”

Negative correlations between “big tech” and high-yield spreads/CDS have become a critical dynamic. The law of large numbers now applies, with an ongoing AI arms race reliant on loose financial conditions. When conditions tightened and deleveraging lurked during February and March (reflected in surging high yield CDS/widening spreads), the crowded AI trade was under pressure. But when market reversal, short squeeze, hedge/derivatives unwind, FOMO, and rejuvenated leveraged speculation fomented extreme loosening, it was off to the races. “The AI bear case is garbage.” The Bubble case is anything but trash.

At this juncture, extrapolating loose conditions much into the future is risky business. It’s reminiscent of March 2000. At March 24th intraday highs, the Nasdaq100 enjoyed y-t-d gains of 30%. That high would not be attained again for 15 years. At October 2022 lows, the Nasdaq100’s decline from the high had reached 83%. Importantly, stocks mounted an extraordinary speculative melt-up in early 2000 in the face of deteriorating industry fundamentals. By March 2000, massive industry overspending and excess were readily observable. Telecom debt concerns were mounting, with widening high-yield spreads. Corporate, MBS, and dollar swap spreads were all widening late in the equities melt-up.

Between February 1st and March 13th 2000, the KBW Bank Index dropped 15% - versus the almost 20% advance in the Nasdaq100. This performance divergence was a critical warning overshadowed by the manic tech melt-up.

It’s worth noting that the KBW Bank Index declined 1.8% this week. Bank stocks notably lagged during the rally, and are basically unchanged for 2026, versus strong gains for the Nasdaq100 (15.3%), Semiconductors (63.6%), and the MAG7 (6.7%). It’s curious to see bank stocks languish in a backdrop of such loose conditions. Warning of a looming shift in the liquidity backdrop?

In a replay of early-2000, the technology equities melt-up unfolded despite deteriorating fundamental prospects. I am not disputing that the big U.S. “hyperscalers” and global tech operators have plans to spend gazillions, a historic arms race that will inflate industry earnings until the Bubble bursts. But this runaway arms race is turning increasingly precarious.

May 11 – Bloomberg (Chris Bryant): “AI infrastructure costs just keep on rising. Big tech firms are likely to invest several trillion dollars over the next few years to satisfy your ChatGPT and Claude habit. But those massive capex bills aren’t just caused by so-called hyperscalers such as Microsoft Corp. and Meta Platforms Inc. building or leasing more and more datacenters. The price of components going into these gargantuan computing warehouses has gone up, too, forcing some of these companies to splurge more cash than they’d anticipated. ‘Chipflation’ isn’t just a problem for our tech overlords who somehow need to earn a financial return on their investments. The artificial-intelligence boom is also crowding out supplies of more conventional chips. When you discover your next smartphone or games console costs far more than the last, blame AI…”

May 13 – Axios (Emily Peck): “Semiconductors, or chips, are again turning out to be the It Girl of the global economy. Chips are essential to the AI build-out, and that’s driving a huge burst of demand, creating supply shortages, pushing up prices and creating an investment frenzy. It also puts chips at the center of geopolitics. Nvidia CEO Jensen Huang boarded Air Force One Tuesday night, joining the delegation to China… The stock market is now largely a story about chips. Since the launch of ChatGPT in 2022, the PHLX semiconductor index, which tracks 30 of the largest companies in the industry, has grown to account for 16% of the S&P 500’s market cap, up from 4%... It’s hard to overemphasize how weird the chip market is at the moment. Outside of the pandemic…, typically the price of computing power has trended down. Now, the frenzied demand for ‘compute’ to power AI has driven up prices throughout the chip supply chain: from the fanciest logic chips to memory chips that store data to older ones that power infrastructure like cars or industrial machinery.”

Prospects that arms race spending will generate outsized returns on investment were already suspect. And while wild price inflation for chips and AI infrastructure has inflated industry profits and spending plans, sober analysis warns that current dynamics pose a major risk to future profitability. This is similar to 1999 and early-2000 dynamics, though the scope of today’s global Bubble so dwarfs “nineties” tech Bubble excess. Moreover, borrowing costs are rising significantly, also at the expense of future profitability.

The incredible scope of AI-related spending has reached the point of fanning general inflationary tailwinds. And while equities relish the prospect of incessant loose conditions, bond markets suffer heightened anxiety.

May 12 – Bloomberg (Daniel Flatley): “The US saw a smaller budget surplus in April — a key month for federal revenues — as individual and corporate tax receipts dropped in the wake of President Donald Trump’s signature tax cut legislation. The April surplus was $215 billion, down 17% from the excess recorded in April the previous year. Total revenue came in at $837 billion for April, down 2% from a year before… Individual tax withholdings plus Social Security and Medicare taxes came in at $288 billion, down 6%, while gross corporate levies amounted to $89 billion, marking a decline of 8%. Spending, meantime, went up in April, thanks especially to higher interest costs… The Treasury paid $112 billion in interest last month, up 10% from a year before… For the fiscal year as a whole, the US is expected to see a wider deficit. The median estimate of primary dealers in US Treasury securities… showed a $1.95 trillion gap for the year ending in September. Dealers see a further widening to $2 trillion in 2027.”

For a while, the trajectory of debt growth has been viewed by Fed officials and serious economists as on an “unsustainable path”. But the Day of Reckoning is invariably pushed out to some future period. Why not now? The world faces an inflationary shock of uncertain scope and duration. Deficit spending in the U.S. and elsewhere is out of control. And the unexpected backup in market yields portends only larger deficits. Central bank inflation-fighting operations risk a meaningful rise in policy rates and only more pressure on government finances.

Meanwhile, the world is also staring at Trillions of ongoing IA-related borrowing requirements. “AI’s Global Dash for Cash is Already Straining Credit Markets.” There are also the many Trillions of speculative leverage that have accumulated throughout Treasury, global government and corporate bonds, and derivatives markets. Such leverage is premised on confidence that central banks retain the capacity to guarantee liquid and continuous markets. A confluence of factors, including a new Fed Chair, a split FOMC, and concerns for Fed independence, unprecedented speculative leverage, worsening inflation, and Washington dysfunction, imperils this confidence.

It’s a challenge to envision a market backdrop with greater vulnerability to deleveraging. A shift away from liquidity abundance and tighter conditions would expose fragilities throughout financial systems and economies. Clearly, the AI arms race is acutely vulnerable to tighter conditions. And Friday trading had the appearance of incipient “risk off,” which could easily evolve into serious deleveraging. That said, we’ve witnessed in previous “risk off” episodes the resilience of “basis trades” and other speculative leverage largely unimpacted by rising yields. All bets are off if an upside breakout in global yields sparks liquidity fears and market dislocation.

May 14 – Axios (Amy Harder): “Energy — whether it be oil for cars or power for data centers — is suddenly the world’s biggest constraint. Energy is becoming the singular driver of both global stability and economic growth. Oil shocks from the Iran war are rippling through inflation and geopolitics. The AI boom is triggering a global race for electricity that grids aren’t ready for… We’re confronting both unprecedented scarcity and demand for energy on a timeline that’s considered remarkably sudden for the usually slow-moving energy sector… Compared with the same period a year ago, energy costs are up 18%. Meanwhile, trouble is also lurking in our power lines. The nation’s grid watchdog took the unusual step last week of issuing its highest level warning that exploding power demand from AI data centers could strain electricity systems.”

May 13 – Reuters (Seher Dareen and Robert Harvey): “Refinery attacks tied to the wars in Iran and Ukraine have knocked out nearly 9% of global oil refining capacity in recent months, deepening a fuel supply crunch and likely delaying recovery by months after fighting ends. The Iran war has not ‌only slashed energy supply by disrupting tanker traffic out of the Gulf, but marks the biggest hit to refining since the COVID-19 pandemic in 2020, with damage to facilities and crude shortages forcing cuts in processing. ‘The current tightness will continue to underpin the refined product market,’ Saxo Bank analyst Ole Hansen told Reuters. ‘Not least considering the damage done to refineries.’”

May 14 – Bloomberg (Alex Harris): “Apollo Global Management Inc.’s insurance arm was the third-largest borrower at the end of March in the Federal Home Loan Bank system, further increasing its holdings since the end of last year. Athene Holding Ltd. owed $28.2 billion in loans, known as principal advances, to the FHLB as of March 31… That’s up from the end of 2025, when Athene was the second-biggest borrower in the system with a balance of $23.3 billion.”

May 14 – Bloomberg: “China’s credit expansion slowed far more than expected from a year earlier in April while banks extended less new loans, underscoring unusually anemic borrowing demand even for a typically slow month for lending. Aggregate financing, a broad measure of credit, increased less than 630 billion yuan ($93bn) in April…, compared with an expansion of 1.2 trillion yuan a year ago. That was about half of the median forecast of almost 1.3 trillion yuan… New loans contracted 15.3 billion yuan in the month, versus a median forecast of an increase of 300 billion yuan. Chinese households net repaid 786.9 billion yuan, the most since comparable data going back to 2010.”

April is a traditionally weak month for Chinese Credit. April 2026 was notable and worthy of additional detail. Consumer Loans (chiefly mortgages) declined a notable $116 billion during April, the largest contraction in data back to 2007. After four months of the new year, the $77 billion decline in Consumer Loans compares to last year’s $76 billion y-t-d expansion. Over 12 months, Consumer Loans contracted $89 billion. This compares to annual expansions exceeding $1.1 TN for both Bubble years 2021 and 2020.

Corporate Loans expanded only $57 billion in April, down from March’s $392 billion and April 2025’s $79 billion. Year-over-year growth slowed a tick to 8.5%, matching the weakest pace since 2017. While down about 3% from comparable 2025, the y-t-d expansion of $1.324 TN remained robust. Certainly not unique to China, government borrowing sustains huge system Credit growth. China’s $132 billion April increase in government bonds put 12-month issuance at a chunky $1.98 TN.


For the Week:

The S&P500 was little changed (up 8.2% y-t-d), while the Dow slipped 0.2% (up 3.0%). The Utilities dropped 2.0% (up 3.6%). The Banks lost 1.8% (down 0.8%), and the Broker/Dealers declined 1.0% (up 5.7%). The Transports slipped 0.3% (up 16.0%). The S&P 400 Midcaps (up 9.2%) and the small cap Russell 2000 (up 12.5%) both dropped 2.4%. The Nasdaq100 dipped 0.4% (up 15.3%). The Semiconductors retreated 1.6% (up 63.6%). The Biotechs declined 1.2% (up 0.6%). With bullion down $175, the HUI gold index slumped 7.0% (up 6.4%).

Three-month Treasury bill rates ended the week at 3.5868%. Two-year government yields jumped 18 bps to 4.07% (up 60bps y-t-d). Five-year T-note yields surged 26 bps to 4.26% (up 53bps). Ten-year Treasury yields rose 24 bps to 4.59% (up 43bps). Long bond yields jumped 18 bps to 5.12% (up 27bps). Benchmark Fannie Mae MBS yields surged 27 bps to 5.57% (up 52bps).

Italian 10-year yields jumped 22 bps to 3.95% (up 40bps y-t-d). Greek 10-year yields rose 21 bps to 3.89% (up 45bps). Spain's 10-year yields gained 18 bps to 3.60% (up 32bps). German bund yields jumped 16 bps to 3.17% (up 31bps). French yields surged 20 bps to 3.82% (up 26bps). The French to German 10-year bond spread widened four to 65 bps. U.K. 10-year gilt yields spiked 26 bps to 5.17% (up 69bps). U.K.’s FTSE equities index slipped 0.4% (up 2.6% y-t-d).

Japan’s Nikkei 225 Equities Index fell 2.1% (up 22.0% y-t-d). Japan’s 10-year “JGB” yields surged 23 bps to 2.72% (up 65bps y-t-d). France’s CAC40 lost 2.0% (down 2.4%). The German DAX equities index declined 1.6% (down 2.2%). Spain’s IBEX 35 equities index lost 1.5% (up 1.8%). Italy’s FTSE MIB index slipped 0.4% (up 9.3%). EM equities were under notable pressure. Brazil’s Bovespa index sank 3.8% (up 10.0%), and Mexico’s Bolsa index dropped 2.7% (up 5.6%). South Korea’s Kospi was about unchanged (up 77.8%). India’s Sensex equities index slumped 2.7% (down 11.7%). China’s Shanghai Exchange Index declined 1.1% (up 4.2%). Turkey’s Borsa Istanbul National 100 index was hit 4.6% (up 27.6%).

Federal Reserve Credit jumped $18.2 billion last week to $6.673 TN, with a 22-week expansion of $183 billion. Fed Credit was down $2.217 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.943 TN, or 79%. Fed Credit inflated $3.862 TN, or 137%, since November 7, 2012 (705 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped $23.8 billion last week to $3.005 TN - falling back toward the low back to October 2010. “Custody holdings” were down $261 billion y-o-y, or 8.0%.

Total money market fund assets (MMFA) were unchanged last week at $7.749 TN. MMFA were up $808 billion, or 11.6%, y-o-y - having ballooned a historic $3.165 TN, or 69%, since October 26, 2022.

Total Commercial Paper added $1.8 billion to $1.432 TN. CP gained $13 billion, or 0.9%, y-o-y.

Freddie Mac 30-year fixed mortgage rates slipped a basis point to 6.36% (down 45bps y-o-y). Fifteen-year rates dipped one basis point to 5.71% (down 21bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate up four bps to 6.60% (down 35bps).

Currency Watch:

May 14 – Bloomberg (David Fickling): “Have a look at a list of the worst-performing currencies since the start of the US and Israeli war with Iran, and a striking but unsurprising pattern emerges: They’re almost all energy importers. The biggest losers include the Egyptian pound, the Philippine peso, the South Korean won, and the Thai baht. Among the handful of currencies that have risen, meanwhile, you find the Brazilian real, the Kazakhstani tenge, and the Nigerian naira — all significant oil exporters. That’s a hint of how the next stage of this energy crisis may play out.”

For the week, the U.S. Dollar Index jumped 1.4% to 99.284 (up 1.0% y-t-d). On the downside, the Brazilian real declined 3.3%, the Swedish krona 2.5%, the South Korean won 2.4%, the British pound 2.2%, the New Zealand dollar 2.2%, the South African rand 1.9%, the euro 1.4%, the Australian dollar 1.3%, the Swiss franc 1.3%, the Japanese yen 1.3%, the Norwegian krone 1.1%, the Singapore dollar 1.0%, the Mexican peso 0.9%, and the Canadian dollar 0.5%. China's (onshore) renminbi slipped 0.18% versus the dollar (up 2.57% y-t-d).

Commodities Watch:

The Bloomberg Commodities Index gained 1.8% (up 28.5% y-t-d). Spot Gold retreated 3.7% to $4,540 (up 5.1%). Silver slumped 5.4% to $75.9921 (up 6.0%). WTI Crude jumped $10.00, or 10.5%, to $105.42 (up 84%). Gasoline rose 5.0% (up 116%), and Natural Gas rallied 7.4% to $2.96 (down 20%). Copper was little changed (up 11%). Wheat jumped 4.7% (up 25%), while Corn was about unchanged (up 4%). Bitcoin declined $1,050, or 1.3%, to $79,100 (down 9.7%).

Market Instability Watch:

May 13 – Bloomberg (Elizabeth Stanton): “Investors snagged 5% yields on 30-year Treasuries for the first time since 2007, as surging energy prices push inflation — and expectations for more of it — higher. A $25 billion auction of new 30-year bonds… was awarded at 5.046% based on the yields that bidders said they were willing to accept. The result… showcased middling demand as US government yields reach their highest levels in nearly a year. Sales of three- and 10-year Treasuries earlier in the week also drew less demand than expected.”

May 12 – Bloomberg (Michael MacKenzie and Ye Xie): “Not long ago, the Treasury market thought it had the Kevin Warsh trade figured out: Simply bet on the multiple interest rate cuts that the nominee had been expected to deliver if he got the job to lead the Federal Reserve. Now, with days left before Warsh steps into the central bank’s top role, a different view is emerging. Instead of rate cuts, wagers in the $31 trillion bond market are leaning toward tighter monetary policy, the upshot of robust US growth and war-driven inflation worries. Yields on 30-year Treasuries are nosing at 5%, while bets on a steeper yield curve — an outgrowth of the market’s earlier easing expectations — have largely been undone.”

May 15 – Bloomberg (Christopher Anstey and Carter Johnson): “Group of Seven finance chiefs are set to discuss the selloff in government bonds that’s sending yields on some benchmark securities to their highest levels in decades, with at least one member viewing the move as temporary. Japanese Finance Minister Satsuki Katayama said Friday…”

May 13 – Bloomberg (Masaki Kondo): “Japanese investors sold the most US sovereign bonds in almost four years as a jump in oil prices led to an abrupt turnaround in Federal Reserve policy bets. Net sales of debt issued by the US government, agencies and local authorities totaled ¥4.67 trillion ($29.6bn) in the three months ended March 31. That’s the highest since the second quarter of 2022…”

May 15 – Bloomberg (Jordan Fitzgerald): “Ford Motor Co.’s blistering rally screeched to a halt Friday, as a broader market selloff cooled enthusiasm over the automaker’s potential to benefit from the boom in energy demand for artificial intelligence. The… company’s stock sank 7.5%, notching its worst day since February 2025. The slump follows a 21% two-day rally that saw the market home in on Ford’s energy storage business and possible future tie-ups with AI hyperscalers.”

U.S. Credit Trouble Watch:

May 11 – Wall Street Journal (AnnaMaria Andriotis): “Private-credit firms delivered eye-popping returns to investors in recent years. That hot streak is over. The latest earnings results across the industry show returns that appear to be entering a more modest chapter, just as investors have grown worried about other aspects of private-credit funds that lend to riskier companies. Ares Capital Corp., Golub Capital and other publicly traded funds marked down their net asset values in the last quarter after lowering the valuations of loans they made to software and other companies. Others like KKR’s largest private-credit fund held by individual investors and Sixth Street Specialty Lending also trimmed their dividends. Apollo Global Management said this past week that gross returns on its direct origination funds that include investment-grade loans to companies were 0.5%, down from 2.6% a year ago.”

May 12 – Reuters (Naomi Rovnick): “Private credit funds have marked down more than a tenth of their loans by at least 50%, new data from MSCI ‌showed, as corporate borrowers in this $3.5 trillion market struggle with growing debt burdens. MSCI said… a loan valuation of less than 50% was ‘a level typically associated with deep distress or risk of restructuring,’ citing a sustained period of relatively high interest rates ⁠as one reason borrowers were struggling. In recent days, big players in private debt including Carlyle, Blackstone and BlackRock have cut the value of their credit funds and regulators have warned about systemic risks arising from major banks lending to these asset managers. MSCI's data showed that private credit funds’ loan writedowns were at the highest level since the aftermath of the COVID-19 pandemic. Smaller private debt funds were experiencing the most borrower distress, ‌MSCI found, ⁠with 13% of their loans now valued below 50 cents on the dollar.”

May 15 – Bloomberg (Olivia Fishlow and Ava Benny-Morrison): “Federal prosecutors are scrutinizing valuation practices at a BlackRock Inc. private credit fund, according to people with knowledge of the matter. The Manhattan US Attorney’s office in recent months has been seeking information about BlackRock TCP Capital Corp., a publicly traded business development company…”

May 9 – Bloomberg (Davide Barbuscia and Yizhu Wang): “For many US companies, the hot new type of credit seems to be getting less attractive. Private credit firms saw their lending volume shrink 14% in the first quarter, even as banks saw an eye-popping 12.7% increase in lending to companies, the fastest growth since 2022. The data, and anecdotal reports from lenders, suggest that some private credit firms are losing business as fears of loan losses have pushed funding costs higher. At the same time, US banks are benefiting from a wave of deregulation that has allowed them to offer cheaper funding for riskier companies and transactions. The head of the Office of the Comptroller of the Currency said explicitly in January that the agency was trying to relax post-crisis rules for leveraged loans to help banks better compete with private credit.”

May 12 – Financial Times (Antoine Gara): “Blue Owl has seen inflows at its flagship credit investment fund for retail investors all but dry up, underscoring the challenges facing the group at the centre of doubts over private credit. The group’s near $20bn Blue Owl Credit Income fund reported just $26mn in new investments on May 1, an about 50% decline from the prior month and a 95% decrease from this time a year ago… At this time last year, the fund attracted nearly $500mn a month as investors were clamouring for the high yields of private credit funds, but it has faced pressure in recent months amid falling returns and broad investor worries over the potential for a surge in loan defaults.”

May 14 – Bloomberg (Olivia Fishlow): “Non-traded private credit funds handed more money back to investors than they raised in the first quarter — the first time outflows from the vehicles have surpassed inflows. Non-listed business development companies gave back about $7 billion over the period, while raising about $5 billion, according to a report from Robert A. Stanger & Co.”

May 11 – Wall Street Journal (Matt Wirz): “KKR’s largest private-credit fund held by individual investors took a $560 million loss in the first quarter when a growing number of loans tipped into default. The write-down—equivalent to about 10% of the fund’s net asset value—is one of the biggest indicators so far of underlying problems in a large private-credit fund. Defaults in the fund jumped to 8.1% in the first quarter from 5.5% in December... The $12.3 billion fund—a business-development company called FS KKR Capital—has been under pressure since last year… The stock tumbled further this year when big loans to software maker Medallia and dental service company Affordable Care went into default.”

May 11 – Bloomberg (Allison McNeely): “KKR & Co. is injecting $300 million into a private credit fund it manages with Future Standard as performance continues to deteriorate. KKR will invest $150 million in preferred equity and tender for $150 million of FS KKR Capital Corp. common shares at $11 per share…”

Global Credit Bubble Watch:

May 14 – Bloomberg (Davide Barbuscia, Tasos Vossos and Aaron Weinman): “Bankers were still putting the final touches on Alphabet Inc.’s blockbuster $17 billion of bond sales when word started to spread Monday morning on Wall Street: the company is already hawking more debt. This time, it was in yen. Alphabet’s executives had stayed up through the night to get on with Tokyo investors and pitch the deal. The week prior it had been in euros and Canadian dollars, and, a few months before that, dollars, pounds and Swiss francs. In all, Alphabet will have raised close to $60 billion by the time the yen sale is finalized, a four-month run that ranks as one of the greatest corporate borrowing binges ever.”

May 12 – Reuters (Gertrude Chavez-Dreyfuss): “U.S. corporate bond markets are on a roll, with investment-grade credit spreads tightening, issuance rising and solid-looking economic fundamentals encouraging investors to put their cash to work. Even as the war in Iran has pushed oil prices above $100 a barrel, the risk-taking that has pushed U.S. stock indexes to records and credit spreads within range of historic lows appears to be gaining momentum. ‘The market very quickly gets ‌over the bad news,’ said Johnathan Owen, portfolio manager at TwentyFour Asset Management... The bottom line, he said, is that ‘people have cash.’”

May 12 – Bloomberg (Jeannine Amodeo and Gerson Freitas Jr.): “Junk-rated firms are rushing to reprice and refinance debt, seizing on renewed investor appetite for riskier US dollar-denominated loans to slash borrowing costs. More than 20 companies have kicked off deals to cut borrowing costs or extend maturities on nearly $30 billion of debt this week, the most volume since January…”

May 12 – Bloomberg (Ronan Martin): “Amazon.com Inc. sold its first Swiss franc bonds across a record six tranches, as Big Tech looks beyond its regular debt markets to raise funds. The company raised 2.82 billion Swiss francs ($3.6bn) from debt due in three, six, nine, 12, 18 and 25-years…The offering size was increased several times through book-building…”

May 13 – Bloomberg (Emily Graffeo): “Life insurance companies owned by private equity firms have quietly reshaped their portfolios, piling into higher-yielding alternative credit in a shift that’s entangled the industry with the broader financial system, according to researchers at the Federal Reserve Bank of Chicago. Private fund giants, including Apollo Global Management Inc. and KKR & Co., have snapped up life insurers over the past decade, changing how they invest. From 2017 to 2024, PE-owned insurers’ investments in private placements for asset-backed securities and financial borrowers jumped to 8% of assets from 2%, as those of stand-alone insurers rose to 4% from 3%... Those changes expose insurers to more liquidity risk, the researchers said.”

May 13 – Bloomberg (Scott Carpenter and Laura Benitez): “Apollo Global Management Inc.’s ‘next generation’ of credit vehicles… are backed by a grab-bag of loans and stakes in its own funds. In one case, a portion of investments will be overseen by an Apollo-backed money manager. The deals, known as AMAPS or Apollo Multi-Asset Prime Securities, break with typical securitizations by bundling together not just one type of asset class but many different ones… Some institutional money managers say AMAPS reminds them of collateralized debt obligations, a type of securitization that offers greater diversity but can also add complexity. CDOs, which boomed before 2008, were largely spurned after helping to fuel the creation of subprime assets that led to the global financial crisis.”

May 13 – Bloomberg (Erin Hudson): “The market for state and local government debt is becoming ‘less forgiving,’ according to BlackRock Inc.’s Pat Haskell… State revenues are softening, and rainy day fund capacity has declined for the first time since the Great Recession, he wrote… The end of pandemic-era stimulus programs, slowing tax collections and rising costs are all adding to the weakness. The combination is ‘driving reserve drawdowns and structural imbalances, contributing to increased downgrades and wider credit gaps,’ he wrote. At the same time, several states including Texas and Florida are considering property tax reductions, often without plans to replace the foregone tax revenue. That’s adding ‘another layer of uncertainty’ and potential fiscal strain.”

Iran War Watch:

May 10 – CNBC (Anniek Bao): “U.S. President Donald Trump rejected Iran’s counterproposal to end the 10-week war in the Middle East, calling it ‘totally unacceptable,’ while Tehran vowed to ‘never bow,’ prolonging a standoff… ‘I have just read the response from Iran’s so-called ‘Representatives.’ I don’t like it — TOTALLY UNACCEPTABLE!’ the president said… Iranian state media framed Tehran’s response as a rejection of the U.S. proposal, which it characterized as a demand for ‘surrender.’ In its response to the latest U.S. proposal, Tehran has insisted on war reparations, full sovereignty over the Strait of Hormuz, an end to sanctions, and the release of frozen Iranian assets. Iranian President Masoud Pezeshkian struck a defiant tone as negotiations proceeded Sunday. ‘We will never bow our heads before the enemy, and if talk of dialogue or negotiation arises, it does not mean surrender or retreat,’ he said…”

May 11 – Bloomberg (Salma El Wardany and Galit Altstein): “The US and Iran remain far apart on a framework to end their war and reopen the Strait of Hormuz, with President Donald Trump saying he’s looking at reviving a plan to escort ships out of the Persian Gulf. Iran responded to last week’s US peace proposal by demanding a lifting of Washington’s naval blockade and sanctions relief, while maintaining a degree of control over traffic through Hormuz… Tehran also insisted that any agreement result in an immediate end to fighting, including in Lebanon, where Israel is waging a parallel war against militant group Hezbollah, the person said.”

May 12 – Wall Street Journal (Chelsey Dulaney and Saleh al-Batati): “Iran said it has significantly expanded its definition of the Strait of Hormuz, signaling its intent to widen its grip on the crucial waterway that was effectively closed to global shipping by Iranian attacks at the start of the conflict. Mohammad Akbarzadeh, an official with the Islamic Revolutionary Guard Corps naval forces, said Tehran now considers the Strait of Hormuz to encompass a much larger area than before the war. Akbarzadeh said Iran would ‘not allow any kind of encroachment upon its waters and interests.’ ‘In the past, the Strait of Hormuz was defined as a limited area around islands such as Hormuz and Hengam, but today this has changed,’ Akbarzadeh said… Iran now considers the strait to stretch hundreds of miles, from the coast of Jask to the Greater Tunb island, he said. ‘The Strait of Hormuz has grown larger and has turned into a vast operational area,’ he said.”

May 11 – Wall Street Journal (Laurence Norman and Robbie Gramer): “The U.S. and Iran are locked in a diplomatic stalemate over issues that have bedeviled the two sides for years, as the conflict settles into a gray zone that is neither war nor peace. The cease-fire is entering its second month and, despite sporadic violence, has now lasted almost as long as the fighting which preceded it. There is little to indicate that either the U.S. or Iran is ready to compromise, but neither wants to start fighting again… Trump told reporters at the White House that Iran believed he would get tired or bored of the conflict, or feel pressure to end it because of rising energy prices. ‘But there’s no pressure,’ Trump said. ‘We’re going to have a complete victory.’”

May 12 – Associated Press (Jon Gambrell and Melanie Lidman): “Kuwait said… Iran launched a failed attack earlier this month on an island where China is helping build a port in the Gulf Arab country. The accusation came just hours before U.S. President Donald Trump was to depart for Beijing on a high-stakes visit over the Iran war and other issues… As he left for the summit, Trump again threatened Iran if its leaders don’t reach an agreement on its nuclear program. ‘We have Iran very much under control,’ Trump said. ‘We’re either going to make a deal or they’re going to be decimated. One way or the other, we win.’”

Iran War Ramifications Watch:

May 13 – Financial Times (Verity Ratcliffe): “Global oil inventories are being depleted at a record pace, accentuating the risk of further price rises as disruption from the Iran war continues, the International Energy Agency warned... Stockpiles of crude oil and refined fuel fell by almost 4mn barrels a day in April — the equivalent of more than the UK and Germany’s consumption combined — threatening to erode the buffers countries rely on to withstand supply shocks. ‘The world is drawing oil inventories at a record pace as importing countries confront unprecedented disruptions to Middle Eastern supplies,’ the IEA said… ‘Rapidly shrinking buffers amid continued disruptions may herald future price spikes ahead.’”

May 13 – Wall Street Journal (Giulia Petroni): “The near-closure of the Strait of Hormuz has unleashed an unprecedented supply shock on global energy markets, one that could keep oil supplies constrained for months even after shipping through the vital waterway resumes, the International Energy Agency said. The… energy watchdog… now expects global oil demand to contract by 420,000 barrels a day this year, from its previous forecast of an 80,000-barrel-a-day decline… The IEA’s base-case scenario assumes flows through Hormuz will gradually resume from June, with demand growth returning to positive territory only in August and then hovering around 2025 levels for the remainder of the year. Supply, however, would recover far more slowly because of infrastructure damage, logistical bottlenecks and the need to clear Iranian mines from the strait before normal export operations can restart. Even after mines are cleared, it would likely take at least two to three months to fully restore steady export operations as oil tankers exit the Gulf…”

May 12 – Financial Times (Delphine Strauss): “With the stand-off in the Strait of Hormuz in its third month, governments around the world are struggling with a shared dilemma: how to prevent hoarders worsening shortages of products from petrol to syringes. In scenes reminiscent of pandemic-era panic buying, South Koreans rushed to buy plastic rubbish bags after the Iran war led to the closure of the strait, disrupting global supply chains. Australians cleared the shelves of jerry cans as drivers and farmers vied to stock up on fuel in rural areas… Companies are hoarding too to secure vital supplies, exacerbating shortages and forcing governments to step in. South Korean police, for example, have launched a crackdown on firms suspected of hoarding syringes… Meanwhile, in India, online influencers are driving a craze for ticketed Diet Coke parties, as limited supplies of the canned drink give it a new cachet.”

May 12 – Associated Press (Anton L. Delgado and Chan Ho-Him): “Ship operators rely on a sludgelike substance known as bunker fuel to keep vessels running. The Iran war ‘s closure of the Strait of Hormuz has choked off the supply of this fuel that powers the global maritime industry and its largest refueling hub in Asia. Bunker fuel is a literal bottom of the barrel product: heavier and dirtier than the more expensive kinds of refined crude oil used by other vehicles like cars and airplanes, it sinks to the bottom of storage containers. But it helps move the 80% of globally traded goods that are transported by sea, and experts say that means a shortage of bunker fuel will translate to higher shipping costs, increase consumer prices and hurt the bottom lines of businesses worldwide.”

May 12 – Bloomberg (Javier Blas): “What do the Federal Reserve and the US oil industry have in common? In today’s war-torn market, both are the supplier of last resort. One provides dollars; the other barrels. But that’s where the similarities end. The central bank can print the currency at ease; the drillers cannot. Facing an unprecedented shortage, the global oil market has called on the US, the world’s top producer, for help. And thanks to the shale revolution, America has been able to respond: Over the last four weeks, US net exports of crude and refined products have averaged a record high of 5.9 million barrels a day, up from 3.3 million a year ago…”

May 11 – Bloomberg (Lucia Kassai and Ari Natter): “The US Strategic Petroleum Reserve awarded 53.3 million barrels to companies including oil trader Trafigura Group and US refiner Marathon Petroleum Corp, adding to a wave of oil released to help tame surging prices stemming from the Iran war.”

May 12 – Financial Times (Harry Dempsey, Gill Plimmer and Nic Fildes): “Construction projects are stalling around the world as the closure of the Strait of Hormuz disrupts the supply of crucial materials and drives up prices for oil-derived products like paint and insulation. The construction industry is a cornerstone of economic growth, contributing about 13% of global GDP, but builders say restricted oil supply out of the Middle East is now holding up projects. Masatomi Maeda, chair of Hiroshima-based Maeda Housing, said about a quarter of its projects have been delayed within the past month as suppliers could not confirm delivery dates for goods including PVC piping, insulation materials and prefabricated bathrooms. Builders say the absence of a single part, adhesive or material is enough to hold up an entire project.”

Trump Administration Watch:

May 13 – Axios (Dave Lawler and Barak Ravid): “President Trump’s remark this week that ‘I don’t think about Americans’ financial situation’ as he weighs his next moves in Iran may have inadvertently captured the fundamental bind he’s in: how to pressure Iran without spooking markets and sending oil prices soaring. Trump currently has no clear way to square his desire to end the war on his terms with the need to rein in inflation and keep the stock market humming in an election year. What Trump appeared to mean in Tuesday’s remark is that domestic economic concerns won’t deter him from whatever steps he feels are necessary to stop Iran from obtaining a nuclear weapon.”

May 11 – Bloomberg (Kate Sullivan, Salma El Wardany and Galit Altstein): “The ceasefire between the US and Iran reached a particularly precarious moment Monday as President Donald Trump said the agreement was on ‘massive life support’ after he rejected Tehran’s latest peace offer… Trump called Iran’s response to his proposal a ‘piece of garbage’ and said he ‘didn’t even finish reading it.’”

May 11 – Axios (Barak Ravid): “President Trump is meeting with his national security team Monday to discuss the way forward in the Iran war, including possibly resuming military action, after negotiations with the country deadlocked Sunday… U.S. officials say Trump wants a deal to end the war, but Iran’s rejection of many of his demands and refusal to make meaningful concessions on its nuclear program puts the military option back on the table. Trump publicly threatened several times in recent days to bomb infrastructure in Iran if diplomacy failed.”

May 13 – Axios (Zachary Basu): “President Trump flew to Beijing… under some of the darkest economic clouds of his political career, leaving behind a country reeling from the cost of everyday life. The bottom is falling out on Trump’s economic credibility — the central promise of his return to power. The inflation crisis that doomed his predecessor suggests he may not recover. A new CNN poll found that 70% of Americans disapprove of Trump’s handling of the economy — a benchmark that never crossed 50% in his first term, even during the pandemic. 77% of Americans, including a majority of Republicans, say Trump's policies have driven up the cost of living in their own community.”

May 11 – Financial Times (Aime Williams): “When Donald Trump threatened tariffs against the US’s Nato allies in a dispute over Greenland in January, London was rattled, the EU held emergency meetings and thousands took to the streets in Denmark. When, just three months later, he announced 50% duties against countries selling arms to Iran, without ‘exclusions or exemptions’, his comment was quickly brushed aside. The difference was down to a judicial decision about presidential power. By ruling against his ‘liberation day’ tariff announcements for overstepping his authority, the US Supreme Court undermined what in many ways was Trump’s superpower — his preferred means of pressuring other countries into bending to his will. ‘The president has lost something important to him, which is the ability to threaten tariffs on a Friday and impose them on a Monday,’ says Michael Smart, managing director at Rock Creek Global Advisors…”

May 12 – New York Times (Andrew Duehren and Alan Feuer): “The Justice Department is holding internal discussions about settling President Trump’s lawsuit against the Internal Revenue Service in the coming days, according to three people familiar…, a move that could involve the government directly providing taxpayer funds or another public benefit to the president. Whether to settle the suit and on what terms remains up in the air. One of the settlement options the Justice Department and White House officials are reviewing is the possibility of the I.R.S. dropping any audits of Mr. Trump, his family members or businesses…”

May 15 – Bloomberg (Bill Allison and Jessica Menton): “President Donald Trump’s latest financial disclosures show that he or his investment advisers made more than 3,700 trades in the first quarter, a flurry totaling tens of millions of dollars and involving major companies that have dealings with his administration. The transactions, spelled out in more than 100 pages of documents filed Thursday…, list purchases and sales in broad ranges, making it hard to calculate an exact value. But the volume of trading — more than 40 per day over a three-month period — stands out as much as the potential dollar value. ‘This is an insane amount of trades,’ said Matthew Tuttle, chief executive officer of Tuttle Capital Management…”

May 14 – Bloomberg (Ben Bartenstein, Annie Massa, and Ted Mann): “The sender: Jared Kushner, envoy for President Donald Trump — and a private investor handling billions of dollars for those same princes and emirs. Since his father-in-law took the US to war with Iran, he’s engaged in a campaign of official peacemaking and private moneymaking like none in modern American history. Between attempts to broker peace, Kushner has participated in investment meetings at his private equity firm, Affinity Partners, which manages billions for Qatar, Saudi Arabia and the United Arab Emirates, according to a person familiar... Those three energy-rich Gulf states aren’t just longtime allies of Washington but also key Affinity clients: They’ve agreed to pay Kushner’s firm tens of millions of dollars in fees annually in hopes of gaining influence at the White House as well as returns for their portfolios…”

Trade War Watch:

May 13 – New York Times (Keith Bradsher): “As President Trump prepares to meet China’s top leader at a summit in Beijing this week, one of the most pressing issues facing the United States, the European Union and Japan lies in China’s restrictions on exports of rare-earth metals and magnets essential to advanced manufacturing. Manufacturers of commercial aircraft, electronics, cars, semiconductor manufacturing equipment and military hardware are facing acute shortages of rare earths, many of which are refined almost exclusively in China. Prices for some of these metals have soared as much as a hundredfold since Beijing halted most exports in early April last year.”

Constitution Watch:

May 11 – Wall Street Journal (Joe Flint): “ABC has been a victim of a ‘sustained, coordinated campaign of censorship and control’ by the Trump administration, Federal Communications Commissioner Anna Gomez told Josh D’Amaro, chief executive of Disney, the network’s parent company. The FCC under Republican Chairman Brendan Carr has been weaponized to pressure ‘a free and independent press and all media into submission,’ Gomez wrote… The lone Democratic commissioner, Gomez has been an outspoken critic of many of Carr’s actions, which she has alleged are aimed at pressuring broadcasters for political purposes.”

Budget Watch:

May 13 – MarketWatch (Dominik Lett): “The Pentagon says the Iran war has cost $29 billion so far - but the total bill for U.S. taxpayers could end up being much higher… In March, the Pentagon asked Congress for $200 billion in supplemental war spending. Factor in the borrowing costs associated with a new deficit-financed spending package and the cumulative fiscal cost of the war could easily sail past $300 billion. Separately, the administration has proposed a $1.5 trillion defense budget for fiscal year 2027, a roughly $440 billion increase year over year.”

May 12 – Bloomberg (Laura Curtis): “The Trump administration is in the process of issuing more than $35.5 billion to importers who successfully filed for tariff refunds after the US Supreme Court found the president’s signature economic policy unlawful… The payments are being processed through a new online government portal and will include interest on duties paid across more than 8 million import entries…”

May 12 – Associated Press (Fatima Hussein): “President Donald Trump’s plan to put weapons in space — pitched as a ‘Golden Dome for America’ missile defense program — is estimated to cost $1.2 trillion over a 20-year period, according to a new analysis from the Congressional Budget Office, a far heftier sum than the initial $175 billion price tag he gave last year.”

New World Order Watch:

May 12 – Wall Street Journal (Jonathan Cheng): “When President Trump returns to China nearly a decade after his last visit, he will find a country that is more self-sufficient, militarily assertive and economically insulated from the tools the president has sought to use to stymie China and its ambitions. China has caught up to or surpassed the U.S. in technologies such as batteries, robotics and advanced manufacturing. Its naval fleet is now the world’s biggest, while its nuclear arsenal keeps growing. It knows it has the capacity to respond to the many threats that Trump issues, with restrictions on rare-earth minerals or with other moves. All of this has altered the balance of power between the U.S. and China, making it more likely that Beijing digs in on core issues of contention, say analysts and diplomats.”

May 12 – Financial Times (Demetri Sevastopulo, Joe Leahy and James Politi): “President Donald Trump has sparked alarm in Taipei and among Asian allies by saying he would discuss American arms sales to Taiwan with Xi Jinping when the US and Chinese leaders meet... Trump said he would discuss the issue with Xi, breaking decades of precedent on not consulting with Beijing on US arms exports to Taiwan. ‘President Xi would like us not to, and I’ll have that discussion,’ Trump said... Trump’s comment has sparked concern among US allies… ‘Across the Indo-Pacific, allies are deeply concerned that President Trump will bend to Xi’s request to delay arms sales to Taiwan,’ said Mira Rapp-Hooper, former senior director for east Asia at the National Security Council in the Biden administration. ‘Not only would this give China a veto over critical security assistance to Taiwan, it would suggest that for the right price, any partner’s fate may be for sale.’”

U.S./Russia/China/Europe/Iran Watch:

May 15 – NBC (Katherine Doyle): “Though U.S. President Donald Trump said he and Chinese President Xi Jinping ‘discussed almost everything,’ their superpower summit here this week produced no sweeping agreements and concluded with just a handful of measurable outcomes. ‘Instead, each side lavished praise upon its counterpart and appeared to count the level-setting as an important step toward stabilizing the relationship. Neither side moved on the issues that matter most,’ Craig Singleton, the China program senior director and senior fellow at the Foundation for Defense of Democracies, said... ‘Technology, Taiwan, Iran, rare earths, and supply-chain dependence remain unresolved. The summit helped manage the moment, but the underlying contest now returns to the same pressure points.’”

May 14 – Bloomberg (Rebecca Choong Wilkins): “When President Xi Jinping met US leader Donald Trump in Beijing on Thursday, he posed a big question: Can China and the US avoid the ‘Thucydides Trap’? It’s a phrase that sounds academic, but it goes to the heart of Beijing’s ambitions for their relationship. The term was popularized by Harvard political scientist Graham Allison in the early 2010s, drawing on the ancient Greek historian Thucydides. His argument: when a rising power challenges an established one, conflict inevitably follows. Allison’s research found this pattern played out repeatedly across history and he used this framing as a lens to examine the US-China rivalry.”

May 14 – Bloomberg (Rebecca Choong Wilkins, Colum Murphy and Yian Lee): “After Xi Jinping regaled Donald Trump with goose-stepping soldiers and flag-waving children, the Chinese leader’s warning that Taiwan could lead to ‘clashes’ between the superpowers amounted to a thunderclap in the choreographed world of Communist Party politics. Cautioning American presidents against interfering with the self-ruled island is standard practice for China. But Xi’s assertion that it could trigger a ‘highly dangerous situation’ for the world’s biggest economies marked his bluntest language yet on the topic. Beijing’s decision to release Xi’s remarks before the nearly two-and-a-half hour huddle in Beijing had even wrapped underscored the gravity of the message.”

May 13 – New York Times (Ana Swanson and John Ismay): “As the United States works to rebuild its supply of missiles and munitions after deploying many of them in the war with Iran, its defense contractors will need a supply of rare-earth minerals and magnets that are essential to making those weapons. But China dominates global production of those minerals, and it has enacted tight controls over them in the past year to cut off any foreign companies linked to the military and to put political pressure on the Trump administration… Christopher Padilla, a former trade official in the George W. Bush administration, said that the U.S. decision to burn through many precision munitions in the Iran war had only increased that leverage. At least in the next few years, the U.S. effort to rebuild its stockpile ‘means we need access to rare-earth minerals from China… Every missile fired at Iran makes us that much more dependent in the near term on China and its rare-earth minerals.’”

Ukraine War Watch:

May 12 – Financial Times (Max Seddon, Christopher Miller and Henry Foy): “Russia and Ukraine believe there is little prospect for reviving US-brokered peace talks even after the war in the Middle East ends, according to people briefed... Vladimir Putin had shifted focus to capturing more Ukrainian territory by force and intended to expand his demands further still once Russia controlled the key Donbas region, the people said. Officials in Kyiv, meanwhile, believe they are less vulnerable to US pressure for a quick, unfavourable deal after halting Russia’s advance and inflicting more damage with drone strikes deep behind enemy lines.”

May 10 – Wall Street Journal (Editorial Board): “Vladimir Putin held a subdued Victory Day parade on Saturday in Moscow, with fewer missiles and other weapons that are an annual boast about Russia’s military power. If it’s true that Mr. Putin feared a long-range Ukrainian drone strike, it’s one more sign that the tide may be turning against Russia after four long years of death. ‘Russian forces are performing worse on the battlefield in Spring 2026 than when the Kremlin emphasized its demand for Donetsk Oblast in 2025,’ the Institute for the Study of War reported... ISW, which offers the best independent analysis of the war, says Ukraine appears to have regained more territory from Russia’s occupiers than it lost in April.”

May 9 – Reuters (Vladimir Soldatkin and Guy Faulconbridge): “Russian President Vladimir Putin said… he thought the Ukraine war was coming to an end, remarks that came just hours after he had vowed victory in Ukraine at Moscow’s most ‌scaled-back Victory Day parade in years. ‘I think that the matter is coming to an end,’ Putin told reporters… He also said he would be willing to negotiate new security arrangements for Europe, and that his preferred negotiating partner would be Germany's former Chancellor Gerhard Schroeder.”

Taiwan Watch:

May 15 – Bloomberg (Aamer Madhani, Will Weissert and Simina Mistreanu): “U.S. President Donald Trump said… he has not made a decision on whether to move forward with a major arms package for Taiwan after hearing concerns about it from Chinese President Xi Jinping. Trump’s comments on Taiwan… came as he flew back to Washington after wrapping up critical talks in which both leaders said important progress was made in stabilizing U.S.-China relations even as deep differences persist between the world’s two biggest powers on Iran and Taiwan. ‘I’ll be making decisions,’ Trump said. ‘But, you know, I think the last thing we need right now is a war that’s 9,500 miles away.’”

AI Bubble/Arms Race Watch:

May 13 – Reuters (Wen-Yee Lee): “TSMC, the world’s largest contract chipmaker, expects the global semiconductor market to exceed $1.5 trillion by 2030, topping its previous forecast of $1 trillion, according to its presentation materials ahead of a tech ‌symposium…”

May 12 – Bloomberg (John Ainger): “The chairman of the top US energy regulator has put America’s biggest power grid on notice, warning that its operator may be too big to function adequately amid the AI data center boom. Laura Swett, who oversees the Federal Energy Regulatory Commission, said… she fears that PJM Interconnection LLC’s struggle to address the voracious power needs from data centers threatens the country’s artificial intelligence ambitions. PJM ‘perhaps simply has grown too big to function,’ she said. ‘We simply cannot have a market that falls short at exactly the time when we must successfully navigate this once-in-a-generation opportunity to cement America’s energy leadership.’”

May 13 – Wall Street Journal (Kate Clark): “Anthropic is emerging as the presumptive front-runner in the race for artificial-intelligence supremacy, with faster growth and fundraising that could soon yield a higher valuation than rival OpenAI. Once a scrappy underdog in a race that OpenAI appeared to have already won, the gap between the two companies has narrowed significantly this year… OpenAI’s, by some indications, has begun to plateau. Anthropic has received investment offers in recent months valuing it at more than $900 billion… That would more than double the company’s current valuation and surpass OpenAI’s for the first time. Earlier this year, OpenAI raised $122 billion at an $852 billion valuation.”

May 12 – Bloomberg (Natasha Mascarenhas and Ed Ludlow): “Anthropic PBC is in early talks with investors to raise at least $30 billion in fresh financing, according to people familiar with the matter, setting the stage for what could be its largest funding round yet. The Claude maker is in discussions to raise the new capital at a valuation of more than $900 billion, not including the investment, said the people…”

May 14 – Bloomberg (Ryan Vlastelica): “Investors are growing increasingly optimistic about Amazon.com Inc.’s position in artificial intelligence, lighting a fire under the stock and sending the company’s market capitalization soaring toward the rarefied $3 trillion level… The stock has been on a tear since bottoming on March 27, with its 36% gain in that span making it the fourth-largest point contributor to the S&P 500 Index…”

Bubble Watch:

May 11 – Bloomberg (Alexandra Semenova): “Retail traders largely sat out a record-setting advance in chip stocks in April. Now they’re diving in just as worries mount that the group’s rally may be losing steam. Individual investors boosted purchases of technology shares to the highest level in a year last week, according to positioning data from JPMorgan…, with companies like memory chipmakers that benefit from all things artificial intelligence drawing the most interest. Hardware companies posted their second-largest inflow on record.”

May 14 – CNBC (Sean Conlon): “Ford Motor shares have been on a tear the past couple days as buzz around its relationship to energy storage could be setting up the stock to join names in more viral areas of the market. The stock jumped 6.7% during Thursday’s session, a move that comes after a 13% pop in the prior trading day.”

May 13 – Los Angeles Times (Roger Vincent): “Even as the relentless rise in Los Angeles housing costs seems to have paused, condominium sales slowed to a trickle this year. The number of condo units sold in the first two months slid to a more than 20-year low, according to… Attom. The median price of a condo fell nearly 5% in February compared with a year earlier, the property information provider said. Cooling condo sales may be an early sign of broader weakness in the market.”

Inflation Watch:

May 12 – Associated Press (Paul Wiseman): “U.S. consumer prices climbed sharply again last month as the 10-week war with Iran delivered higher gasoline prices and more pain for Americans. The… consumer price index rose 3.8% from April 2025, the biggest jump in three years, and up from a 3.3% year-over-year gain in March. On a month-to-month basis, April prices rose 0.6% from March as gasoline prices rose 5.4%... The month-over-month gain was down from a 0.9% increase in overall prices from February to March… Excluding volatile food and energy costs, so-called consumer core prices rose 0.4% last month from March and 2.8% from April 2025…”

May 13 – Associated Press (Paul Wiseman): “U.S. wholesale inflation came in hot last month. Producer prices rose 6% from a year earlier, the highest point in more than three years… The… producer price index — which tracks inflation before it hits consumers — shot up 1.4% in April, the biggest monthly gain in more than four years. Energy prices climbed 7.8% from March to April and 22.7% from a year earlier. Gasoline soared 15.6% from March and diesel, the dominant fuel used in shipping, jumped 12.6%. Gasoline prices, which have already become painful for many Americans, rose again overnight to a national average of $4.51 per gallon, according to motor club AAA. Excluding volatile food and energy costs, so-called core producer prices rose 1% from March and 5.2% from April 2025.”

May 14 – Bloomberg (Scott Lanman): “US import and export prices surged in April by the most in four years on oil-market pressures tied to the Iran conflict, adding to evidence of higher inflation in the world’s largest economy. The import price index rose 1.9% from the prior month, the biggest increase since March 2022, as petroleum costs surged 19%... Export prices rose 3.3% from the prior month, also the most in more than four years.”

May 12 – New York Times (Julie Creswell): “The price of tomatoes — tart bursts of flavor in salads and sandwiches — surged nearly 40% in April from a year earlier on a combination of bad weather, high tariffs and climbing transportation costs. Overall, food prices in grocery stores rose 2.9 percent in April from a year earlier and were up 0.7% from March, according to the Consumer Price Index. Fresh fruits and vegetables — perishable items that faced higher shipping and trucking costs as fuel prices surged in the past month — soared 6.5% in April from a year earlier.”

May 10 – Wall Street Journal (Owen Tucker-Smith): “Stefanie Katzman’s celery is starting to feel the pinch of $5.66-a-gallon diesel. Her food-distribution company buys fresh stalks from farmers in California and trucks them nearly 3,000 miles to a maze of chilled warehouses in New York City’s Bronx borough. That journey costs $11,000—46% more than it did last year. Workers at the three-million-square-foot New York market… unload the celery and drive it into the city, paying for even more diesel along the way. By the time the celery sleeve arrives at the corner store, it is around 40 cents pricier than it would be otherwise.”

May 13 – Bloomberg (Will Kubzansky): “US oil refiners are sending more jet fuel overseas than at any time in history as airlines around the world struggle to cope with the Strait of Hormuz closure. Exports of US jet fuel surged to an all-time record last week of 455,000 barrels a day, toppling the previous high touched in early April… Jet fuel prices are surging in Europe and Asia, where airlines and refiners are heavily reliant on steady shipments of oil and other energy cargoes from the Persian Gulf. Prices in Singapore and the EU are up 61% and 59%...”

May 13 – Bloomberg (Dina Katgara): “Lake Tahoe has long been a refuge for Silicon Valley’s tech elite, from Mark Zuckerberg to Larry Ellison. Now the artificial intelligence boom behind much of that wealth is straining the region’s power market, pushing up costs for residents in the lakeside towns below. Energy-hungry data centers across the border in Nevada are adding pressure to the market serving roughly 50,000 electricity customers on the California side of the lake. By the local utility’s own sample-bill calculation, the cost of keeping the lights on at home has surged about 77% since late 2022 — approaching twice the national residential average.”

May 13 – Washington Post (Sarah Kaplan): “When the reservoirs that provide water to Corpus Christi, Texas, dropped to just a tenth of their full capacity, officials knew they needed to take drastic action. Forecasts projected the city, which had entered its fourth year of drought, could run out of water in a matter of months. So the city council approved nearly half a billion dollars to seek out new water sources, including paying a contractor almost 40% more to speed up construction of a nearly $500 million groundwater project for which it didn’t yet have the necessary permits. To fund this 11th-hour spending, residents will likely see their water rates double over the next few years, according to city manager Peter Zanoni — putting Corpus Christi among countless American communities whose water costs are on the rise as the planet warms.”

Federal Reserve Watch:

May 11 – Financial Times (Claire Jones and Lauren Fedor): “Kevin Warsh will be thrust into an ‘impossible’ position when he takes the helm of the Federal Reserve as he battles against the inflation triggered by the Iran war and President Donald Trump’s calls for lower rates, economists warn… The 56-year-old financier will take the helm at a fraught moment for a US central bank divided on how to respond to surging fuel prices, which have pushed its favoured PCE inflation measure to 3.5%. The consumer price index, a separate inflation gauge, jumped to 3.8% in April, its highest level in three years… At the same time, Trump and the president’s top economic officials are relentlessly demanding interest rate cuts, while the Supreme Court is weighing whether to allow the president to sack Fed governor Lisa Cook.”

May 13 – Reuters (Ann Saphir): “Minneapolis Federal Reserve President Neel Kashkari said… the U.S. labor market looks ‘a bit better’ than it did ‌earlier this year, while the Iran war has worsened inflation that already was running too high, views that underscore his preference for leaving the Fed’s door open to possible rate hikes. ‘We are dead serious about getting inflation back down,’ Kashkari said… President Donald Trump says he expects the Fed to ‌cut ⁠rates under Warsh. ‘The chair of the Federal Reserve has a lot of influence. The chair sets the agenda. What are the topics we're going to talk about? What are the types of things that we’re going to ⁠be considering in this deliberation?’ Kashkari said… ‘But when it comes ⁠down to a vote (on interest rates), the chair is one of 12 voters. And so a new chair coming in, whoever the ⁠chair is, whatever the environment is, will have to persuade his or her colleagues that this is the best course of action.’”

U.S. Economic Bubble Watch:

May 14 – Associated Press (Matt Ott): “The number of Americans filing for jobless aid rose last week but remains historically low… U.S. applications for unemployment benefits for the week ending May 9 rose by 12,000 to 211,000… The total number of Americans filing for unemployment benefits for the previous week ending May 2 jumped by 24,000 to 1.78 million, in line with analyst forecasts.”

May 14 – Associated Press (Anne D’Innocenzio): “Shoppers pulled back on spending in April as higher gas prices fueled by the Iran war meant less money left over for some nonessentials like clothing and furniture. Retail sales rose 0.5% in April, a slowdown from the revised growth level of 1.6% in March... March marked the largest one-month increase in retail spending in more than three years, largely because gas prices spiked higher rapidly. Excluding gas sales, retail sales in April were up 0.3%. That’s a slowdown from the 0.7% pace… in March. Elsewhere in some areas, shoppers had tepid spending. Sales at department stores fell 3.2%, while sales at furniture and home furnishings stores slipped 2%. Business at building material and garden equipment had a modest 0.1% increase. But online retailers saw a 1.1% increase and electronics and appliance stores posted a 1.4% sales gain.”

May 11 – Associated Press (Nicholas Riccardi): “For years, younger Americans have been more optimistic about the job market than older Americans, even through the depths of the Great Recession. But in an abrupt shift, a new poll… finds young people’s confidence has plummeted over the past two years — while their elders remain more upbeat. The gap between young and older Americans’ views of the job market now is greater than in any other country among the 141 surveyed, according to the Gallup World Poll. In the United States, 43% of those aged 15-34 believe it’s ‘a good time’ to find a job in the area where they live, well below the 64% of those aged 55 and over who say the same.”

May 11 – CNBC (Diana Olick): “Sales of previously owned homes in April were essentially flat compared with March, rising just 0.2% to 4.02 million units on a seasonally adjusted, annualized basis… April sales were unchanged year over year… Inventory in April rose 5.8% from March, but was up just 1.4% from the previous April to a 4.4-month supply. That is still considered tight, as a six-month supply represents a balanced market between buyer and seller… The median price of a home sold in April was $417,700, up 0.9% from the year before. That is the highest price NAR has recorded for April.”

China Watch:

May 13 – Bloomberg: “By any measure, Tom Hu should be in default on a $730,000 bank loan for his plastics business in China. He barely brings in enough revenue to pay expenses and can’t cover the debt costs… Stories like Hu’s are playing out across China as banks grapple with a growing pile of bad debt. It’s impossible to quantify the true extent of the problem, though most economists say the ratio of bad loans is significantly higher than the 1.5% official rate. One analyst at Absolute Strategy Research in London pegs it at about 10%, which would mean a staggering $3 trillion in loans that should be classified as past due are not. Others say it could be double that amount. While the leniency, largely condoned by regulators in Beijing, has helped maintain financial stability over the past few years, it also means the banking system is recycling capital into unproductive companies rather than spurring real growth in healthy firms.”

May 12 – New York Times (Meaghan Tobin): “When the Chinese start-up DeepSeek released its latest artificial intelligence model last month, it edged Beijing closer to a future that it has spent years trying to build. In a small but meaningful break from American technology, DeepSeek said for the first time that its new model had been optimized to run on chips made by the Chinese tech giant Huawei. This was a milestone in China’s long-running effort to develop advanced technologies at home and reduce its reliance on Western innovation. While most of the world’s leading A.I. systems still rely on semiconductors from the U.S. chip-making giant Nvidia, Chinese A.I. firms are increasingly turning to homegrown alternatives.”

May 11 – Bloomberg: “China’s central bank has warned on the risks of imported inflation from higher oil prices stemming from the war in Iran, offering no hint of preparing to ease policy as it looks to ensure that its interest rates reach the economy. ‘Recent geopolitical events in the Middle East have driven up prices of international crude oil and some commodities, which has contributed to the rebound of China’s price indicators,’ the People’s Bank of China said… ‘But the impact of imported inflation on the domestic economy needs to be closely monitored.’”

May 8 – Associated Press (Chan Ho-Tim): “China’s exports rose 14.1% in April from a year earlier… That beat analysts’ estimates and was a significant improvement from March’s 2.5% year-on-year expansion. Exports to the U.S. rose 11.3% from the year before, up from a 26.5% drop in March. Imports climbed 25.3%, slower than the 27.8% growth in March but still robust.”

May 10 – Wall Street Journal (Jiahui Huang): “China exported more electric vehicles and plug-in vehicles than gasoline or diesel cars for the first time in April… China exported 769,000 automobiles in April, with new-energy vehicles, a term that includes EVs and plug-in hybrids, accounting for 52.7% of total exports… Exports of new-energy vehicles more than doubled to 406,000 units in April…”

May 13 – Bloomberg: “China’s Nasdaq-like ChiNext index climbed to its highest level on record, buoyed by a global artificial intelligence boom that lifted the shares of chipmakers and hardware suppliers along the chain. The gauge rose as much as 2.7% to 4,041.99 points on Wednesday in a late afternoon surge, surpassing its previous record of 4,038 set during the 2015 stock bubble.”

May 10 – Bloomberg: “China’s factory prices grew at the fastest pace since the pandemic four years ago as the fallout from the Iran war sharply raises costs and leaves profits under pressure. Producer prices rose 2.8% in April from a year earlier after an increase of 0.5% in the previous month… That was the fastest since July 2022 and higher than all estimates…”

May 11 – Bloomberg: “China’s central bank has warned on the risks of imported inflation from higher oil prices stemming from the war in Iran, offering no hint of preparing to ease policy as it looks to ensure that its interest rates reach the economy. ‘Recent geopolitical events in the Middle East have driven up prices of international crude oil and some commodities, which has contributed to the rebound of China’s price indicators,’ the People’s Bank of China said… ‘But the impact of imported inflation on the domestic economy needs to be closely monitored.’”

May 12 – Bloomberg: “At Asia’s biggest metal industry gathering last week, a single word dominated almost every conversation — fapiao, China’s humble tax receipt. At their most basic, these official forms — printed and distributed by the government, and vital for closing payments — offer proof of purchase and ensure tax compliance. Crucially, they can also be used to secure financing, meaning these slips also grease the trade that keeps metals and other commodities flowing around the world’s largest consumer. Now Beijing is pulling apart the so-called ‘invoice economy’ in order to crack down on fraudulent trades…, blurring the line between real demand and financial engineering. Traders say that not every business will survive the strain of a halt that is already paralyzing parts of the copper trade.”

Central Banker Watch:

May 12 – Reuters (Balazs Koranyi): “European Central Bank interest rate hikes are becoming increasingly likely, unless there is a fundamental change in the inflation outlook, Bundesbank President Joachim Nagel told… Handelsblatt. The ECB debated a ‌rate hike already last month and signalled that a move in June was likely since high energy prices have already pushed inflation well above its target and it was only a matter of time before this increase starts to generate second-round impacts, perpetuating rapid price growth. ‘We cannot ⁠ignore high energy prices,’ Nagel was quoted as saying… ‘Interest rate hikes are becoming more and more likely if the inflation picture does not fundamentally change.’ ‘We’re no longer in the baseline scenario of the (ECB's)projections and are moving towards the adverse scenario,’ he said.”

May 13 – Bloomberg (Jan Bratanic, Ott Tammik, and Slav Okov): “European Central Bank Governing Council member Olli Rehn warned that data are starting point to stagflation… ‘The first signs were already visible in the statistics, when growth in the euro area in the first quarter was only slightly positive and inflation accelerated to 3%,’ the Finnish central-bank chief said… While stressing that the current shock is ‘not quite as big’ as the last spike in prices in 2022, he said events have shifted away from the ECB’s baseline outlook and closer to a ‘less favorable scenario, at least for oil prices.’”

May 14 – Bloomberg (Irina Anghel): “The Bank of England should raise interest rates to fight off strong inflation spillovers from the Iran energy shock, according to its chief economist who set out his case for active policy in an unpredictable world. Huw Pill, one of the most hawkish voices on the BOE’s Monetary Policy Committee, warned that uncertainty around when the conflict will end and how it will impact the UK economy is not a reason for inaction.”

May 11 – Bloomberg: “Global central banks’ use of the People’s Bank of China’s swap lines reached a two‑year high in the first quarter, underscoring rising international demand for the Chinese currency. By the end of March, central banks worldwide had drawn a total of 111.6 billion yuan ($16.4bn) from the PBOC’s foreign‑exchange swap lines, the highest level since March 2024…The 17.4 billion yuan increase from the previous three-month period marked the steepest quarter‑on‑quarter rise since 2023… China’s swap line is a key tool for supplying yuan to the global financial system…”

Europe Watch:

May 12 – Associated Press (Brian Melley and Pan Pylas): “U.K. Prime Minister Keir Starmer insisted… he has no intention of resigning as calls grew louder within his Labour Party for him to step down and some junior members of his government quit in protest. A day before the state opening of Parliament…, Starmer tried to shore up support within his Cabinet. Starmer’s future has become a hot topic over the past few feverish days following historic losses for the Labour Party in local elections last week, which if repeated in a national election that has to be held by 2029, would see it overwhelmingly ejected from power.”

May 8 – Wall Street Journal (Bertrand Benoit, David Luhnow, and Noemie Bisserbe): “Across Europe, voters are fed up and taking it out on their leaders. This week, Britain’s ruling Labour Party had its worst result ever in local elections… Last month, Europe’s longest-serving leader, Hungary’s Viktor Orban, was swept out of office by a wave of discontent over the sluggish economy and a government that many saw as corrupt… In Germany, a left-right government that is breaking public spending records is also plumbing uncharted popularity lows… ‘We see revolutionary changes in geopolitics, technology, AI, social coherence, and we see political systems that are struggling to keep up and manage these changes,’ said Norbert Röttgen, a veteran German conservative lawmaker. ‘Then there is a growing sense that if you’re part of an elite, you can insulate yourself from these changes, and if you’re not, you can’t.’”

May 13 – UK Telegraph (Hans van Leeuwen): “France’s unemployment rate has jumped to its highest level in five years… The unemployment rate hit 8.1% in the first quarter of the year, marking the highest level since the pandemic in 2021 and pushing the number of jobless people in the country to 2.6 million. The outbreak of war in the Middle East has sapped growth from an already sluggish French economy, which flatlined in the first three months of the year.”

Japan Watch:

May 13 – Bloomberg (Toru Fujioka): “A Bank of Japan board member called for interest rates to be increased as soon as possible provided there is no indication of the economy running into trouble, citing more enduring inflationary risks from the war in Iran. ‘If statistical data do not indicate clear signs of an economic downturn, I believe it is desirable to raise the policy rate at the earliest stage possible,’ Kazuyuki Masu said…”

Emerging Market Watch:

May 13 – Bloomberg (Charlotte Yang and Sangmi Cha): “In South Korea’s $4.6 trillion stock market, signs of euphoria are popping up everywhere. Enthralled by a 200% surge over the past year…, locals are borrowing record sums to amplify their bets on stocks. Trading volumes have soared to all-time highs, while daily price swings of 5% or more have become more common — making the benchmark Kospi index the most volatile major stock gauge worldwide. The sense of FOMO spreading through offices, lunchrooms and family gatherings across South Korea has gotten so intense that investors are increasingly buying stocks for their kids, too: Data compiled by Toss Securities show a near 10-fold surge in new account openings for under-18s in the first quarter versus a year earlier. ‘The mood in the retail community is very hot, nearly maniacal,’ said Jang Eunjung, 37, a Seoul-based video producer whose YouTube show on stock investing grew from a tiny audience to more than 1.3 million subscribers... ‘Will we ever see such a vertical rally again?’”

May 12 – Bloomberg (Shinhye Kang, Yoolim Lee and Youkyung Lee): “A top South Korean policymaker said the nation should pay citizens a ‘dividend’ using taxes on AI profits, underscoring growing pressure to redistribute gains from a boom that’s enriched chipmakers like Samsung Electronics Co. and SK Hynix Inc. The comments in a Facebook post by presidential policy chief Kim Yong-beom fueled sharp swings in Korean stocks on Tuesday as investors struggled to parse the scope of the proposals.”

May 10 – Wall Street Journal (Kimberley Kao): “India’s prime minister has urged locals to stop buying gold for a year, an appeal aimed at defending the country’s foreign-exchange reserves as geopolitical headwinds keep buffeting the rupee. Prime Minister Narendra Modi asked citizens… to avoid buying gold jewelry for functions, coming as the country’s appetite for the precious metal continues to drive foreign-currency spending. India is one of the world’s largest consumers of gold, which is culturally significant and prized as an investment asset.”

Leveraged Speculation Watch:

May 14 – Wall Street Journal (Peter Rudegeair): “The hedge-fund herd was early to see opportunity in the stocks of chip makers and other artificial-intelligence hardware companies. Those bets just delivered stock-picking funds their best month in over two decades. Steve Cohen’s Point72, Whale Rock Capital Management and Seligman Investments are among the hedge-fund firms that posted strong returns in April thanks in part to rallies in semiconductor stocks and those of related equipment makers. That helped make April the best month for stock-picking funds since December 1999, according to… PivotalPath, with a gain of 6.5%. For PivotalPath’s index of tech-focused funds, April’s 10.3% gain was the best month since its data series began 28 years ago.”

May 10 – Financial Times (Robin Wigglesworth): “In case you missed it, Jane Street on Friday told its lenders that it notched up a new record trading haul in the first three months of the year — a cool $16.1bn of net trading revenues and net income of $10.3bn. That’s a lot. Naturally, this has stirred plenty of envy. Some rival trading firms have long argued that it’s unfair to compare Jane Street’s results to theirs, given Jane Street’s willingness and ability to make a lot of outright ‘proprietary’ bets. Even some embarrassed bank trading heads would probably say the same. And they’re not wrong. Despite calling itself ‘a quantitative trading firm and liquidity provider with a unique focus on technology and collaborative problem solving’, Jane Street can probably more fairly be compared to hedge funds.”

Social, Political, Environmental, Cybersecurity Instability Watch:

May 12 – Axios (Jim VandeHei and Mike Allen): “Las Vegas has long been known as Sin City for its 24/7 access to all kinds of indecencies. America is quickly becoming Sin Nation. Or, as President Trump put it while discussing prediction markets in the Oval Office last month: ‘The whole world, unfortunately, has become somewhat of a casino.’ Once-forbidden vices — weed, gambling and porn — are no longer confined to back alleys or the desert. They’re ubiquitous, digital and spreading at a pace that has outstripped the country’s social and regulatory guardrails. Governments didn’t turn a blind eye to most of this behavior. They encouraged it. We’re scaling sin in real time. This shift in American governance, both at the national and local levels, didn’t play out all at once — or get kick-started by a singular moment. It happened in a thousand small ones, one app launch and regulatory retreat at a time. New York Times columnist Ross Douthat made sense of our ‘more immoral society’ this way: ‘As our laws have become less moralistic and more libertarian, addictive behaviors have increased.’ Substacker Derek Thompson points out that in a 2023 Wall Street Journal poll, Americans said patriotism, religion, having children and community all mattered less to them than in years prior. The only metric that mattered more? Money.”

May 11 – Bloomberg (Margi Murphy): “Security researchers at Alphabet Inc.’s Google said they believe a cybercrime group used artificial intelligence to create a hacking tool that can bypass defenses in a widely-used tool to administer computer systems. The scheme, which was foiled when Google alerted the tool developer, would mark the first time that Google’s Threat Intelligence Group caught a hacker using an AI-generated ‘zero-day’ in such a way… Zero-day vulnerabilities are flaws unknown to the developer, leaving defenders no time to patch before they can be exploited. Google said it has ‘high confidence’ that AI was used to help discover and weaponize the exploit.”

May 8 – Financial Times (Eva Xiao): “More wildfires have burned across the US in 2026 than in any year of the past decade, driven by persistent drought conditions ahead of what scientists warn could be an exceptionally hot summer. An area four times the size of New York City, or about 1.9mn acres, has been razed by the fires, the latest data from the National Interagency Fire Center shows. This is about 80% more than the 10-year average and the most in the year to date since 2017.”

May 14 – Bloomberg (Brian K Sullivan): “The odds are rising that a weather-roiling El Niño will emerge in the next few months and strengthen through the year, threatening global crop supplies, altering storm patterns and pushing temperatures toward record highs. There is an 82% chance El Niño will develop in the equatorial Pacific between May and July, and a 67% chance it will be either a strong or very strong event when it peaks between November to January, the US Climate Prediction Center said… ‘El Niño could likely be declared in the next two months,’ said Nathaniel Johnson, a meteorologist with the US Geophysical Fluid Dynamics Laboratory... In addition to disrupting weather patterns globally, ‘it increases the chance that we will see a record-breaking global average temperature.’”

May 11 – Bloomberg (Joe Wertz): “Record-breaking heat and drought have fueled the world’s worst ever start to a wildfire year, as climate change and a developing El Niño threaten to push extreme weather to new heights. Over the first four months of this year, more than 579,150 square miles was burned, according to satellite estimates from the Global Wildfire Information System. That’s an area nearly the size of Alaska and roughly double the seasonal average for this period. ‘This rapid start, in combination with the forecast El Niño means that we’re looking at a particularly severe year,’ said Theodore Keeping, an extreme weather and climate researcher at Imperial College London.”

May 11 – Reuters (David Stanway): “Climate change has driven record-breaking outbreaks of fire in Africa, Asia and elsewhere this year, with conditions expected to get worse as ‌the northern hemisphere's summer approaches and El Nino weather patterns kick in, scientists warned... Fires from January to April have already caused unprecedented levels of damage, burning more than 370.66 million acres of land, 20% more than the previous record, according to data compiled by World Weather Attribution…”