Folks in the future will undoubtedly find this period confounding. It’s a fundamental Credit Bubble principle that things get crazy at the end of cycles. Super cycles ensure Super Crazy. And there’s the theme for 2026 in play: “Expect the Unbelievable.”
Maybe the war is ending soon. And, then again, maybe it’s not. Either way, it is a reasonable assumption that normality returning to the Gulf will be a begrudgingly rocky process. December 2027 crude futures closed the week at $72.40, up 25% from the start of the year. While retreating 1.3% this week, the Goldman Sachs Commodity Index has gained 26.2% y-t-d.
The S&P500 has now rallied 17% from March 30th lows, a relatively feeble rally compared to melt-up dynamics, which have taken hold in key indices and markets. That Nasdaq100 has surged almost 28% from March lows, while the MAG7 has jumped 27%. The Semiconductors’ 66% melt-up rally places 2026 gains at a blistering 65%. While lagging tech, the small cap Russell 2000’s 20% rally pushed y-t-d gains to 15.2%. The Goldman Sachs most short index rallied as much as 31%, with 2026 gains ending the week at 26.3%.
Gulf and energy market instability is a major risk throughout Asia. No worries. Apparently, no risk matters much so long as the AI arms race continues unimpeded. South Korea’s (semiconductor and tech heavy) KOSPI Index has rallied 49% from March 30th lows. The KOSPI surged 13.6% this week, inflating y-t-d gains to 77.9%. But that’s less than five months. The KOSPI boasts a one-year return of 195%. The Taiwan TWSE Index’s 6.9% gain pushed 2026 returns to 44.0%. In China, the CSI 300 IT and ChiNext indices enjoyed weekly gains of 7.2% and 5.5%.
Money Market Fund Assets (MMFA) surged $122 billion last week, the largest weekly gain since December 3rd ($132bn – the biggest increase since Covid April 2020). Conventional analysis has traditionally associated rapid growth in money fund assets with equities market risk aversion. An analytical framework overhaul is long overdue.
Not coincidently, the early December MMFA surge also occurred in a “risk on” squeeze environment. November had been a dicey period for equities, especially in the tech sector. From November 3rd highs to November 21st lows, the Semiconductor and MAG7 indexes reversed 16% and 9% lower. Market concerns were alleviated by a strong forecast from Nvidia.
A sharp market reversal saw the VIX drop from a November 20th high of 28.27 to a November 28th 15.78 close. A peppy short squeeze erupted, with the Goldman Sachs Most Short Index surging 18.6% from November 21st lows to the November 28th close. The abrupt return of “risk on” saw high yield CDS reverse sharply lower - from 353 to 322 bps. Curiously, the bond volatility MOVE Index sank from 84.3 on the 19th to a November 28th close of 68.95. Strong moves in dollar swap spreads also suggested a sharp uptick in leveraged speculation.
With roots back to classical economists such as David Ricardo and John Stuart Mill, “crowding out” theorizing enjoyed its heyday during the eighties and the Reagan big deficit spending era. It only seems reasonable that excessive government borrowing and spending would come at the expense of private sector investment and activity.
Well, deficit spending will (again) approach $2 TN this year. However, these days no one (other than perhaps Apollo’s Torsten Sløk) has a care in the world that massive government borrowing could impede the multi-trillion AI buildout.
The complete breakdown of the relationship between borrowing demands and the price of finance is fundamental to Credit Bubble analysis. After all, functioning market pricing and adjustment mechanisms are essential for Credit and monetary stability. At least traditionally, rising financing costs helped cool overheated borrowing. This market dynamic is indispensable to sound capitalistic systems, both from financial and economic stability perspectives.
Long time in the making, the breakdown of the relationship between borrowing demands and the price of finance accelerated in the nineties. The rapid expansion of non-bank finance was key, most notably the proliferation of leveraged speculation and concurrent rapid expansion of “repo” finance, money market fund intermediation, and the GSEs. In a historic yet unappreciated development, the supply of available finance essentially became unlimited.
It’s nothing short of late-super cycle crazy. Unbelievable, and only more unbelievable that it unfolds with nary a peep from Fed officials or the economic community. In a number I tabulate weekly, MMFA have inflated $3.165 TN, or 69%, since the week of October 26, 2022. This historic monetary inflation has corresponded with an extraordinary ($3TN plus) expansion of “repo” finance and hedge fund leveraged speculation.
Many important things were thrown out the window when the Fed and global central bank community adopted QE – especially the open-ended “whatever it takes” variety. With the Fed ready to aggressively buy (monetize) Treasuries to quash any nascent bout of (much needed) market adjustment, this extraordinary market liquidity backstop incentivized the leveraged speculating community’s accumulation of highly levered Treasury holdings. This effectively quashed any hope that market discipline would impose some fiscal restraint on Washington.
And you can’t overstate the monumental significance of this financial and policy evolution. Persistent massive federal deficit spending promotes ongoing economic expansion and a semblance of stability and resilience. Even the massive $6 TN two-year Covid deficits were financed at the most marginal interest rates. There is seemingly no crisis not resolvable through the trifecta of deficit spending, Fed monetization, and hedge fund leveraging. Moreover, the greater the degree of Bubble excess, the more confidence the leveraged speculating community gains in fiscal and monetary policy backstops.
We’ve reached the point in the speculative cycle where massive fiscal deficits only stoke general excess. Paradoxically, extreme borrowing demands foster loose conditions, as hedge funds and others finance levered Treasury (and other) holdings in the “repo” marketplace (intermediated through the money fund complex).
Two key dynamics sustain general Bubble excess. First, massive deficit spending supports incomes, spending, corporate profits, and asset prices. Second, extraordinary liquidity expansion sustains loose financial conditions, household and corporate borrowings, financial speculation and leveraging, and inflated market Bubbles generally. Importantly, similar “global government finance Bubble” dynamics flourish around the globe, promoting historically unique loose financial conditions internationally. What could upset the applecart?
May 5 – Axios (Madison Mills): “The biggest tech companies are set to spend $1 trillion on AI by next year…, a bill so big that it’s propping up both the stock market and economy. Our financial system is now load-bearing on AI spending that may never pay off, and most investors can't even see what the full tab is. The biggest tech firms are on track to spend $700 billion on their AI ambitions this year, double their 2025 spending, according to Goldman Sachs. That could swell to over $1 trillion next year… AI costs went up, not down, for four of the Big Tech companies that reported earnings last week, according to Bank of America. As their cash flows erode, these companies argue they have to keep spending to stay ahead in the AI race.”
Even with the week’s 6.4% retreat in crude prices, 10-year Treasury yields only mustered a two bps decline (to 4.35%). Two-year yields added a basis point to 3.88% - having surged 50 bps since the February 27th close.
Overheating risks are high and rising. April Non-Farm Payrolls were reported at a stronger-than-expected 115k, with a 123k gain in Private Payrolls (March revised 8k higher to 185k). The Unemployment Rate was unchanged at 4.3%. ADP reported April job gains of 109k, up from March’s 61k. Job Openings (JOLTS) of 6.866 million remain elevated on a historical basis. At 200k, weekly unemployment claims continue to signal labor market firmness. And after four months of the year, Challenger job cuts are 10% below comparable 2025.
One of my favorite economic indicators, the ISM Services Index, slipped marginally in April to a still robust 53.6, with 14 industries reporting expansion versus only three in contraction. The ISM Services Prices Paid component was unchanged at 70.7, matching the high back to October 2022.
At 3.64%, New York Fed Inflation Expectations was reported at the highest level since September 2023. Surely boosted by high gas prices, Consumer Credit popped in April to $24.9 billion (est. $13.7bn), the strongest gain since November 2022. Stronger-than-expected: March Factory Orders (up 1.5% vs. 0.6% forecast) and March New Home Sales (682k vs. 652k).
After trading up to 335 bps to end March, high yield spreads are back down to 266 bps – below the February 27th pre-war level (291bps) and unchanged from the start of the year. At 77 bps, investment-grade spreads are also below pre-war levels. The VIX and MOVE volatility indices have both retreated to pre-war levels. In short, financial conditions have loosened meaningfully.
At this point, it’s only a matter of how much of an inflationary spike is in the offing. Much depends on how long traffic through the Strait of Hormuz remains impeded. This creates an especially precarious backdrop for loose conditions, market speculative melt-ups, and general overheating. Throw in massive deficit spending (for as far as the eye can see), and this is clearly a risky juncture for highly levered U.S. and global bond markets. What’s more, there’s rapidly escalating borrowing requirements to finance the historic AI arms race. Cracks are developing in global bond land.
May 5 – Bloomberg (James Hirai and Georgia Hall): “UK long-term borrowing costs jumped to a 28-year high as worries intensified over local government elections and the impact of soaring energy prices on the economy. The yield on 30-year gilts surged as much as 13 bps to 5.78%, the highest since 1998. The selloff swept across bonds of all maturities, with 10-year notes topping 5.10%... While bond investors around the world have signaled their discontent with faster inflation and potentially higher interest rates, the UK stands out as the most extreme example. The combination of Britain’s messy political landscape, with unpopular Prime Minister Keir Starmer likely to face a leadership challenge, feeble economy and strained government finances have made it a target for traders looking for a weak link.”
May 7 – Financial Times (Ryan McMorrow, Rafe Rosner-Uddin, Stephen Morris and Hannah Murphy): “Big Tech’s record $725bn AI investment strategy is beginning to strain the resources of America’s largest companies, leaving them with less cash left over this year than at any point in the past decade. The combined free cash flow of the four ‘hyperscalers’ — Amazon, Alphabet, Microsoft and Meta — is expected to fall to roughly $4bn in the third quarter, according to Wall Street’s forecasts, down from an average of $45bn in each quarter since the Covid-19 pandemic six years ago. Their full-year free cash flow is set to hit the lowest level since 2014, when their revenues were about a seventh of their current size, according to analysts’ estimates compiled by Visible Alpha. It is a striking turn for companies that have rapidly transformed from relatively asset-light cash generators into some of the world’s biggest investors in physical infrastructure.”
May 6 – Reuters (Karin Strohecker): “Investors are showing signs of diversifying away from U.S. Treasuries as global debt levels hit a record of nearly $353 trillion by end-March, a report by the Institute of International Finance… found. IIF’s quarterly Global Debt Monitor said that strengthening international demand for Japanese and European government bonds contrasted with broadly stable demand for U.S. Treasuries since the start of the year. ‘This highlights that there are some efforts by international investors diversifying away from U.S. Treasuries,’ Emre Tiftik, director at the IIF for Global Markets and Policy said… Washington’s borrowing push was one of the main drivers for global debt to rise by over $4.4 trillion in the first quarter, the fastest increase since mid‑2025 and the fifth straight quarterly increase... Tiftik said the rise in U.S. debt had been largely driven by government borrowing.”
And let’s not forget the festering private Credit and high-risk lending problem.
May 6 – Bloomberg (Silla Brush): “DoubleLine Capital Chief Executive Officer Jeffrey Gundlach raised pointed questions about financial advisers and other intermediaries who ushered individual investors into private credit and other so-called semi-liquid funds, suggesting they’ve been motivated by high fees as much as by their clients’ interests. ‘It’s clear that prospectuses talked about the gating mechanism, but I have a feeling that the financial intermediaries, not all of them of course, but enough of them, didn’t explain,’ he said… The products have been ‘kept opaque and not granularly described,’ he said. ‘That’s why everybody wants their money back: They’re starting to realize they might be the bag-holder.’ Gundlach took issue specifically with private credit firms calling their funds ‘semi-liquid’ in nature. ‘Semi-liquid is kind of a diabolical name,’ Gundlach said. ‘Half the time it’s liquid. It’s liquid when you don’t want your money, and it’s illiquid when you do want your money.’”
Jeffrey Gundlach provided an extensive interview Thursday afternoon on Bloomberg Television, where he offered an interesting take on private Credit, while comparing it to 2007 and the subprime mortgage debacle.
Gundlach: “I’ve used the analogy of the wild west. This is what I think really explains it in simple terms. You have this nice town – it’s 1840. Out on the frontier, you have this little town. Mostly farmers living off the land. And they’re all God-fearing people. There’s a sheriff there who has a heart of gold. He’s like Gary Cooper in High Noon. And there’s little crime. Every now and then there’ll be a murder of passion. No one even locks their doors. You don’t have to worry about it. But then something happens. There’s a discovery of gold three miles away. And all the sudden all the fast-buck artists, the con men, rapscallions – they come flooding in. Not everybody is a rapscallion. But a sufficient fraction of them are rapscallions. And they’re coming in there to hit it big and then get out. Suddenly there’s murders – you have to lock your door. You have to barricade your door. The sheriff is completely overwhelmed.”
Bloomberg’s Romaine Bostick: “Who’s going to clean it up this time? Who's going to be the Gary Cooper?”
Gundlach: “The market will be the Gary Cooper. The market inflicts the pain…”
Gundlach also spoke cautiously on the Treasury market, suggesting possible draconian measures that might be necessary as deficits spiral out of control. Years of excessively loose conditions and government backstops ensured high-risk lending market infestation with fast-buck artists, con men, and rapscallions. I ponder how much leverage the rapscallions accumulated; in what markets; and to what degree, over many Bubble years, they crowded out the prudent and responsible. We can only hope easy-money rapscallion proliferation has not been as systemic as I suspect.
For the Week:
The S&P500 rose 2.3% (up 8.1% y-t-d), and the Dow added 0.2% (up 3.2%). The Utilities sank 3.9% (up 5.7%). The Banks fell 1.9% (up 1.0%), while the Broker/Dealers gained 1.6% (up 6.8%). The Transports retreated 1.9% (up 16.4%). The S&P 400 Midcaps gained 1.6% (up 11.9%), and the small cap Russell 2000 rose 1.7% (up 15.3%). The Nasdaq100 jumped 5.5% (up 15.8%). The Semiconductors surged 11.1% (up 66.2%). The Biotechs advanced 1.9% (up 1.8%). With bullion recovering $101, the HUI gold index rallied 8.3% (up 14.4%).
Three-month Treasury bill rates ended the week at 3.5941%. Two-year government yields added a basis point to 3.88% (up 41bps y-t-d). Five-year T-note yields slipped a basis point to 4.00% (up 28bps). Ten-year Treasury yields dipped two bps to 4.35% (up 19bps). Long bond yields declined three bps to 4.94% (up 9bps). Benchmark Fannie Mae MBS yields dipped three bps to 5.30% (up 25bps).
Italian 10-year yields dropped 13 bps to 3.73% (up 18bps y-t-d). Greek 10-year yields fell 12 bps to 3.68% (up 24bps). Spain's 10-year yields declined eight bps to 3.36% (up 21bps). German bund yields slipped three bps to 3.01% (up 15bps). French yields fell seven bps to 3.62% (up 6bps). The French to German 10-year bond spread narrowed about five to 61 bps. U.K. 10-year gilt yields declined five bps to 4.91% (up 43bps). U.K.’s FTSE equities index declined 1.3% (up 2.9% y-t-d).
Japan’s Nikkei 225 Equities Index jumped 5.4% (up 24.6% y-t-d). Japan’s 10-year “JGB” yields declined three bps to 2.48% (up 42bps y-t-d). France’s CAC40 was little changed (down 0.5%). The German DAX equities index increased 0.2% (down 0.6%). Spain’s IBEX 35 equities index added 0.6% (up 3.4%). Italy’s FTSE MIB index rose 2.2% (up 9.7%). EM equities were mixed. Brazil’s Bovespa index fell 1.7% (up 14.3%), while Mexico’s Bolsa index jumped 3.0% (up 8.6%). South Korea’s Kospi surged 13.6% (up 77.9%). India’s Sensex equities index increased 0.5% (down 9.3%). China’s Shanghai Exchange Index advanced 1.6% (up 5.3%). Turkey’s Borsa Istanbul National 100 index jumped 4.3% (up 33.8%).
Federal Reserve Credit slipped $1.9 billion last week to $6.655 TN, with a 21-week expansion of $164 billion. Fed Credit was down $2.235 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.928 TN, or 79%. Fed Credit inflated $3.844 TN, or 137%, since November 7, 2012 (704 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt rose $10.6 billion last week to $3.029 TN - recovering somewhat from the low back to October 2010. “Custody holdings” were down $239 billion y-o-y, or 7.3%.
Total money market fund assets (MMFA) surged $122 billion last week to $7.749 TN. MMFA were up $803 billion, or 11.6%, y-o-y - having ballooned a historic $3.165 TN, or 69%, since October 26, 2022.
Total Commercial Paper increased $7.3 billion to $1.430 TN. CP gained $28 billion, or 2.0%, y-o-y.
Freddie Mac 30-year fixed mortgage rates rose seven bps to 6.37% (down 39bps y-o-y). Fifteen-year rates gained eight bps to 5.72% (down 17bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate up five bps to 6.56% (down 36bps).
Currency Watch:
For the week, the U.S. Dollar Index slipped 0.3% to 97.90 (down 0.4% y-t-d). On the upside, the South African rand increased 1.7%, the Mexican peso 1.6%, the Brazilian real 1.4%, the New Zealand dollar 1.2%, the Norwegian krone 0.9%, the South Korean won 1.0%, the Swiss franc 0.7%, the Australian dollar 0.6%, the euro 0.6%, the Singapore dollar 0.4%, the British pound 0.4%, and the Japanese yen 0.2%. On the downside, the Canadian dollar declined 0.6%. China's (onshore) renminbi increased 0.41% versus the dollar (up 2.76% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index declined 1.3% (up 26.2% y-t-d). Spot Gold rallied 2.2% to $4,715 (up 9.2%). Silver jumped 6.6% to $80.3389 (up 12.1%). WTI Crude retreated $6.52, or 6.4%, to $95.42 (up 66%). Gasoline dipped 1.9% (up 106%), and Natural Gas declined 0.8% to $2.757 (down 25%). Copper surged 5.2% (up 11%). Wheat fell 2.7% (up 20%), and Corn lost 2.6% (up 4%). Bitcoin jumped $2,020, or 2.6%, to $80,160 (down 8.5%).
Market Instability Watch:
May 6 – Bloomberg (Carter Johnson and Zijia Song): “Foreign investors are showing signs of diversifying away from US Treasuries as debt levels mount, according to the financial industry’s global trade group. Net purchases of US government debt by foreign investors have been stable this year, while Japanese and European sovereign debt have seen increased accumulation by foreigners, according to… the Institute of International Finance. The association represents about 400 banks, insurers and asset managers. ‘Recent market developments point to early signs of portfolio diversification, particularly in cross-border investments in government securities,’ a team at the IIF including Emre Tiftik and Khadija Mahmood wrote. ‘These trends partly reflect diverging debt trajectories’ as the US debt-to-GDP ratio is expected to continue rising while those in Europe and Japan are on a more moderate path, they added.”
May 5 – Financial Times (Ian Smith, Emily Herbert and Sam Fleming): “The UK’s long-term borrowing costs climbed to their highest level since 1998 on Tuesday... Thirty-year gilt yields rose as much as 0.14 percentage points to 5.79%, their highest level in almost three decades, before dipping slightly to 5.74%. The yield on the 10-year gilt climbed as much as 0.15 percentage points to 5.11%, close to the 18-year high of 5.12% hit earlier in the Iran war.”
May 7 – Bloomberg (Toru Fujioka): “Japanese authorities likely used another $30 billion intervening in the currency market just days after an earlier round of action…, in the latest indication of their resolve to support the yen… Authorities earlier spent an estimated ¥3.86 trillion ($24.7bn) supporting the yen on April 30…”
May 5 – Bloomberg (Grace Sihombing): “Indonesia’s central bank intervened in the foreign-exchange markets as the rupiah set a new record low. Bank Indonesia intervened through offshore and domestic non-deliverable forwards, spot transactions and government bonds in the secondary market… Investors are dumping assets of nations which are most impacted by the surge in oil prices following the Iran war, with the Indian rupee also falling to a new record low. The Philippine peso also weakened and is very close to an all-time low.”
U.S. Credit Trouble Watch:
May 7 – Bloomberg (Silla Brush): “BlackRock Inc. cut the value of its publicly-traded private credit fund by about 5%, as it struggled under the weight of troubled loans, markdowns and lower returns. BlackRock TCP Capital Corp., a publicly traded middle-market lending fund, said markdowns totaled $35 million in the quarter ended March 31…”
May 6 – Bloomberg (Aaron Weinman): “A private credit fund overseen by Apollo Global Management Inc. reported a quarterly loss, citing declining valuations amid market volatility and weakness in some specific deals. MidCap Financial Investment Corp., a business development company focused on direct lending, reported a net loss per share of 30 cents, compared to a 32 cent gain for the same period a year ago… Net asset value per share fell to $13.82 compared to $14.18 at the end of December, missing analyst expectations.”
May 6 – Bloomberg (Olivia Fishlow): “Two private credit funds managed by Blue Owl Capital Inc. bought back $85 million of shares as volatility in technology markets and a selloff in publicly traded loans brought down their value. The firm cut the value of its $14.1 billion technology-focused business development fund by about 5% to $16.49 a share in the three months ended March 31… Blue Owl co-president Craig Packer said underlying credit trends remained sound for both funds. ‘We continue to see solid credit performance across our portfolio of durable, mission-critical businesses with many already taking steps to adapt to the evolving AI environment,’ Packer said…”
May 6 – Financial Times (Martin Arnold): “Private credit’s opacity, high levels of debt and rising default rates are creating vulnerabilities that risk amplifying stress in the event of a crisis, the global financial stability watchdog warned. The rising participation of retail investors and growing interconnections between the fast-growing market and mainstream finance added to the threat, the Financial Stability Board said in a report, with the $2tn industry ‘untested’ in a deep economic downturn. Although banks’ direct lending to private credit funds was ‘relatively small’ at less than 0.5% of their total assets, the watchdog warned a ‘web of interlinkages may create challenges for banks in effectively managing their direct and indirect risks’.”
May 6 – Financial Times (Ortenca Aliaj): “The collapse of Market Financial Solutions amid fraud allegations in February ensnared some of the largest lenders on Wall Street. But one big bank with exposure to the UK mortgage provider had until Tuesday avoided the limelight: HSBC. The $400mn ‘fraud-related’ charge HSBC disclosed in its quarterly earnings this week marked it out as one of the lenders hardest hit by MFS’s collapse… Unlike banks such as Barclays, Santander and Jefferies, HSBC was able to maintain that it had not lent directly to MFS — and to keep its large exposure under wraps. Instead, HSBC’s ties stemmed from so-called back-leverage to a private credit unit of Apollo Global Management that was formerly part of Credit Suisse. HSBC’s disclosure casts a spotlight on one of the key drivers of the private credit boom: bank debt.”
May 4 – Bloomberg (Lydia Beyoud): “Securities and Exchange Commission Chairman Paul Atkins said the agency is investigating allegations of fraud in private credit firms, though he declined to say specifically which companies are under scrutiny. Atkins spoke… at the Milken Institute Global Conference, noting the SEC was monitoring the private credit space alongside the US Treasury Department and the Federal Reserve. ‘We are taking it seriously, we are monitoring the situation,’ Atkins said… ‘There’s been allegations of fraud and obviously I can’t talk about any specific cases, but we are investigating that as well.’”
May 6 – CNBC (Hugh Son): “Apollo Global Management CEO Marc Rowan… warned investors that he is preparing his giant asset management firm for a potential market downturn and sharply criticized what he called the ‘egregious’ practices of some rival insurers. The current solid economic backdrop — which helped Apollo report a banner quarter, in which the firm reached $1 trillion in assets under management… — is masking a growing risk of what he called ‘out of the box’ shocks… A convergence of forces could destabilize markets…, including a ‘total geopolitical reset,’ policies that could prove inflationary by restricting labor and trade, and the sweeping artificial intelligence cycle reshaping jobs and economic growth. ‘Almost everything we’re doing, whether intentional or not, has the potential to be inflationary,’ Rowan said…”
May 4 – Bloomberg (Davide Scigliuzzo and Paula Seligson): “Strategic Value Partners founder Victor Khosla expects years of elevated defaults in credit markets and is preparing to take advantage of opportunities created by greater dispersion among private credit managers. ‘So far it’s been if you just said direct lending, you were raising money,’ Khosla said… Khosla said he expects the pain among software companies to spill over to other areas of the credit markets. While SVP isn’t focused on snapping up such companies roiled by AI risk, he does envision opportunities to offer capital to highly levered companies in other industries that will need to restructure their balance sheets. ‘Software will get troubled,’ he said. ‘It’ll taint everything.’”
Global Credit Watch:
May 5 – Bloomberg (Ronan Martin, Chunzi Xu and Davide Barbuscia): “Alphabet Inc. needs to borrow heavily to fund investments in artificial intelligence, and it’s increasingly tapping every market to do so. The parent of Google Inc. sold its biggest-ever euro-denominated bonds and and its first Canadian dollar notes, raising almost $17 billion. That comes just a few months after the company issued sterling, and Swiss franc-denominated notes — its debut offerings in the currencies — around the same time as a US dollar debt sale. ‘The dollar market is becoming crowded, so there’s an incentive to take these deals outside the US,” said Karl Schamotta, chief market strategist at Corpay. ‘The global investor base is expressing a lot of demand for exposure to AI in the US.’”
May 6 – Bloomberg (Ronan Martin and Abraham Gonzalez): “Companies flooded Europe’s bond market at a record pace… Both investment-grade and junk-rated firms joined the frenzy, and in total 17 corporate borrowers offered 24 tranches — each a record… ‘Credit spreads remain near historic tights given the rate environment,’ said James Cunniffe, HSBC Holdings Plc’s head of corporate and structured debt capital markets syndicate for Europe. ‘Investors are well positioned to take down anticipated supply, with May being one of the busiest months of the year.’”
May 7 – Bloomberg (Srinivasan Sivabalan): “Global investors are favoring junk-rated bonds over investment-grade debt in emerging markets by the widest margin in eight years, as the winding down of the Iran war revives the hunt for yield. A rally in bonds triggered by the ceasefire has compressed the risk premium on emerging-market high-yield debt over US Treasuries faster than the equivalent spread for investment-grade sovereigns. That has narrowed the gap between the two spreads to 311 bps, the tightest since May 2018…”
May 5 – Bloomberg (Aashna Shah): “Investors are piling into municipal bonds at the fastest rate in five years, drawn by attractive yields and the promise of a safe harbor from recent market volatility. Net inflows into funds focused on state and local government debt totaled roughly $22.3 billion in the first four months of the year, the most for the period since 2021, according to… LSEG Lipper Global Fund Flows. April marked the fourth straight month of inflows, as well as the muni market’s best performance for that month in over a decade…”
May 7 – Bloomberg (Tasos Vossos and Ronan Martin): “Companies are selling hybrid bonds at a record pace, seeking to pad their balance sheets while the extra cost of the risky debt hovers near an all-time low. More than $65 billion hybrid bonds in major currencies have been sold year-to-date, the most ever at this point in the year…”
Iran War Watch:
May 5 – Bloomberg (Eric Martin, Josh Wingrove and Eltaf Najafizada): “The US said offensive operations against Iran are over as it shifts to protecting shipping in the Strait of Hormuz, but the targeting of another cargo vessel after a day of strikes signaled that the conflict is dragging on. ‘Operation Epic Fury is concluded,’ Secretary of State Marco Rubio told reporters…, 66 days after the US and Israel began bombing Iran. ‘We achieved the objectives of that operation.’”
May 4 – Axios (Barak Ravid and Marc Caputo): “The U.S. is using force in the Strait of Hormuz and diplomacy in New York in an effort to break Tehran’s chokehold on the vital shipping lane. Iran has already shown it’s willing to respond with force, putting the two countries on the verge of a return to full-fledged war. President Trump announced an initiative to ‘guide’ commercial vessels through the strait starting on Monday morning, and Iran threatened to fire on ships that did not coordinate with its military. CENTCOM commander Adm. Brad Cooper told reporters… that after the U.S. began the operation, Iran fired cruise missiles at Navy ships and drones at commercial vessels... Six Iranian small boats were eliminated by U.S. forces, including by military helicopters, Cooper said.”
May 5 – Axios (Barak Ravid): “President Trump said Tuesday he’s suspending the new U.S. military operation in the Strait of Hormuz due to progress in the negotiations with Iran on an agreement to end the war. The operation to ‘guide’ ships through the Strait of Hormuz, which was launched Monday, led to an exchange of fire between the U.S. and Iran and to Iranian missile attacks on the United Arab Emirates for the first time since the ceasefire was announced a month ago. ‘Based on the request of Pakistan and other Countries… and, additionally, the fact that Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran, we have mutually agreed that, while the Blockade will remain in full force and effect, Project Freedom will be paused for a short period of time to see whether or not the Agreement can be finalized and signed,’ Trump wrote…”
May 4 – Reuters (Gram Slattery, Jonathan Landay and Erin Banco): “U.S. intelligence assessments indicate that the time Iran would need to build a nuclear weapon has not changed since last summer, when analysts estimated that a U.S.-Israeli attack had pushed back the timeline to up to a year, according to three sources familiar... The assessments of Tehran’s nuclear program remain broadly unchanged even after two months of a war that U.S. President Donald Trump launched in part to stop the Islamic Republic from developing a nuclear bomb… The unchanged timeline suggests that significantly impeding Tehran’s nuclear program may require destroying or removing Iran's remaining stockpile of highly enriched uranium, or HEU.”
May 4 – Axios (Dave Lawler and Barak Ravid): “The United Arab Emirates reported that four missiles were fired toward its territory from Iran on Monday, and that it was actively engaging with another ‘missile and drone attack.’ There were also fires reported at a fuel facility in the UAE and on ships off its coast… The U.S. and Iran may now be on the precipice of a return to war. The incidents come after President Trump launched a new initiative to ‘guide’ ships through the Strait of Hormuz, and Iran threatened to respond with ‘force.’”
May 4 – Bloomberg (Ruth Liao and Anthony Di Paola): “An oil terminal in the United Arab Emirates city of Fujairah was hit in an aerial attack amid an up-tick of Iranian strikes on Monday in the vicinity of the Strait of Hormuz. The strike on the VTTI facility… was confirmed by people familiar…”
May 7 – Financial Times (Andrew England in London and Steff Chávez): “Donald Trump abruptly halted a US military plan to guide commercial ships through the Strait of Hormuz after Saudi Arabia told Washington it would not allow American warplanes to use its bases or airspace in the operation… Riyadh considered the US president’s plan — dubbed ‘Project Freedom’ — to be ‘unnecessarily escalatory and not well thought through’, said one of the people briefed... The move from Saudi Arabia underscores frustrations over Trump’s management of the war among some of the US’s key Arab allies.”
May 7 – Wall Street Journal (Lara Seligman, Summer Said, Shelby Holliday and Costas Paris): “Saudi Arabia and Kuwait have lifted restrictions on the U.S. military’s use of their bases and airspace imposed after the start of the American operation to reopen the Strait of Hormuz, according to U.S. and Saudi officials, removing a hurdle that had tripped up President Trump’s effort to move ships through the vital waterway. The Trump administration is now looking to restart the operation to guide commercial ships with naval and air support that it had paused after 36 hours this week… It isn’t clear when that could happen though Pentagon officials gave a timeline of as early as this week. The U.S. operation to force open the strait relied on an enormous fleet of aircraft to protect commercial ships from Iranian missiles and drones, making Saudi and Kuwaiti bases and airspace critical to its execution.”
May 7 – Bloomberg (James Stavridis): “President Donald Trump has halted the US Navy’s nascent effort to guide commercial ships out of the Persian Gulf — pending the Iranians’ response to his latest peace proposal. But don’t let the pause fool you. Even in the very unlikely event Iran agrees to a compromise, it would be naive to assume Tehran will stick to it. Either way, over the next few months the US will have to undertake significant maritime operations to ensure tankers can pass safely through the Strait of Hormuz, sweep it for mines, restore navigational coherence and wrest operational control from Iran.”
May 7 – Washington Post (Warren P. Strobel, John Hudson and Ellen Nakashima): “A confidential CIA analysis delivered to administration policymakers this week concludes that Iran can survive the U.S. naval blockade for at least three to four months before facing more severe economic hardship… The analysis by the U.S. intelligence community, whose secret assessments on Iran have often been more sober than the administration’s public statements, also found that Tehran retains significant ballistic missile capabilities despite weeks of intense U.S. and Israeli bombardment… Iran retains about 75% of its prewar inventories of mobile launchers and about 70% of its prewar stockpiles of missiles, a U.S. official said. The official said there is evidence that the regime has been able to recover and reopen almost all of its underground storage facilities, repair some damaged missiles and even assemble some new missiles that were nearly complete when the war began.”
May 5 – Wall Street Journal (James T. Areddy): “During the Tanker War of the 1980s, Iran used missiles, mines and speed boats to assert its control over the Strait of Hormuz. Back then, it took an extensive naval operation, including the destruction of command posts on offshore oil platforms by U.S. Marines, to break Tehran’s hold. This time around, in addition to its earlier playbook, Iran has a legion of attack drones that are serving as a significant force multiplier. And, unlike in the 1980s, the U.S. Navy has so far decided not to send warships to escort tankers and other vessels trapped in the Persian Gulf.”
Iran War Ramifications Watch:
May 5 – Financial Times (Malcolm Moore): “Global oil reserves plunged at a record pace in April, as the conflict in the Middle East strains supplies and raises the risk of a further sharp jump in prices ahead of the summer travel season. Stockpiles of crude fell by nearly 200mn barrels, or 6.6mn barrels a day, estimated S&P Global Energy, even as higher prices triggered a collapse in demand of about 5mn b/d, the sharpest ever fall outside of the Covid-19 pandemic. ‘This is massive, it is far above the usual range,’ said Jim Burkhard, head of crude research at S&P, adding that in a normal month, global stocks fluctuate by between a few hundred thousand and a million barrels. ‘An inevitable market reckoning is coming,’ he said.”
May 4 – Axios (Amy Harder): “A fully closed Strait of Hormuz was long seen as unthinkable — and unmanageable if it happened — based on past modeling and interviews with energy experts. That conventional wisdom underscores just how unprecedented today’s closure is — and how little playbook exists for what could come next. In at least two major exercises assessing potential oil disruptions — one in 2007 and another in 2022 — energy experts considered a full shutdown of the strait but ultimately didn’t model it in their planning. In both cases, they judged it either too unlikely or too large in scale to meaningfully plan around. ‘The idea was laughed out of the room,’ said Sam Ori, who worked on the 2007 exercise at the nonprofit SAFE. ‘The view was that it just wasn’t credible and would be seen as alarmist.’”
May 6 – CNBC (Spencer Kimball): “Jet fuel shortages threaten to disrupt summer travel as the loss of supplies from the Middle East ripples across Asia and Europe. Exports from the Persian Gulf represented the largest single source of jet fuel supply to the global market before the U.S. and Israel attacked Iran… Europe is directly affected because the continent was the biggest importer of Middle Eastern fuel supplies. About 20% of the continent’s jet fuel came from the Gulf, according to the IEA. The other major source of jet fuel exports to world markets are refineries in China, South Korea and India. But these refineries themselves rely heavily on crude oil from the Middle East. About 90% of the oil exported from the Gulf through the strait went to Asia before the war.”
May 6 – Financial Times (A. Anantha Lakshmi, Diana Mariska, Harry Dempsey and Daniel Tudor): “Asia is in the grip of a plastic crisis, with manufacturers across the region warning of shortages as the Iran oil shock hits supplies of packaging for food, medical aid and other consumer products. The disruption of oil shipments from the Middle East has severely constrained supplies of naphtha, a petroleum product that is turned into speciality chemicals used in semiconductor manufacturing but is also essential to making plastic. The price of naphtha in Asia has almost doubled since the war began. That has sent the prices of bags, containers, cups and utensils soaring, sparking fears of shortages as manufacturers struggle to source packaging for products such as instant noodles, beverages and cosmetics.”
May 6 – Financial Times (Owen Walker): “The jet fuel shock triggered by the Iran war has been a bigger crisis for the global airline industry than the Covid-19 pandemic, according to one of Asia’s biggest carriers. The airline industry has been particularly susceptible to the supply shortages resulting from the closure of the Strait of Hormuz since the start of the Iran war because many of the sector’s costs are tied to jet fuel. Prices went from about $85 a barrel in late February to more than $200 within days… ‘I thought I’d seen it all with Covid… but having seen jet fuel go up almost three times — this is much worse,’ AirAsia chief executive Tony Fernandes told the FT. ‘You wake up one day and your major cost has tripled — it was quite a new experience for me and I’ve been through a lot in my life.’”
May 3 – Financial Times (Peter Campbell): “Global airlines have cut 2mn seats from their May schedules within the past two weeks, as concerns about fuel availability in the coming weeks intensify. Thousands of flights have been cancelled and several services have switched to smaller or more fuel-efficient aircraft to conserve fuel as they brace for supply disruption, according to… Cirium. Since the start of the Iran war in late February, the cost of jet fuel has doubled, forcing airlines to raise ticket prices, while the closure of Gulf airports that connected a third of European journeys to Asia has thrown global travel into disarray.”
May 2 – Financial Times (Kana Inagaki, Christian Davies and Sebastien Ash): “Detroit carmakers have warned that the financial hit from higher commodity prices will rise to $5bn this year as the Middle East war strains the supply chains for materials from aluminium to plastics and paint. The Big Three US carmakers… all flagged commodities inflation as they reported first-quarter earnings, pledging to compensate with greater cost discipline… ‘The war in Iran has raised our costs and its duration remains uncertain,’ GM’s chief executive Mary Barra said…”
May 5 – Bloomberg (Mirette Magdy): “Saudi Arabia’s fiscal deficit widened in the first quarter to the highest level since 2018 as the closure of the Strait of Hormuz forced it to reduce oil exports and spending on projects to diversify the economy continued to rise. The kingdom posted a budget shortfall of 125.7 billion riyals ($33.5bn)… That compares with a deficit of 95 billion riyals in the last three months of 2025 and was more than double the figure from a year earlier. Oil revenue dipped around 3% year-on-year for the first quarter, while expenditure rose roughly 20% to the equivalent of $103 billion.”
May 5 – New York Times (Keith Bradsher): “As the war in Iran threatens to choke off oil and gas supplies from the Persian Gulf, China is seizing the moment to extend its dominance in wind power. Across China, hilltops are dotted with wind turbines, and long rows of them span many miles in western deserts. Ultrahigh-voltage power lines carry electricity thousands of miles to the energy-hungry factories along China’s coast. Last year, China installed three times as much wind power capacity as the rest of the world combined, even as its turbine exports jumped. The global industry’s center of gravity has shifted decisively: All of the world’s six largest wind turbine manufacturers are Chinese, displacing once-dominant European firms and companies like General Electric.”
Trump Administration Watch:
May 3 – New York Times (Zolan Kanno-Youngs): “Two months into the war in Iran, President Trump is confronting the complicated reality of a conflict that has proved costly and deeply unpopular, and lacks a clear endgame. Energy markets are in turmoil. The Pentagon has given its first public estimate of the war’s cost: $25 billion so far. Key Republicans in Congress are growing impatient. And Mr. Trump is lashing out at foreign allies, like Germany, who have shown no interest in joining the fight. Speaking to a crowd of supporters on Friday, Mr. Trump insisted he had no regrets. ‘I did something that was, I don’t know, foolish, brave, but it was smart,’ Mr. Trump said... ‘I would do it again.’”
May 6 – Bloomberg (Chris Anstey and Greg Ritchie): “The US Treasury signaled it’s still comfortable issuing the shortest-dated debt to meet escalating government borrowing needs — even as warnings emerge about the strategy’s risks. The Treasury anticipates keeping nominal note and bond sale sizes unchanged ‘for at least the next several quarters,’ the department said in a quarterly statement on debt policy…’Treasury believes its current auction sizes leave it well positioned to address potential changes to the fiscal outlook’ and shifts in the Federal Reserve’s purchases of Treasuries, it said.”
May 3 – CNBC (Matt Peterson): “U.S. Attorney for the District of Columbia Jeanine Pirro… asked a federal judge to vacate his decisions blocking aspects of her criminal investigation into the Federal Reserve under Chair Jerome Powell. Pirro’s motion effectively walks back an often-repeated plan to appeal the judge’s rulings to a higher court. That ends, for the time being, the threat that Powell could be forced to turn over evidence to Pirro. Still, it is unlikely to provide the Fed chair the certainty he wants that the legal threat against him and the central bank has dissipated. Pirro continues to say she wants the proceedings to go forward, although she hasn’t presented any evidence of criminal wrongdoing...”
May 5 – Reuters (Suzanne McGee, Douglas Gillison and Anirban Sen): “Wall Street’s top regulator… proposed ending quarterly earnings reporting requirements for U.S.-traded companies and allowing them to switch to twice-annual reports. President Donald Trump raised the idea during his first term and it re-emerged as an administration priority last September. The Securities and Exchange Commission wants to give publicly traded companies the option to file their earnings twice annually, a move that would end a 55-year-old requirement that U.S. public companies share detailed financial results four times a year, within 45 days of the end of their fiscal quarters.”
May 3 – Financial Times (Kaye Wiggins): “The US Department of Justice has lost more than a quarter of its lawyers… In total, 3,402 lawyers out of a total of 12,955 left the department between the beginning of last year and January 31 this year. Over the same period, 771 joined, leaving the department with 20% fewer lawyers overall than it had at the end of 2024. The figures underscore both the impact of lay-offs by Elon Musk’s so-called Department of Government Efficiency and of politically charged firings and resignations. Overall, the department lost 8,558 staff last year, more than at any time in at least a decade…”
May 7 – Reuters (Jesus Calero): “Global perceptions of the U.S. have deteriorated for a second consecutive year and are now worse than views of Russia, an annual study on democracy published on Friday showed, as U.S. President Donald Trump's policies continue to severely strain the NATO alliance. The Denmark-based Alliance of Democracies Foundation, which commissioned the survey, said the U.S. was also most frequently named in response to which country posed the greatest threat to the world, after Russia and Israel. The survey did not go into details on the criteria used, but the Alliance says its aim is to defend and advance democratic values. ‘The fast decline of the United States’ perception around the world is saddening but not shocking,’ alliance founder and former NATO Secretary General Anders Fogh Rasmussen said. ‘U.S. foreign policy over the past 18 months has, among other things, called into question the transatlantic relationship, imposed widespread tariffs, and threatened to invade a NATO ally’s territory,’ he added.”
Trade War Watch:
May 5 – Bloomberg (Anna Edwards, Guy Johnson and Tom Mackenzie): “The European Union has tools that it can turn to if Donald Trump makes excessive threats to strategic industries such as steel, French Trade Minister Nicolas Forissier said. The US president said… he planned to increase levies on imports of EU cars and trucks to 25% this week because he considers the bloc isn’t complying with a trade deal struck in July. EU officials have said all options will be on the table if Trump follows through with the threat as the two sides work to implement the agreement. ‘We will use our tools, especially if there are too many threats on our economy or on our industrial, strategic interests — for example, I am thinking of steel — so we will no longer be naive,’ Forissier said…”
May 4 – Bloomberg (Michael Nienaber): “German authorities seeking to map out US supply-chain vulnerabilities as a way to win leverage with President Donald Trump’s administration have identified a key pressure point: potash. The US imports more than 90% of the key ingredient for agricultural fertilizer, leaving the world’s No. 1 economy highly reliant on global producers — above all Canada. Potash, a potassium-rich fertilizer made from underground deposits, would be among options for US allies should Trump further ratchet up trade and security threats…”
May 6 – Bloomberg (Jorge Valero and Oliver Crook): “US Ambassador to the EU Andrew Puzder said Washington will implement 25% tariffs on cars and trucks from the European Union ‘relatively soon’ if the bloc doesn’t swiftly ratify a long-delayed trade deal. ‘Unless we see some substantial progress, I think you probably should expect those relatively soon,’ Puzder told Bloomberg Television.”
Constitution Watch:
May 7 – Financial Times (Aime Williams): “Donald Trump’s 10% global tariffs have been ruled illegal by a US court, striking a fresh blow to the president’s flagship economic agenda as he battles to raise levies on trading partners. The US Court of International Trade ruled on Thursday that the 10% tariffs, imposed under Section 122 of the Trade Act of 1974, were ‘unauthorized by law’. The court did not suspend the tariffs broadly but only for the two companies that brought the case.”
Budget Watch:
May 6 – Bloomberg (Zoe Tillman and Laura Curtis): “The Trump administration has begun paying out refunds for the $166 billion in global tariffs that the US Supreme Court declared unlawful earlier this year. Trade lawyers told Bloomberg News that some of their clients have received money in their bank accounts as of Wednesday.”
New World Order Watch:
May 3 – Politico (Jones Hayden): “U.S. President Donald Trump said on Saturday that the Pentagon’s withdrawal of American troops from Germany would be much larger than indicated just two days ago. ‘We’re going to cut way down. And we’re cutting a lot further than 5,000,’ Trump told reporters... The Pentagon announced on Friday that it would withdraw 5,000 U.S. troops from Germany over the next year. Trump’s latest comments escalate a dispute with German Chancellor Friedrich Merz, who said last week that Washington was being ‘humiliated’ by Iran.”
U.S./Russia/China/Europe/Iran Watch:
May 4 – New York Times (Alan Rappeport): “The United States… urged China to push Iran to open the Strait of Hormuz and said that its purchases of Iranian oil amounted to funding global terrorism, delivering a stern rebuke ahead of President Trump’s meeting in Beijing this month with the Chinese leader, Xi Jinping. The warning came from Treasury Secretary Scott Bessent… Mr. Bessent has been leading an aggressive campaign to cripple Iran’s economy with a blitz of new sanctions… ‘Let’s see if China — let’s see them step up with some diplomacy and get the Iranians to open the strait,’ Mr. Bessent said… ‘Iran is the largest state sponsor of terrorism, and China has been buying 90% of their energy, so they are funding the largest state sponsor of terrorism.’”
Ukraine War Watch:
May 4 – Bloomberg: “Ukrainian drones are regularly hitting targets deep inside Russia, reaching to the Ural Mountains and communities where most people had seen the war as a distant problem. A residential high-rise in Yekaterinburg, home to more than 1.5 million people, was struck on April 25, the first damage that city has suffered since the full-scale invasion of Ukraine in 2022. Since early April, authorities have temporarily suspended operations at the local airport on five separate days to respond to drone threats. ‘This came as a shock,’ said Vladimir, a 35-year-old businessman in Yekaterinburg… ‘Even though no one was killed, people finally realized the city is no longer deep in the rear.’”
May 3 – Bloomberg: “A drone hit a residential tower in an upscale Moscow district in a rare strike near the city center ahead of the traditional World War II Victory Day parade. Moscow air defenses repelled an attack by two Ukrainian drones, and one hit the building on Mosfilmovskaya Street… Emergency services were at the scene, and there were no immediate reports of casualties.”
May 6 – Wall Street Journal (Ian Lovett): “Days after Russian President Vladimir Putin discussed a temporary cease-fire in a phone call with President Trump, Russian forces launched one of the deadliest aerial attacks of the year, killing at least 27 people and injuring more than 70 others. The brunt of the attacks on Tuesday—which used explosive drones, missiles and glide bombs—was directed at the southern Ukrainian city of Zaporizhzhia.”
Taiwan Watch:
May 7 – Associated Press (E. Eduardo Castillo and Huizhong Wu): “China again signaled that Taiwan would be a priority topic ahead of a highly anticipated summit between U.S. President Donald Trump and Chinese President Xi Jinping next week, saying that U.S. must adhere to the ‘one China principle’ for a stable relationship with Beijing. Last week, China’s top diplomat Wang Yi said he hopes the U.S. would make the ‘right choices’ relating to the self-ruled island when he spoke with U.S. Secretary of State Marco Rubio… ‘The Taiwan question is at the core of China’s core interests and the bedrock of the political foundation of China-U.S. relations,’ said Foreign Ministry spokesman Lin Jian…”
AI Bubble/Arms Race Watch:
May 6 – Financial Times (Robin Wigglesworth): “The AI ‘hyperscalers’ reported bumper earnings for the first quarter, with both sales and profits beating expectations. But if you look more closely at the P&L, some of them had a lot of help from an interesting line item. Most of the attention has naturally fastened on to another slew of engorged capex forecasts from Alphabet, Amazon, Microsoft, Meta and Oracle. Morgan Stanley now expects them to spend over $800bn in 2026 — and circa $1.1tn in 2027… However, Alphaville was mainly curious about the ‘other income’ parts of their earnings reports, which in several cases had a meaningful impact. And by meaningful, we mean YUGE. Alphabet, for example, booked $37.7bn of ‘other income’ in just the first three months of the year, accounting for over half the company’s net income... Amazon reported ‘other income’ of nearly $16bn in the first quarter, up from $2.7bn in the same period last year. That was nearly half its overall net income... Microsoft reported ‘only’ $942mn of other income in the first three months of the year, but this line item has now made $7.2bn over the past nine months… As Goldman Sachs analysts said in a note last week: ‘The hyperscalers’ earnings growth this quarter was boosted by an unusually large contribution from equity stakes in private companies. Alphabet and Amazon generated ‘other income’ totalling $53 billion in Q1 2026, which accounted for nearly 60% of those two companies’ income in Q1…’”
May 4 – Yahoo Finance (Brian Sozzi): “Debt funding for AI capital expenditures will remain healthy at least until 2028, Apollo Global Management president Jim Zelter said. This year, net origination of investment-grade debt will be ‘north of $1 trillion’ and will ‘exceed net issuance versus the US Treasury market,’ Zelter told Yahoo… ‘And if you think about that $800 billion [in hyperscaler capex], a portion of it will be funded by the cash flow of these companies. A few hundred billion will be funded by the public investment-grade markets. And our stance is private investment-grade capital will be the third leg of that funding stool… It’s going to take all the markets, it’s going to take the equity market, operating cash flow, the public [investment-grade] market, and the private [investment-grade] market for those kinds of numbers to come through,’ he said.”
May 6 – Bloomberg (John Ainger): “The biggest US power grid needs a revamp to cope with the unprecedented surge in electricity demand stemming from the data-center boom, said Chief Executive Officer David Mills. As currently structured, PJM Interconnection LLC, which serves 67 million people across 13 states, can’t ensure ample electricity supplies while simultaneously shielding residential consumers from soaring bills, Mills wrote… ‘The current situation is not tenable,’ Mills wrote… The ‘stress now visible in prices, reserve margins and investment pipelines reflects something more fundamental than a design that needs recalibration.’ The crises stressing PJM include looming power shortages expected to hit the grid as soon as next year and the threatened defection of one of the largest US utilities — American Electric Power Co.”
May 5 – Bloomberg (Ryan Weeks and Sidhartha Shukla): “The race to sell retail investors a piece of the AI boom has gone mainstream — closed-end funds, interval funds, special-purpose vehicles. Now, crypto platforms are offering trades tied to the most valuable private AI companies on earth — ones ordinary investors have almost no other way to access. The result is a new frontier in the financialization of private markets: crypto infrastructure, once the domain of digital token speculation, being redeployed to give traders a way to bet on Anthropic, OpenAI and SpaceX — in real time, 24 hours a day, with leverage. Ventuals and PreStocks, two crypto venues riding that shift, have seen their trading activity — measured by open interest and market value combined — surge more than threefold since the start of the year to last month.”
May 5 – Financial Times (Joshua Franklin, Akila Quinio and Zehra Munir and Harriet Clarfelt): “Jamie Dimon believes the $1tn investment in data centres ‘will make sense’ in the long haul because of the power of AI technology, underscoring Wall Street’s appetite to fund an unprecedented level of spending on tech infrastructure. JPMorgan Chase’s chief executive said the spending would also include vast sums for things such as chips, wires and hardware but that ‘technology tends to pay for itself, just not in a straight line’. ‘The way I look at it is that in total it will make sense. If you want to try to pick the winners and losers, you will have a hard time,’ Dimon said… ‘So there will be losers in that, there will be winners, or people saying I told you so, and stuff like that. But the technology itself is so powerful, it’s worth $1tn of investment.’”
Bubble Watch:
May 3 – Financial Times (Ruchir Sharma): “Wall Street pros used to dismiss retail investors as ‘dumb money’ — amateurs who knew no better than to chase the latest hot trade. But lately, the little guys have made impressive gains by ‘buying the dip’, and have arguably emerged as the single most influential set of investors in the stock market… The share of US households that own stocks has surged this decade to nearly 60%, the highest proportion in any country. Americans are all in on the market, holding more wealth in stocks than in their homes for the first time. And retail is now the most active class of traders as well. Retail’s share of daily trading in US stocks doubled in the past 15 years to 36%, surpassing that of big banks or hedge funds… Last year US retail trading topped $5tn, exceeding the pandemic high... So far in 2026 they have remained net buyers on most days.”
May 3 – Bloomberg (Justina Lee, Weihua Li, and Denitsa Tsekova): “At the heart of the US retirement industry, underpinning the later-life plans of millions of Americans, is a set of financial products that hardly anyone can tell you a thing about. No one knows exactly how much money they control. No one can say how it’s all allocated. No single financial regulator is in charge of them. Yet Collective Investment Trusts are now a multi-trillion dollar business to rival mutual funds or ETFs — and are poised to become the backdoor through which more private assets are added to Americans’ retirement savings. For years now, the country’s biggest employers have been slowly migrating workers’ nest eggs toward these pooled vehicles, which are used exclusively by retirement plans. For 401(k)s with more than 100 participants, about 40% of all assets were invested in CITs by 2024…, up from 12% in 2010 and above the share allocated to mutual funds.”
May 6 – Bloomberg (Laura Benitez): “Apollo Global Management Inc. eclipsed $1 trillion of assets under management on record first-quarter inflows and reported earnings that beat Wall Street estimates… Apollo is pushing to become one of the largest underwriters on Wall Street. Inflows totaled $115 billion in the quarter and $300 billion over the past 12 months… By contrast, Blackstone Inc. took in $68.5 billion during the first three months of the year, while KKR & Co. and Ares Management Corp. collected $27.8 billion and $29.5 billion…”
May 6 – Axios (Dan Primack): “It’s no secret that AI has become a splitting headache for private equity, or at least for funds that bought big into enterprise software. But this isn’t just a backward-looking problem, which can be temporarily stemmed by Q1 equity markdowns and maturing debt renegotiations. Almost every industry big that spoke to Axios at the Milken Global Conference this week said that AI has created massive modeling challenges for new deals, almost regardless of sector. Private equity is a long-term asset class, typically holding portfolio companies for a minimum of three or four years. For context, it’s been only three-and-a-half years since ChatGPT was first released. Subsequent AI advancements — including the introductions of Claude, Gemini, etc. — have upended industries. Any financial sponsor (or lender) who claims a high degree of confidence in the environment three-and-a-half years from now is either lying or self-deluded. Even if it partners with a major frontier lab.”
May 4 – Bloomberg (Cecilia D'Anastasio and Spencer Soper): “GameStop Corp. is trying to buy eBay Inc. for about $56 billion in cash and stock, a bold attempt by Ryan Cohen to take over a storied e-commerce name several times larger. The gaming retail chain has offered $125 per share in cash and stock for the online marketplace, or about a 20% premium to its Friday close. GameStop… has secured an initial, nonbinding ‘highly confident letter’ from TD Bank to provide about $20 billion of debt financing for the deal. In a memo to investors, Cohen’s company pledged to find some $2 billion of annual savings within 12 months of closing.”
Inflation Watch:
May 5 – Associated Press (Cathy Bussewitz): “The price of a gallon of regular gasoline climbed 31 cents in the past week, spiking to an average of $4.48 per gallon Tuesday, according to AAA, hitting the wallets of drivers after rising 50% since the war with Iran began.”
May 6 – Financial Times (Malcolm Moore, Andrew England, Jamie Smyth and Humza Jilani): “US fuel exports have surged to a record level as Europe and Asia lean on American energy supplies to make up for the shortfalls caused by the war in Iran. More than 8.2mn barrels a day of refined fuels including gasoline, diesel and jet fuel were shipped from the US overseas last week, an increase of more than 20% on the same period last year… The surge in overseas purchases is contributing to a windfall for US energy companies, who may earn an additional $60bn of cash flow this year if prices remain elevated. But it also risks a political backlash for President Donald Trump as domestic pump prices rise, with the average price of petrol reaching a four-year high of $4.53 a gallon.”
May 3 – Associated Press (Matt Sedensky): “A hidden force is quietly pushing up costs for everything from your summer vacation to your weekly grocery bills: a weaker U.S. dollar. The dollar has fallen about 10% against other major currencies since President Donald Trump returned to the White House, a pullback potentially playing a role in Americans’ concerns about affordability. ‘It’s kind of a hidden tax,’ says economist Thomas Savidge of the conservative-leaning American Institute for Economic Research. ‘What your dollar is going to be able to buy is going to shrink.’”
May 4 – Financial Times (Clara Murray, Chris Cook and Gregory Meyer): “Consumers face the threat of higher prices spreading beyond the petrol pump without a swift end to the Middle East war, executives and analysts have warned, as companies lay bare the hit from spiralling energy costs. The repercussions from a conflict now in its third month have dominated quarterly earnings in the US and Europe… Companies across Asia have also been buffeted by the energy crisis. References to ‘pricing action’ and ‘passing on costs’ during first-quarter US earnings calls have climbed to the highest level since Russia’s full-scale invasion of Ukraine sparked the last global inflation shock in 2022, according to an FT analysis.”
May 6 – Wall Street Journal (John Keilman): “For much of America, the Iran war has meant pain at the pump. For Whirlpool, it has caused what it calls a ‘recession-level industry decline,’ and higher appliance prices are coming as a result. The… maker of refrigerators and washing machines cut its full-year earnings guidance roughly in half Wednesday, from $6 a share to a range of $3 to $3.50, and said it would suspend its dividend as it focuses on paying down debt… Chief Financial Officer Roxanne Warner said U.S. consumer confidence nosedived to historically low levels, driven by worries over the rising cost of living, after the war began Feb. 28.”
May 6 – Wall Street Journal (Kwanwoo Jun): “South Korea’s headline inflation accelerated to a 21-month high in April… Rising inflation is likely to put pressure on the Bank of Korea to join global peers in tightening policy amid a global energy shock. The Reserve Bank of Australia raised rates for a third straight meeting this week, citing stronger-than-expected fuel-price pressures. The BOK has kept rates on hold since a cut in May 2025. The benchmark consumer-price index rose 2.6% from a year earlier in April—the fastest pace since July 2024—following the previous month’s 2.2% gain…”
Federal Reserve Watch:
May 5 – Bloomberg (Edward Bolingbroke): “Bond traders are boosting wagers that the Federal Reserve’s next policy move could be an interest rate hike rather than a cut. Swaps linked to central bank rate decisions are currently pricing more than a 50% chance that the Fed raises rates by next April, before easing. A growing chorus of traders is also ramping up positions looking to hedge the prospect of rate-hike odds rising by the end of the year. The market shift comes as policymakers appear increasingly divided over the interest-rate outlook, just before Kevin Warsh takes over as Fed Chair following a campaign by US President Donald Trump for lower rates.”
May 3 – Bloomberg (Laura Noonan): “Federal Reserve Governor Michael Barr said stress in private credit could spark ‘psychological contagion’ leading to a broader credit crunch, once again warning against loosening the reins on Wall Street at a time of rising risks… Barr said that while direct links between banks and private credit do not yet appear ‘super worrisome,’ there were other areas of concern such as the insurance sector’s overlaps with private lenders. ‘Then you also have the problem of kind of psychological Contagion… People might look at private credit, and instead of saying ‘this is an idiosyncratic problem, these were high risk loans, the rest of the corporate sector is different’, they might say, ‘Wow, there seem to be cracks in our corporate sector. Maybe over here in the corporate bond market, there are also cracks.’’ ‘Then you could have a credit pullback, and that could lead to more financial strain,’ he added.”
May 7 – Yahoo Finance (Jennifer Schonberger): “Cleveland Federal Reserve president Beth Hammack added to a growing chorus from central bank officials projecting that interest rates are likely to remain on hold, given the uncertainty about the impact the conflict in Iran is having on both inflation and the job market. ‘Right now, my base case is that we'll be on hold for quite some time around this level, which is pretty close to what I think of as the natural rate of interest,” Hammack said… ‘I think we have pressures coming on both sides of our mandate.’”
May 6 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Chicago President Austan Goolsbee struck a note of caution about inflation that has not only failed to continue cooling to the US central bank’s 2% target, but has moved up since the start of the US war in Iran. Goolsbee… called the labor market stable and signaled that the Fed’s more dominant problem right now is likely inflation that’s too high. ‘That’s why I’m attuned to these inflation risks — precisely because it has not yet been a stagflationary direction shock,’ Goolsbee said. ‘It’s just been an inflationary shock. The longer that continues, the more nervous that makes me.’”
U.S. Economic Bubble Watch:
May 5 – Wall Street Journal (Jessica Coacci): “U.S. services-sector activity continued to rise in April though price pressures from the war in Iran weighed on growth, a survey of managers found. The Institute for Supply Management’s purchasing managers index for services providers was 53.6 compared with 54.0 in March… The prices index held steady at 70.7 in April from March, the highest figure since October 2022.”
May 5 – Bloomberg (Mark Niquette): “The US trade deficit widened in March as an increase in the value of imports exceeded exports in a sign of solid consumer and business demand. The gap in goods and services trade grew 4.4% from the prior month to $60.3 billion… The value of imports rose 2.3%... Imports of capital goods also rose to a record as the build out of artificial intelligence boosted demand for foreign-made computer equipment… Exports increased 2% in March from the prior month, helped by a record level of shipments of industrial supplies like oil and other petroleum products. Exports of foods, feeds and beverages were the strongest since 2022.”
May 5 – Associated Press (Paul Wiseman): “U.S. job openings were essentially unchanged in March but hiring improved before the full impact of the Iran war hit the economy. Employers posted 6.87 million jobs in March, compared to 6.92 million in February…”
May 7 – Associated Press (Matt Ott): “U.S. jobless claim applications rose last week but remain at historically low levels despite elevated inflation and other economic headwinds. The number of Americans filing for unemployment benefits in the week ending May 2 rose by 10,000 to 200,000… The total number of Americans filing for unemployment benefits for the previous week ending April 25 declined by 10,000 to 1.77 million.”
May 6 – CNBC (Jeff Cox): “Private sector job creation was stronger than expected in April, providing more evidence of a stable labor market and less incentive for the Federal Reserve to lower interest rates amid persistently higher inflation, ADP reported... The payrolls processing firm said companies added 109,000 jobs for the month, a step up from the 61,000 created in March… April’s gains were the best for the ADP count since January 2025… Wages for those staying in their jobs rose 4.4% annually, down 0.1 percentage point… Education and health services again dominated, adding 61,000 new hires. Trade, transportation and utilities saw a gain of 25,000. Construction, another consistent leader in recent months, rose by 10,000, while financial activities contributed 9,000.”
May 5 – Axios (Neil Irwin): “The job market’s headline numbers have looked pretty good so far in 2026. Some of the more subtle indicators of labor market health have been more worrying. Which should we believe? The latest data — which shows a surge in business hiring in March — points toward a relatively sunny scenario. Based on the March Job Openings and Labor Turnover data, steady demand from consumers and businesses means that businesses need new workers… It aligns with other recent evidence suggesting that reports of labor market doom and gloom have been greatly exaggerated. Employers hired 5.55 million people in March, a stunning rise of 655,000 from February. That was enough to bring the hires rate… up 0.4 percentage point, to 3.5%, its highest since May 2024. In another positive sign for the job market, the quits rate ticked up, with 125,000 more Americans voluntarily leaving their jobs — a small move but a sign of greater confidence in finding work elsewhere. In a particularly welcome sign, several areas where the hiring rate surged the most are cyclical sectors tied to underlying private-sector activity.”
May 7 – Wall Street Journal: “There is a lot of concern about how artificial intelligence is affecting work as each new month brings a wave of job-cut announcements from large employers... Layoffs in the first four months of the year totaled 300,749, according to… Challenger, Gray & Christmas, a level 50% lower than the same period last year when enormous federal-worker job cuts dominated the start of President Trump’s second term. Private-sector layoffs were 10% lower than this time last year. Now AI is upending workplaces in ways both real and whitewashed. Tech has been hardest-hit, with firms letting go of more than 85,000 employees so far this year, a 33% increase over the same period in 2025…”
May 7 – Bloomberg (Mark Niquette): “US labor productivity continued to rise in the first quarter, though at a slower pace… Productivity, or nonfarm employee output per hour, increased at a 0.8% annualized rate after a downwardly revised 1.6% advance in the fourth quarter… Compared with a year ago, productivity climbed 2.9%, the largest annual increase since 2024.”
May 5 – Bloomberg (Mark Niquette): “US new-home sales rose in March by more than forecast as the median selling price slid to a more than four-year low and builders offered incentives. New single-family home sales increased 7.4% from February to an annualized 682,000 pace, the fastest this year… Median sales price of a new home decreased 6.2% in March from a year earlier to $387,400 — the lowest since July 2021. That decline likely reflected a pickup in contract signings for cheaper properties. Some 22,000 homes priced from $300,000 up to $400,000 were sold, the most in that category in nearly five years. A larger number of houses priced less than that were also purchased. By region, sales in the South, the nation’s biggest home-selling region, increased 11.1%, while purchases in the Northeast rebounded sharply. March contract signings fell in the Midwest and West.”
May 7 – Reuters (Lucia Mutikani): “U.S. construction spending rebounded in March, boosted by a surge in single-family homebuilding… The Commerce Department’s Census Bureau said… construction spending rose 0.6% after falling 0.2% in February. Construction spending advanced 1.6% on a year-over-year basis in March. Spending on private construction projects increased 0.8% in March after slipping 0.2% in February. Investment in residential construction rose 1.7% after easing 0.1% in February. Spending on new single-family housing projects jumped 2.7%.”
May 4 – Reuters (Dan Burns): “New orders for U.S. factory goods rose more than expected in March, led by surging demand for electronics products amid the artificial intelligence investment boom. Factory orders were up 1.5% on the month, the biggest gain since November, from an upwardly revised 0.3% in February... Orders increased 3.7% on a year-over-year basis in March.”
May 1 – Wall Street Journal (Nicole Friedman and Veronica Dagher): “U.S. foreclosure filings hit a six-year high in the first quarter. Fast-rising homeownership costs such as property-tax and insurance bills are a reason to blame. The number of U.S. properties with a foreclosure filing rose to almost 119,000 in the first quarter, according to… Attom. That marked a 26% jump from the same period a year earlier. The figure is also the highest since the first quarter of 2020, when pandemic-era mortgage-relief measures and stimulus payments first led to a huge drop in foreclosures. The current foreclosure rate is a return to the prepandemic norm and not a sign of widespread borrower distress, analysts say.”
May 4 – Wall Street Journal (Nicholas G. Miller): “State and local governments across the U.S. are seizing on a juicy new target for plugging budget holes and easing housing shortages: second homeowners. New York City is planning to tax pieds-à-terre worth $5 million or more. Rhode Island’s ‘Taylor Swift tax’ will hit homes valued at over $1 million that are uninhabited for at least 183 days of the year… Meanwhile, courts are weighing proposals in Montana and San Francisco for extra levies on vacant homes. These taxes are generating furious debate.”
China Watch:
May 5 – Wall Street Journal (Lingling Wei): “In a single week, Beijing killed a U.S. tech deal and ordered Chinese companies to defy American sanctions on domestic oil refiners—two unprecedented moves, both terse, both wielding tools that had been advertised for years but never used. Welcome to the era of Chinese regulatory aggression, one Beijing has spent the better part of a decade promising. Since the trade war Donald Trump opened in 2018, during his first presidency, Beijing has been quietly building a counter-sanctions arsenal: a blacklist for foreign firms it deems hostile, a law authorizing punishment of any company that helps enforce U.S. sanctions on Chinese targets, a rule ordering Chinese parties to ignore those sanctions outright, and expanded powers for its antitrust regulators to kill cross-border merger deals on national-security grounds.”
Central Banker Watch:
May 5 – Bloomberg (Swati Pandey): “Australia’s central bank raised its key interest rate for a third consecutive meeting… The Reserve Bank’s nine-member policy committee opted to increase the cash rate to 4.35% from 4.1% by a vote of eight to one…, unwinding all of last year’s cycle of monetary easing. The aggressive tightening underscored its determination to tame stubbornly strong inflation and cemented the RBA’s outlier status among global counterparts.”
May 7 – Bloomberg (Ott Ummelas and Charlie Duxbury): “Norges Bank delivered western Europe’s first hike in borrowing costs since the outbreak of the Iran war, opting for immediate action to tackle stubbornly high inflation. The Norwegian central bank increased its key deposit rate by a quarter point to 4.25%... The move, its first tightening step since 2023, was predicted by only five out of 17 economists…”
May 4 – Bloomberg (Mark Schroers, Daniel Hornak and Milda Seputyte): “It’s highly likely that the European Central Bank will have to raise interest rates at its next meeting in June due to the Iran war, Governing Council member Peter Kazimir said. While officials aren’t pre-committing to any fixed path and more data are needed to assess the conflict’s fallout, ‘we remain firm in our approach,’ the Slovak official said. ‘On this basis, policy tightening in June is all but inevitable,’ he said... ‘It is becoming increasingly likely that we must prepare for a prolonged period of broad-based price increases coupled with visibly weaker growth across the euro zone.’”
May 3 – Reuters (Jihoon Lee): “The Bank of Korea’s senior deputy governor said forward guidance on monetary policy would become more hawkish at the next meeting later this month, as it was time to consider interest rate hikes, according to pool reports… ‘Since April, the impression has been that economic growth will not be much lower than 2.0%, while inflation will be higher than 2.2%. Given that, it is time to stop rate cuts and start thinking about rate hikes,’ said Ryoo Sang-dai, a member of the central bank’s seven-seat monetary policy board.”
Europe Watch:
May 5 – Bloomberg (Nick Heubeck, Jorge Valero and Kamil Kowalcze): “European Union Economy Commissioner Valdis Dombrovskis warned of the stagflationary effect that the Iran war is creating for the bloc. ‘Higher energy prices affect every actor in the European economy, firms and families alike — they are pushing the EU economy onto a path of weaker growth and higher inflation,’ he told reporters... ‘Europe is facing is a stagflationary shock’… Eurogroup chief Kyriakos Pierrakakis tried to put a brave face on the situation. ‘We are in a stagflationary tendency, meaning that we are updating our projections for growth downwards and for inflation upwards,’ he said. ‘But we are not in full stagflation mode at this point.’”
May 7 – Bloomberg (Ott Tammik): “Officials on Europe’s eastern flank urged lawmakers to find sustainable sources of revenue to finance a massive surge in defense spending and avoid growing government borrowing across the continent. Madis Muller, Estonia’s outgoing rate hawk on the European Central Bank’s Governing Council, said that increasing the budget deficit to compensate was not a long-term solution, warning in a speech in his nation’s parliament… that ‘these higher defense expenditures are not temporary.’ The finance minister of neighboring Latvia, Arvils Aseradens, issued a similar warning…”
Emerging Market Watch:
May 5 – Bloomberg (Giovanna Bellotti Azevedo and Rachel Gamarski): “Take a glance at the stock market, and all appears well in the Brazilian economy. The Ibovespa has soared more than any other major index in the Americas over the past year — roughly 60% in dollar terms at last count. But inside C-suites and corner shops and cafes all across the country, the picture is far bleaker. With borrowing costs hovering near a two-decade peak and credit growing increasingly scarce, a historically high number of companies are fighting to keep their doors open. The latest high-profile example of a company dealing with mounting financial stress came just last week, when hospital operator Kora Saúde Participações SA filed for an out-of-court debt restructuring. It’s the same fate that a pair of corporate heavyweights — biofuels producer Raízen SA and supermarket chain Companhia Brasileira de Distribuição — had suffered weeks earlier.”
Leveraged Speculation Watch:
May 7 – Bloomberg: “Hedge funds gained 3.6% last month, the most since December 2020, led by the Bloomberg Equity Hedge Fund Index, according to preliminary figures from the Bloomberg Hedge Fund Indices.”
May 6 – Financial Times (Costas Mourselas in London and Amelia Pollard): “Hedge funds have enjoyed their best monthly performance since 2020, as managers profited from a blistering rally in technology stocks such as Intel, Alphabet and AMD. A global hedge fund index collated by data group HFR jumped 5% in April, the biggest rise since November 2020… The gains were driven by technology-focused funds, which surged 14% over the month. ‘It has been a story of very strong performance across all strategies,’ said Jon Feeney, co-chief investment officer of Investcorp-Tages… Hedge funds’ net leverage, a measure of their borrowing, increased in April as managers bought more stocks than they sold, according to… Goldman Sachs…”
May 7 – Bloomberg (Georgia Hall): “The recovery in European bonds is drawing investors back into carry trades abandoned at the height of Middle East tensions… The carry trade, where investors aim to profit from the difference between these rates, is working again as volatility declines amid optimism over a peace deal between the US and Iran. ‘There is an appetite to try to get back into carry trades,’ said Max Kitson, vice-president for fixed income at Barclays Plc. ‘At the start of the year, everyone was long carry, short vol, then obviously this energy shock came along. That washed a lot of people out.’”
May 3 – Financial Times (Laurence Fletcher): “When a merger announcement hits the wires, Sand Grove Capital Management has to be ready to act quickly. The hedge fund makes money from investing around big, corporate events such as M&A deals and is competing with others who do the same. Traditionally, reading through the complex, lengthy deal documents — which often stretch to over 100 pages — would take an investment professional over an hour. Even a quick review would take 15 to 20 minutes. But the use of AI has now reduced the process to seconds. ‘We think of AI as a very fast, very thorough intern who is brilliant at analysing big datasets,’ says Daniel Caplan, chief executive of London-based Sand Grove.”
Social, Political, Environmental, Cybersecurity Instability Watch:
May 7 – Financial Times (Martin Arnold): “The latest AI models pose a risk of ‘correlated failures’ that could affect the financial system on a ‘systemic’ level, the IMF has said, urging policymakers to prepare to deal with an ‘inevitable’ breach. The fund warned that the capabilities of new AI models ‘elevate cyber risk to a potential macro‑financial shock’. The IMF’s alert underlines how regulators are becoming increasingly alarmed at the potential for Anthropic’s Claude Mythos and other AI models developed by US tech companies to threaten the world banking system by exposing weaknesses in lenders’ cyber defences. ‘Advanced AI models can dramatically reduce the time and cost needed to identify and exploit vulnerabilities, raising the likelihood of simultaneously discovering and targeting weaknesses in widely used systems,’ senior IMF officials wrote…”
May 7 – Washington Post (Ben Noll): “Chances are rising that an El Niño expected to form soon could become one of the most powerful such events on record… The latest outlook from the European Center for Medium-Range Weather Forecasts (ECMWF) shows water temperatures in a key region of the central equatorial Pacific Ocean potentially reaching 3 degrees Celsius (5.4 degrees F.) above average late in the year. That could approach or even surpass the current records set in 1877 and 2015 and exceed the threshold for a super El Niño. ‘Confidence is clearly shifting higher on potentially the biggest El Niño event since the 1870s,’ wrote Paul Roundy, a professor of atmospheric science at the State University of New York at Albany. Records for El Niño began around 1850.”
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