He was impressive. Listening intently to Kevin Warsh’s post-meeting press conference was a reminder of why I admired Fed Governor Warsh (2006 to 2011) and was disappointed to see him leave the institution. The new Chair conveyed complete control over the subject matter, as well as admirable commitment and determination to uphold the great responsibility of leading our central bank in an uncertain and unstable era. It was only 45 minutes, but his opening Chair performance outshone all predecessors back to Paul Volcker.
Warsh: “We recognize that inflation has been running well ahead of the Fed’s long-stated inflation goal of 2%. That’s been going on for more than 5 years. Persistently high prices are a burden for the American people. But the recent past need not be prologue. I am pleased to report that members of the FOMC are unambiguous and unanimous: This Committee will deliver price stability.”
“…We have the capability and commitment to deliver on our price stability objective of 2%. That’s exactly what we’re going to do. In the Fed’s review of its strategy over the last any number of years, in January, the Fed -- including the strategy that we’re still bound by – the Fed statement says that inflation is primarily determined by monetary policy. You bet it is. I’ve said for years inflation is a choice. You bet it is. And today I’m announcing that this committee unambiguously and unanimously have decided we are going to deliver on that.”
“Inflation remains elevated relative to the committee’s 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The paragraph goes on to say, but, to be clear, the Fed will deliver price stability. My own judgment is the committee spent quite a bit of time, not just in two days, but over iterations of a couple of weeks. That’s what we’re prepared to say about inflation. But the commitment to deliver is strong, unanimous, and unambiguous. And that’s, I think, an important message we’ve missed for five years, and we’re going to fix that.”
“Today I think we had something important to say about our commitment to deliver on price stability, our commitment to rethink practices with an eye of moving the Fed forward, and to give you and the American people a sense that these aren’t idle thoughts, these are concrete thoughts, that we’re going to seek out the best minds -- both the best thinking inside of the Federal Reserve and the best people I know in business and economics and the academy and technology, and the rest -- to share their views. That’s what we’re going to be doing here, the pursuit of truth. I think we’re going to come up with some new and interesting things.”
June 17 – Bloomberg (Maya Prakash): “Federal Reserve Chairman Kevin Warsh’s highly anticipated maiden press conference… was, according to many Fed watchers, smooth, polished and tightly controlled… Economists largely gave Warsh high marks on style, saying he avoided major missteps and communicated his priorities clearly. Some, however, noted he sidestepped tougher questions on topics such as how, exactly, he would lower inflation. ‘It was classic Warsh. His comments were slick and well-rehearsed,’ said Joe Brusuelas, Chief Economist, RSM US. ‘One of the hallmarks of Warsh’s style that he has developed over the past three decades is that of a policymaker with strong preferences that lean in the direction of market-based indicators and preferences, rather than the more intellectually nimble framework favored by Ben Bernanke and Janet Yellen.’”
“Slick and well-rehearsed” – but not in a negative way. The backdrop demands a price stability hyper-focus. The new Chair delivered the appropriate message loud and unmistakably. Coincidentally, a few hours after Warsh’s press conference, President Trump signed the U.S.-Iran memorandum of understanding (MOU) as he dined with President Macron at the Palace of Versailles. For Warsh’s inflation focus and Trump’s MOU, both provided encouraging starts. Really tough challenges await. Success, on both fronts, hangs in the balance.
Colby Smith from the New York Times: “…I am curious how restrictive you think things are at the current moment, given the flow of data that we've seen, and you know, forecasts that are coming down the pipeline.”
Warsh: “I’ve heard characterizations both inside and the Fed about that. I’ll give you my own. It’s uneven. If I look at the housing markets as one example, Fed policy isn’t the single determinant of the state of the housing market. But broadly, I would say Fed policy appears to be somewhat restrictive. I would have a hard time managing to say those words if I were to see what’s happening in financial markets. So, I’d say it’s uneven. That’s perhaps a function of different transmission mechanisms of monetary policy, whether monetary policy is coming from our interest rate tool or our balance sheet tool.”
“Uneven” perhaps, but from a systemic standpoint, the somewhat restrictive policy stance from the housing perspective is inconsequential compared to loose conditions virtually everywhere else. Importantly, Warsh specifically noted the unrestrictiveness of “what’s happening in financial markets.” It’s the booming financial sphere that today poses the greatest risk to monetary and price stability.
I would have welcomed even terse mentions of some critical issues. “Financial conditions,” “Credit,” “hedge funds,” “leverage,” and “Wall Street” went unspoken. But the Chair’s comment regarding “what’s happening in financial markets” was a subtle shot across the bow.
June 19 – Reuters (Howard Schneider): “U.S. Federal Reserve Chairman Kevin Warsh put his stamp on the job fast this week at a debut policy meeting that produced a return to stripped-down, 1990s-style central banking, before this century’s crises put the Fed center-stage in economic management and turned its leader into a consoler-in-chief for Wall Street and Main Street alike. The question now is whether the reduced role he seeks for the Fed and in effect for himself is compatible with a world grown more complex, a more-intense and polarized information environment, and markets now accustomed to a steady diet of top policymaker commentary.”
Howard Schneider’s above article included insight from (former top NY Fed official) Evercore ISI’s Krishna Guha: “The market reaction ‘was massively amplified by the Warsh press conference that combined a hawkish near single-mandate emphasis on the need to deliver price stability, with a total absence of any modulating discussion of the Fed’s strategy or reaction function. Discussion of the reaction function and strategy... supports more effective central banking,’ a main tenet of current central bank practice.”
A Thursday Bloomberg article (Greg Ritchie, Ye Xie and Michael MacKenzie) quoted Johnathan Owen, portfolio manager at TwentyFour Asset Management: “He said absolutely nothing about the future of Fed policy, which leaves the markets in the dark. If it is a Fed that’s going to rely on a lot more real-time data, that’s how markets will trade.”
Tim Mahedy, chief economist at Access/Macro (PRNewswire): “We’re going to be parsing through comments trying to figure out what the reaction function is. It’s just like 1995 again.”
New Century Advisors’ Claudia Sahm: “I still have no idea what Kevin Warsh thinks about monetary policy. Maybe we need a task force for that! Saying you will deliver on price stability without explaining how you might do it is empty words.”
Warsh: “Financial market prices are probably the most important source of information to guide central bankers. But when all the financial markets are doing is reflecting back what we’ve said, then we’re taking the most important source of information, and we’re being blind to it.”
Kevin Warsh is approaching “regime change” with purpose. His term will undoubtedly be of major historical relevance. There were some less consequential changes to get the ball rolling: an abridged Fed policy statement and somewhat abbreviated press conference; a “dotless” Chair and, more substantially, a moratorium on forward guidance. A herd (five) of task forces will be engaged for a comprehensive review of communications, the Fed’s balance sheet, data/information sources, productivity and employment, and the Federal Reserve’s inflation framework.
Regime change is certainly overdue. I’ll go so far as to say Warsh is “the right guy.” It’s the “right time” issue where problems await. “Regime change” would be a predictable post-Bubble development. But we’re operating in Peak Bubble. Federal Reserve institutional transformation and inflation containment – with vulnerable Bubbles not missing a beat? “Everybody has a plan until they get punched in the mouth.”
Two-year Treasury yields surged 13 bps in post-press conference Wednesday trading – the largest jump since (“liberation day” turmoil) April 9th, 2025. At Thursday’s close, the market was pricing 93% probability for a (25bps) hike by the September 16th meeting (39% for the July 29th gathering). The market is now pricing two hikes over the next nine months – versus almost three (2.78) cuts back on pre-war February 27th.
Markets took Chair Warsh’s regime change introduction party pretty well, considering the hawkish tenor and the cold-turkey withdrawal of coddling and handholding. The Semiconductor rocket ship managed only a 1.4% gain during the session, as the S&P500 declined 1.2%.
In a different environment, markets might have buckled. After all, Warsh is committing to getting inflation back to target after five years of Fed flailing. It was a risky gamble when the Fed moved to slash rates in September 2024. If premature loosening accommodated upward pricing pressures, the next round of rate hikes would only confront more deeply entrenched inflationary dynamics. That’s today’s predicament.
Conditions have been extraordinarily loose, debt growth has accelerated, monetary inflation has gone into overdrive, and manic market excess has been nothing short of historic. In short, protracted “terminal phase Bubble excess” has gone to unprecedented extremes.
At this point, I believe a true tightening of financial conditions will be necessary to contain inflationary forces. It will require slower Credit expansion and a tighter liquidity backdrop. Tightened conditions would be perilous for historic Bubbles, at home and abroad.
Markets are pricing a 4.03% policy rate at yearend – with a 4.14% peak rate at the March 2027 FOMC meeting. With the current trajectory of excess, including debt growth, market speculation and AI arms race spending, a 4% policy rate will be insufficient to wrestle stubborn inflation back to target.
“If it can’t happen, it won’t happen.” Markets listened to Chair Warsh talk the talk, while completely dismissing the possibility that the Fed might actually move to tighten financial conditions. After all, rates that were hiked to (5.25% to) 5.5% (pre-9/18/24 loosening) failed to tighten conditions. A serious effort to rein in today’s deeply entrenched inflation would contemplate the possibility of meaningfully higher policy rates – perhaps even to 6 or 7%. Markets enjoy unwavering confidence that the Fed would not dare contemplate such a policy approach that would risk bursting Bubbles.
Fox Business’s Edward Lawrence: “So, if you don’t give a lot of ongoing forward guidance, won’t the markets have more volatility? And shouldn’t Americans have more access into what you’re thinking going forward?”
Warsh: “So, I think financial markets perform best when they react to incoming data. I think the financial markets work less efficiently when they ask a question: How will the Federal Reserve react to that incoming information? The more that markets are paying attention to what’s happening in the real economy, deciding what’s good data and what’s less-good data, the more financial markets can price what they believe is the most likely and what are the tail risks. Financial market prices are probably the most important source of information to guide central bankers. But when all the financial markets are doing is reflecting back what we’ve said, then we’re taking the most important source of information and we’re being blind to it. I’d like us to create a system where those blinders come off, where markets are following data that they efficiently think is reliable, and they’ll be watching data, we’ll be watching data, they’ll come with better information through market prices to us. We can make more-informed decisions with, ultimately, the goal that I set at the outset: Deliver on the price stability objective that Congress told us to do and that we’ve got to get in the business of doing.”
Kevin Warsh is right on this. Wall Street and the Federal Reserve have been locked in a dysfunctional co-dependent relationship. A central bank should avoid pre-committing to a future policy course. The Statement of Economic Projections (more specifically with projected policy rate “dots”) encourages markets to speculate on prospective policy moves, which then biases future decision-making. The FOMC needs to be nimble and not face pressure from shifting forecasts and upsetting the markets. When Fed officials publicly and in detail convey their views, there is a psychological component of seeking to avoid criticism from “flip flopping” and misjudgments.
This is an especially powerful late-cycle dynamic. Markets ignore myriad risks, including troubling inflation dynamics, confident that the Fed will not risk bursting Bubbles. Markets price ongoing relatively low policy rates and loose conditions, content to disregard Credit excess, asset Bubbles, and overheating risks. Faith in the Fed’s liquidity backstop ensures markets price “the most likely” while almost completely disregarding “what are the tail risks.”
Hyman Minsky’s “stability is destabilizing” theory is apt. Believing the Fed is trapped by systemic Bubble fragilities, the market prices ongoing low rates and monetary policy accommodation – irrespective of economic, financial, and market developments. Such a backdrop only fuels self-reinforcing Bubble excess. Importantly, the markets’ pricing of policy stability breeds the kind of behavior (i.e., speculation and leverage) that exacerbates system fragility. This ensures that the longer things remain ostensibly stable, the more precarious the underlying backdrop becomes.
Bloomberg’s Enda Curran: “Could you guide us through, please, some of the principles that guide your own reaction function, and tell us a little bit about the kind of conditions that you think when the Fed should respond?”
Warsh: “It’s going to be a very unsatisfactory answer to the final question. The Federal Reserve has a lot of responsibilities -- not just in monetary policy, but in supervision and regulation, consumer affairs, and payments. My own view is our credibility comes from delivering on what we’re saying we’re going to do across everything we do. I’ve devoted more time in my first three weeks to monetary policy than all those things. But the more we deliver on our promises as good supervisors and good regulators, the more benefit we get, the more credibility enhancement we have in monetary policy. When we deliver on our price stability objectives - which we will - the American people will feel as though the hardships that they’ve been living through in part because of inflation in the last five years are in the rear-view mirror, and that credibility will have dividends across what we do. And the institution will come to press conferences like this always with an impetus to reform, always with an impetus to do better, but we’re going to put some points on the board.”
“Unsatisfactory” indeed. Not sure how long the Chair can dodge the “reaction function” question. Surely, Warsh has well-defined thoughts on this critical issue. He has had three decades to shape his analytical framework, including the past 15 years working with Stanley Druckenmiller. Perhaps his strategy is to afford his task forces the opportunity to do their work and come with comprehensive analysis and recommendations. Until then, for better or worse, key elements of the new regime’s policy analytical framework will remain somewhat of a mystery.
If I were a task force member, I’d be an impassioned proponent of incorporating financial conditions analysis as a fundamental policy analytical focus. Scrap problematic “neutral rate” conjecture. Focus instead on lending conditions, the marketplace liquidity backdrop, debt issuance and Credit growth, speculation and speculative leverage, Wall Street risk intermediation, risk premiums and financial flow analysis.
It's difficult to believe that Mr. Warsh’s 15 years alongside Stanley Druckenmiller haven’t been transformational. For a Fed official, let along the Chair, he has gained unique insight and perspective. I’m assuming he understands the issues, the “plumbing,” the excesses, the vulnerabilities, and most things contemporary levered speculative finance. Warsh has intimate knowledge and understanding of today’s Bubble. He’s been in the catbird’s seat, watching, thinking, discussing – and contemplating possible policy prescriptions.
This could go either way. The Warsh Fed might orchestrate a tightening, with a focus on containing both inflation and precarious financial excess. That would be a perilous course, which future historians might find parallels to Paul Volcker.
More likely, Warsh will attempt to thread the needle between moderate containment of inflation and financial excess, while avoiding Bubble piercing. We can imagine, over French toast and strawberry waffles, Warsh and Bessent discuss weekly the perils of bursting Bubbles and the absence of good policy options. Resolved to avert catastrophe, growing out of over indebtedness and imbalances might be viewed as a gamble worth taking. They should know better. There will be no growing out of the consequences of history’s greatest Bubble.
Warsh: “If I heard one other thing around that subject over the course of the last couple of days, what I heard was that strong productivity-led growth is not something that we fear but something we embrace. Thank you all very much.”
Warsh’s Regime Change is a momentous development at a perilous juncture. The entire architecture of global financial asset prices rests on the assumption of indefinitely loose monetary conditions. Unprecedented speculative leverage has accumulated on the presumption that the Federal Reserve and global central bank community guarantee unrelenting low rates and liquidity abundance. Is market adjustment in the offing?
At the minimum, Kevin Warsh has injected major additional uncertainty into an already complicated equation. The Dollar Index rose 1.0% this week to a one-year high. Currency markets, curiously stable throughout the war, appear at the cusp of instability. Nervousness must be building throughout the levered EM “carry trade” universe. And while the AI mania/arms race remains in full force, festering de-risking/deleveraging risks are evident elsewhere (i.e., bonds, crypto, commodities, metals…). With the war MOU, the SpaceX IPO, and quarterly options/derivatives expiration all now behind us, an abrupt change in the market environment is not an unlikely scenario.
Warsh: “But our number-one goal is to get monetary policy right. The way to get monetary policy right is to deliver on the remit that Congress gave us, to deliver on price stability.”
For the Week
The S&P500 gained 0.9% (up 9.6% y-t-d), and the Dow increased 0.7% (up 7.3%). The Utilities added 0.3% (up 4.7%). The Banks were unchanged (up 9.5%), and the Broker/Dealers surged 3.9% (up 13.3%). The Transports sank 4.2% (up 24.7%). The S&P 400 Midcaps were little changed (up 14.7%), and the small cap Russell 2000 gained 1.2% (up 20.1%). The Nasdaq100 jumped 2.6% (up 20.4%). The Semiconductors surged 7.3% (up 102.5%). The Biotechs advanced 1.4% (up 11.3%). While bullion declined $64, the HUI gold index rose 3.1% (up 0.3%).
Three-month Treasury bill rates ended the week at 3.6563%. Two-year government yields jumped 10 bps to 4.18% (up 70bps y-t-d). Five-year T-note yields increased three bps to 4.23% (up 51bps). Ten-year Treasury yields slipped three bps to 4.45% (up 29bps). Long bond yields declined seven bps to 4.90% (up 5bps). Benchmark Fannie Mae MBS yields added a basis point to 5.44% (up 40bps).
Italian 10-year yields dipped three bps to 3.70% (up 15bps y-t-d). Greek 10-year yields slipped two bps to 3.65% (up 21bps). Spain's 10-year yields rose four bps to 3.46% (up 17bps). German bund yields dipped one basis point to 2.99% (up 13bps). French yields were unchanged at 3.74% (up 18bps). The French to German 10-year bond spread widened about one to 75 bps. U.K. 10-year gilt yields increased a basis point to 4.84% (up 36bps). U.K.’s FTSE equities index declined 1.0% (up 4.3% y-t-d).
Japan’s Nikkei 225 Equities Index surged 7.9% (up 41.5% y-t-d). Japan’s 10-year “JGB” yields increased three bps to 2.66% (up 59bps y-t-d). France’s CAC40 increased 0.8% (up 3.3%). The German DAX equities index rallied 1.4% (up 2.0%). Spain’s IBEX 35 equities index jumped 3.1% (up 11.8%). Italy’s FTSE MIB index rose 2.6% (up 17.3%). EM equities were mixed. Brazil’s Bovespa index fell 1.5% (up 4.6%), and the Mexico’s Bolsa index declined 0.4% (up 5.2%). South Korea’s Kospi surged 11.4% (up 114.8%). India’s Sensex equities index recovered 1.7% (down 9.9%). China’s Shanghai Exchange Index gained 1.5% (up 3.1%). Turkey’s Borsa Istanbul National 100 index jumped 5.7% (up 30.8%).
Federal Reserve Credit expanded $8.9 billion last week to $6.681 TN, with a 27-week expansion of $191.1 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 $2.946 TN, or 79%. Fed Credit inflated $3.870 TN, or 138%, since November 7, 2012 (710 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt declined $7.4 billion last week to $2.921 TN - the low back to September 2010. “Custody holdings” were down $306 billion y-o-y, or 9.5%.
Total money market fund assets (MMFA) jumped $39.7 billion to a record $7.919 TN. MMFA were up $904 billion, or 12.9%, y-o-y - having ballooned a historic $3.335 TN, or 73%, since October 26, 2022.
Total Commercial Paper fell $12.6 billion to $1.401 TN. CP declined $72 billion, or 4.9%, y-o-y.
Freddie Mac 30-year fixed mortgage rates declined five bps to 6.47% (down 34bps y-o-y). Fifteen-year rates slipped three bps to 5.81% (down 15bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate up a basis point to 6.71% (down 24bps).
Currency Watch
June 18 – Financial Times (Joseph Cotterill and Ian Smith): “A resurgence in the dollar has sent bets on the currencies of big emerging markets and major commodity producers into reverse, as a hawkish shift by the Federal Reserve upends what had been one of the strongest trades in FX markets this year. Currencies such as the Argentine peso and Norwegian krone have been hit in recent weeks as markets have begun to price in higher US interest rates… ‘Expectations of a hawkish shift in US rates are reshaping currency markets,’ said Rushabh Amin, a multi-asset portfolio manager at Allspring Global Investments. He added that this was undermining currencies that had offered the so-called carry of higher expected interest rates.”
For the week, the U.S. Dollar Index gained 1.0% to 100.76 (up 2.5% y-t-d). On the downside, the Norwegian krone declined 1.9%, the Brazilian real 1.8%, the New Zealand dollar 1.6%, the British pound 1.3%, the Swiss franc 1.2%, the Canadian dollar 1.2%, the Swedish krona 1.2%, the South African rand 1.0%, the South Korean won 0.9%, the euro 0.8%, the Mexican peso 0.7%, the Japanese yen 0.7%, the Singapore dollar 0.5%, and the Australian dollar 0.5%. China's (onshore) renminbi slipped 0.08% versus the dollar (up 3.25% y-t-d).
Commodities Watch
June 15 – Bloomberg (Jack Ryan): “More central banks than ever expect to increase their gold reserves, a sign one of the key forces behind bullion’s record-breaking rally remains intact despite this year’s pullback. In a survey of 74 central banks, 45% said they plan to buy in the coming year, the biggest-ever share in data collected by the World Gold Council and YouGov Plc since 2018. Just one said it planned to cut holdings, the WGC said…”
June 16 – Wall Street Journal (Giulia Petroni): “Central banks are increasingly shifting where they store their gold—a move that reflects growing geopolitical concerns and a desire to ensure greater control and access to reserves. A survey from the World Gold Council… showed fewer central banks now store bullion in London and New York than a year earlier, two hubs that house the world’s most liquid bullion markets. ‘This year's survey reveals an emergent trend of central banks increasingly looking to diversify gold vaulting locations,’ the WGC said… The survey found 57% of respondents stored gold at the Bank of England, down from 64% last year, while 14% held bullion at the New York Federal Reserve, down from 17%.”
The Bloomberg Commodities Index fell 1.9% (up 15.7% y-t-d). Spot Gold declined 1.5% to $4,156 (down 3.8%). Silver sank 4.6% to $64.9028 (down 9.4%). WTI Crude slumped $7.34, or 8.6%, to $77.54 (up 35%). Gasoline dipped 1.5% (up 75%), while Natural Gas recovered 2.5% to $3.198 (down 13%). Copper lost 1.6% (up 13%). Wheat rallied 3.6% (up 20%), and Corn gained 1.2% (down 5%). Bitcoin declined $400, or 0.6%, to $63,200 (down 28%).
Market Instability Watch
June 17 – Bloomberg (Greg Ritchie, Ye Xie, and Cameron Fozi): “Traders piled into betting on interest-rate hikes as soon as next month after Kevin Warsh used his debut press conference as Federal Reserve chairman to make clear the central bank won’t tolerate high inflation. Two-year Treasury yields, which closely track expectations for monetary policy, steadied on Thursday at around 4.17% after shooting up 13 bps on Wednesday. That was the biggest jump since April 2025 and matched the largest increase on a Fed meeting day since 2008. The hawkish message was driven home by the projections of individual Fed members, half of whom expect to raise rates by the end of the year.”
June 17 – CNBC (Yun Li): “DoubleLine Capital CEO Jeffrey Gundlach said new Federal Reserve Chairman Kevin Warsh struck a more hawkish tone than many investors expected, underscoring his commitment to restoring price stability and signaling less appetite for easy monetary policy. ‘He is absolutely telling you that he plans on delivering on price stability. So that means... we’re not going to have such easy money policy as everybody thought maybe Chairman Warsh would do back in the first quarter of this year, when everyone was counting on rate cuts… He doesn’t sound like that today at all.’”
June 17 – Bloomberg (Natalia Kniazhevich): “Retail investors poured into US stocks at a record pace on the day of SpaceX’s blockbuster initial public offering and are increasingly driving the broader rally in equities, according to Citadel Securities. SpaceX’s debut on June 12 coincided with the largest single day of net buying by individual investors ever recorded by Citadel Securities, which executes around 35% of all US-listed retail volume. Trading activity from the group spiked to unprecedented levels across both equities and options…”
June 17 – Financial Times (Martin Arnold, Joshua Franklin and Kate Duguid): “Wall Street groups are warning US regulators that their plans to implement ‘Basel Endgame’ global bank capital requirements will threaten liquidity in Treasury markets, urging them to rework proposals to manage market risk. The claim of potential instability in the $29tn Treasury market is the latest burst of lobbying by US banks over Washington’s plans to adopt rules drawn by global regulators on how lenders assess risk in response to the 2008 financial crisis. The US Federal Reserve and other regulators have already dramatically watered down their plans under pressure from lenders, meaning that instead of causing a big increase in overall capital requirements for American banks, they are now expected to lower them.”
June 16 – Bloomberg (Ye Xie): “Citadel Securities says odds are rising that the Federal Reserve will begin a series of interest-rate increases as soon as September as inflation becomes more persistent and broad-based. Although oil prices have retreated after the US and Iran announced they reached an interim peace deal to end their conflict, inflation pressures have become more entrenched over the course of the war, Frank Flight, the firm’s head of macro strategy, wrote… Easy financial conditions, lingering supply-chain disruptions, a reaccelerating labor market and a surge in artificial-intelligence investment are converging to sustain price pressures, he said.”
U.S. Credit Trouble Watch
June 16 – Bloomberg (Charlotte Plaskwa): “The default rate among private-credit borrowers has reached the highest in the roughly three-year history of an index from Kroll Bond Rating Agency LLC, adding to signs of stress in the $1.8 trillion industry. The trailing 12-month default rate in the KBRA DLD Direct Lending Index rose to 2.3% of issuers…, matching the highest level since the gauge’s inception… The firm expects the rate to keep rising, ending 2026 at 3.5%, or roughly 111 issuers.”
June 18 – Bloomberg (Liam Knox): “The number of student loan borrowers in default soared to a record 9.16 million in April after the government ended a four-year pause on collections that was instituted during the Covid pandemic… The figure… is an increase from 7.7 million people in default in December and 6 million reported for August last year. That means about 20% of the 43 million Americans with federal student debt are more than a year behind on their payments. In addition, about 3 million people are at least 90 days behind on payments.”
June 17 – Bloomberg (Martin Z Braun): “More than two decades after Wall Street started pumping out a new type of bonds — those backed by the legal-settlement payments governments receive from cigarette companies — one batch has finally been driven into a default. It almost certainly won’t be the last. The securities allowed state and local governments to get the cash upfront by selling debt that’s repaid, gradually, when the proceeds roll in. That offloaded all the risk to investors, who were compensated with high yields in return. But the warning signs in what swelled into an $80 billion corner of the municipal-bond market have been building up for years because the size of the annual payments under the 1998 agreement are based on cigarette shipments. And those have been plunging, year after year, at a far faster pace than was expected…”
Global Credit Bubble Watch
June 14 – Financial Times (Eric Platt, Kate Duguid, Michelle Chan and Amelia Pollard): “US investors are showing a voracious appetite to fund the AI race and put cash to work, agreeing to dole out more than $100bn in the span of a few days, even as anxieties about global growth and the Iran war loom in the background. The $75bn initial public offering of SpaceX… and $35bn debt financing for Anthropic point to an investor willingness to absorb a torrent of supply. Bankers are in the final stages of cobbling together more than $40bn of debt for Paramount to pay for its takeover of Warner Bros Discovery, with their equity capital markets colleagues turning their attention to the looming IPOs of Anthropic and OpenAI. Kristina Hooper, chief market strategist at Man Group, said: ‘There is an incredible combination in markets of Fomo [fear of missing out] and fear. Fomo most weeks, including this week, is winning out.’”
June 15 – Financial Times (Michelle Chan and Tim Bradshaw): “Chipmaker Nvidia is planning to sell $25bn of investment-grade debt in the US on Monday, its first bond sale in five years… The issuance was upsized from $20bn after receiving more than $85bn in orders by early afternoon in New York…”
June 18 – Bloomberg (Brian Smith, Davide Barbuscia and Gowri Gurumurthy): “Bankers for Elon Musk’s SpaceX are preparing to hold calls with investors as soon as next week to discuss a potential bond offering on the heels of the company’s record IPO… The bond is expected to be at least $20 billion…”
June 16 – Wall Street Journal (Vicky Ge Huang): “Artificial-intelligence companies hungry for cash are rushing into an arcane corner of the bond market. As U.S. companies search to fund their AI ambitions, they are issuing near-record volumes of bonds that investors can convert into stocks if the shares rise to a designated price… So far this year, U.S.-listed companies including CoreWeave and Microchip Technology have issued about $54 billion worth of convertible bonds. That is up 43% from the same period in 2025, and the highest year-to-date volume since the start of the Covid-19 pandemic.... Bankers and investors expect the momentum to continue, driven by everything from the AI boom’s huge infrastructure build-outs to an insatiable demand for chips. ‘Convertibles are growth capital for growth issuers, and I don’t think you can think of a better growth opportunity than AI,’ said Joe Wysocki, senior co-portfolio manager at Calamos Investments.”
Leveraged Speculation Watch
June 16 – Bloomberg (Alice Atkins and Naomi Tajitsu): “Some sovereign debt chiefs are warming up to the growing footprint of hedge funds in government bond markets, casting these investors as potentially beneficial participants rather than a source of risk. The heads of the Canadian, German and Italian government debt offices said the more active role now being played by hedge funds is benefiting liquidity and market functioning. The remarks, at the FT Global Bond Summit…, follow recent concerns from various regulators about the risks to financial stability from leveraged hedge fund strategies. ‘A year or so ago, we were fairly concerned, but our views have evolved and they’re more nuanced now,’ said Matt Emde, director general for funds management at the Government of Canada’s department of finance. ‘It’s added depth to our markets, and we’re getting better pricing interactions because these hedge funds have been bidding very aggressively, they want the volumes.’ Emde said that hedge funds currently make up 30%-50% of demand in Canadian debt auctions.”
June 16 – Bloomberg (Abhinav Ramnarayan): “Man Group Plc says ‘bubble risks’ are mounting as bond sales boom in the race to build out artificial intelligence infrastructure. ‘The enthusiasm for the sector has encouraged significant overreach,’ wrote executives including Sriram Reddy, head of client portfolio management… ‘We are particularly concerned about issuance in the high yield and leveraged loan markets, where many borrowers remain firmly free-cash-flow negative.’ Man Group, the world’s largest listed hedge fund, said the AI-related debt splurge is expected to dwarf issuance during the dot-com era, citing estimates from Morgan Stanley that total AI and hyperscaler-related issuance may reach $400 billion in investment grade bonds and a further $65 billion in junk debt. That may account for nearly 20% of total issuance…”
June 14 – Reuters (Summer Zhen): “Some Asia hedge funds delivered returns exceeding 100% in the first five months of the year, riding on record highs in stock markets and wagers on AI hardware and large language model leaders… The performance highlights how market volatility induced by the Iran war has not derailed the AI-driven rally this year, as growing demand and tight supply lifted stocks and pushed Japan, South Korea and Taiwan to record highs.”
Iran War Watch
June 19 – Associated Press (Erin Cunningham, Jon Gambrell and Aamer Madhani): “Talks between the U.S. and Iran were called off Friday after intense fighting between Israel and Hezbollah in southern Lebanon, officials said, raising questions about an initial agreement to end the war in Iran. Israel and the militant group later agreed to renew their ceasefire, three officials said.”
June 17 – New York Times (David E. Sanger): “It was less than 15 weeks ago when President Trump, at the height of his bravado about how the war with Iran would end, declared ‘there will be no deal with Iran except UNCONDITIONAL SURRENDER.’ When the text of the deal intended to wind down the conflict was… read aloud paragraph by paragraph by a senior administration official who stopped to defend each section, it read nothing like a surrender document. Instead, the Iranians emerged from a confrontation with the world’s most powerful military having not only survived, but with much to celebrate. It starts with the resumption of Tehran’s ability to reap billions of dollars in oil sales, lifting pressure on the struggling regime even as negotiators prepare to begin haggling over a far more lengthy and critical document…”
June 17 – Bloomberg (Nick Wadhams): “President Donald Trump and his team had several red lines that they used to justify the US war against Iran… On Wednesday, Trump largely brushed them aside. Explaining his decision to agree to an interim peace deal, Trump repeated his insistence that the country would never get a nuclear weapon. Yet he went on to suggest that Iran should have the right to enrich uranium, be allowed to develop ballistic missiles and get access to billions of dollars in frozen funds. Those three things have been at the center of the debate around how to approach Iran for years, dating to the 2015 agreement that the US, under President Barack Obama, and other great powers signed with Iran to limit its nuclear program.”
June 14 – Financial Times (Andrew England and Neri Zilber): “About a week into the US war against Iran, Donald Trump pledged that there would be no deal with Tehran except ‘unconditional surrender!’ More than 100 days later, the US president is hailing a deal that underlines not only the Islamic republic’s capacity to withstand American-Israeli bombing but its newfound leverage from severely disrupting energy flows through the Strait of Hormuz. US officials say the agreement will not only reopen the strait but is also a pathway to finally dismantling Iran’s nuclear programme… But others say that while a deal to halt the war is welcome, it pushes key issues further down the road… ‘It’s a very weak deal for the US considering what the stated objectives were at the beginning,’ said Dan Shapiro, a former senior US official. ‘It largely attempts to reopen the strait, which had definitely become the most important issue. But that just demonstrates how much leverage Iran had to persuade Trump that it was better to end this war even on weak terms than to continue it.’”
June 16 – Associated Press (Jon Gambrell, Sam Metz, and Samy Magdy): “Iran’s top diplomat said Tuesday that the tentative deal to end the war with the United States would require Israel to withdraw from Lebanon — a condition Israel has already rejected and that could sink the agreement, leading to the resumption of all-out war… Iranian Foreign Minister Abbas Araghchi said Israel’s continued occupation of southern Lebanon would violate the deal. ‘Without the withdrawal of Israeli forces from the territories they occupied during this war, the war has not fully come to an end,’ Araghchi said.”
June 18 – Reuters (Nandita Bose and Yomna Ehab): “Oil tankers sailed through the Strait of Hormuz and the United States said it lifted its blockade on Iran on Thursday as an interim deal to end the war took effect, though key issues are still unresolved between the two countries… But Israel continued its war against Hezbollah in Lebanon, raising questions about whether the agreement would hold. In Washington, some of President Donald Trump’s Republican allies in Congress questioned whether he had given up too much in order to end the conflict… Iran’s Supreme Leader Ayatollah Mojtaba Khamenei said Trump signed the deal ‘out of desperation’ and signaled that upcoming talks over Iran’s nuclear program… would not be easy. ‘If the American side wants to be too demanding, we will not accept it,’ he said…”
June 18 – Financial Times (Alice Hancock): “Iran has said it reserves the right to charge ships ‘insurance fees’ for passage through the Strait of Hormuz as it seeks to establish control over the waterway following the interim peace deal with Washington. In a document circulated among shipping industry executives…, Iran’s Persian Gulf Strait Authority said that ‘all vessels must hold a valid insurance policy approved by the PGSA’. While this would be provided ‘free of charge’ for the moment, the PGSA — a government agency created in May — said it ‘reserves the right to introduce insurance fees in the future, which will be determined by the relevant insurer’.”
June 15 – Reuters (Samia Nakhoul): “The U.S.-Iran deal may silence the guns, but it cannot alter the verdict of more than three months of war. The region has emerged from one of its most dangerous crises in decades with the balance of power broadly unchanged, Iran politically emboldened, and Gulf confidence in U.S. protection deeply shaken, Gulf sources, diplomats and analysts say. Iran remains a formidable and undefeated force capable of threatening Gulf Arab states and global energy flows, they say, while the United States has again revealed the limits of military power against a resilient adversary.”
June 16 – Financial Times (Najmeh Bozorgmehr): “As Iran’s state television blasted out victory anthems after announcing the deal with the US, a new narrative began taking shape in Tehran: the regime believes it has not only survived its greatest crisis in decades, but emerged stronger. Within the highest ranks of the Islamic republic, nobody would deny Iran is nursing devastating losses… But regime insiders, Iranian analysts and western diplomats in Tehran agree on one thing: the war failed to bring the radical transformation sought by Iran’s enemies. In fact, the regime, which at the start of the year appeared to be at its most vulnerable, seems more confident than before the war began in February. ‘The US made a big mistake. It awakened the sleeping dragon,’ said a regime insider. ‘We paid a huge price, but we activated capacities that we had previously hesitated to use.’”
Iran War Ramifications Watch
June 18 – New York Times (David M. Halbfinger): “Israel awoke to a frightening new reality on Thursday as it absorbed, with disbelief and largely in silence, the terms of President Trump’s preliminary agreement to end the war with Iran. It accomplishes none of Israel’s war aims, analysts and officials said, and arguably leaves the country in worse shape on each of them. Regime change? The government in Tehran is emerging from the war even more hard-line and emboldened… The deal’s requirement that American forces retreat from the ‘proximity’ of Iran within 30 days means that Iran can boast that it has chased the U.S. military out of the region. Ballistic missiles and proxy militias? The agreement does nothing to address Iran’s missile arsenal or its support of Israel’s enemies, like Hezbollah… and the Houthis… David Horovitz, the editor of The Times of Israel, called it ‘a catastrophic capitulation,’ in the headline of a fiery opinion column.”
June 17 – Bloomberg (Weilun Soon): “Oil flows going through the Strait of Hormuz may recover to only about 70% of their pre-war level, according to Goldman Sachs..., which highlighted regional producers leaning on alternative routes. ‘This normalization in gulf exports to pre-war levels might be achieved with a 13-million-barrel-a-day increase in Hormuz flows from current levels,’ analysts including Yulia Zhestkova Grigsby wrote… The expected pickup in shipments may be completed by the end of next month, with gulf production likely to recover by October, they said.”
June 14 – Wall Street Journal (Collin Eaton, Benoît Morenne and Michael R. Gordon): “President Trump’s deal with Iran is set to reopen the Strait of Hormuz, but how quickly it can arrest a steep decline in oil stockpiles will determine the trajectory of energy prices in the coming weeks. For more than 15 weeks, the U.S. and other countries around the world have had to dip into oil tanks, salt caverns and strategic reserves to make up for the millions of barrels of oil trapped behind the strait. Now, the stocks are nearing critical levels, and energy executives say without an influx of more oil, prices will have to surge to stop the run on supplies. Mike Wirth, chief executive of Chevron, has repeatedly warned on television that the supply crunch will soon manifest itself around the world. Neil Chapman, the No. 2 at Exxon Mobil, has said the U.S. is approaching ‘unheard-of inventory levels.’ Other executives, such as Wil VanLoh, of Quantum Capital Group, say ‘it’s going to get ugly.’”
June 18 – Financial Times (Ryohtaroh Satoh and Peter Campbell): “Jet fuel prices have tumbled as traders prepare for a resumption of exports from the Middle East… The north-west European jet fuel benchmark sank as low as $957 a tonne this week according to data from Argus Media, down nearly 50% from its peak in early April... Singapore jet fuel prices fell to their lowest level since the start of the war on Thursday. On the US Gulf Coast, prices also dropped to their lowest level since early March.”
June 15 – New York Times (Patricia Cohen): “The framework deal between the United States and Iran sets the stage for an end to the bursts of violence and debilitating disruption of energy deliveries and trade in the Persian Gulf. But don’t expect economies around the globe to simply pick up where they left off before… Feb. 28. The war has set in motion changes that will be hard to reverse. The near shutdown in oil and gas deliveries from the Middle East and the leap in prices are causing a shift in power. Energy producers from the Gulf to the Americas are jockeying to maintain or increase their dominance, and customers are struggling to reduce their dependency and shore up their supply. As a result, the energy market is changing, the energy mix is changing and the energy players are changing.”
Trump Administration Watch
June 17 – Wall Street Journal (Alexander Ward, Natalie Andrews and Vera Bergengruen): “President Trump on Wednesday defended his agreement to end the Iran war, saying he wanted to avoid an ‘economic catastrophe’ that could have resulted if the conflict the U.S. launched had continued. Trump… said he was influenced by the stock market’s rise as he worked toward a resolution of the conflict. He said he didn’t want to be compared with former President Herbert Hoover, who was president during the 1929 market crash that led to the Great Depression. ‘He was always the one I didn’t want to be,’ Trump told reporters… ‘I didn’t want to see an economic catastrophe.’”
June 17 – CNBC (Hugh Leask): “President Donald Trump said Wednesday at the G7 conference that the U.S. will ‘go right back to dropping bombs’ if he doesn’t like the Iran deal. Trump said that the proposed agreement to bring the Middle East conflict to an end… is ‘not final.’ ‘It’s a memorandum of understanding, and if I don’t like it, we’ll go back to shooting at them, dropping bombs on their heads. I don’t like it if they don’t behave. We’ll go right back to dropping bombs right smack in the middle of their head,’ the president said…”
June 15 – Axios (Barak Ravid): “CIA Director John Ratcliffe told President Trump and other senior officials that evidence gathered by U.S. intelligence agencies raises serious doubts about Iran’s willingness to make the nuclear concessions the U.S. is seeking in any final deal, according to three sources… Friction point: Ratcliffe isn’t the only skeptic in Trump’s top team. In internal discussions, Secretary of State Marco Rubio and Secretary of Defense Pete Hegseth both expressed concerns and raised questions about the memorandum of understanding (MOU) announced Sunday, while Vice President Vance and U.S. envoys Steve Witkoff and Jared Kushner advocated for it…”
June 19 – Wall Street Journal (Brian Schwartz, Natalie Andrews and Alexander Ward): “President Trump has delivered the same retort to political allies who have offered him strategic advice in recent weeks, according to people with knowledge…: ‘I’m the president and you’re not.’ Seventeen months into his second term, Trump is increasingly relying on his own gut instincts, dismissing the counsel of aides, conservative lawmakers and longtime associates. The result has been a series of decisions that have confounded and frustrated Republicans—heightening fears that voters will punish the GOP in the November elections and testing Trump’s iron grip on the party.”
June 16 – Reuters (Michel Rose, John Irish and Steve Holland): “U.S. President Donald Trump… told a roomful of global leaders ‘I’m the boss’, as he and other G7 heads acknowledged Ukraine’s improved battlefield fortunes with a unified pledge of support and fresh sanctions against Russia. Trump’s comment -- a tongue-in-cheek acknowledgment of an unspoken truth hanging over the June 15 to 17 summit of the Group of Seven Western powers in the French resort of Evian-les-Bains -- followed a joint leaders’ statement that could bolster Kyiv’s growing leverage in potential peace talks with Moscow.”
June 14 – Bloomberg (Maggie Eastland, Joshua Green, and Nancy Cook): “The extraordinary move by the US to bar foreign access to Anthropic PBC’s best AI models underscores the Trump administration’s newfound willingness to exert control over a pivotal industry. It also reminds Silicon Valley that it’s working with an imperfectly understood technology with uncertain impact. Washington has taken the unprecedented step of ordering the AI startup to disable access to its most advanced AI platforms for all foreign nationals. The US government issued the order after discovering it’s possible to ‘jailbreak,’ or bypass the guardrails, of the Fable 5 AI model Anthropic released just days prior.”
June 16 – Axios (Mike Zapler): “The Trump administration says it wants American AI to dominate the world. But its decision to force Anthropic to abruptly cut off access to one of its most advanced models risks sending foreign governments and companies a very different message: Don’t build your future on U.S. AI. As the Trump administration shapes its AI regulatory regime in real time, the precedents it sets could reverberate far beyond an individual showdown with Anthropic. The last month of AI policymaking has been a blur of zigs and zags by the administration. First Trump delayed an executive order that would have created a voluntary reporting system for advanced AI releases. He said he didn’t want to threaten America's lead over China. A few weeks later, the White House issued a slimmed-down executive order that explicitly barred mandatory government licensing. Then came Friday: The administration placed Anthropic’s Mythos 5 and Fable 5 under export controls, a move critics said amounts to a licensing system by another name.”
June 15 – CNBC (Matt Peterson): “When Kevin Warsh steps to the podium… for his first news conference as chair of the Federal Reserve, he will enjoy something his predecessor Jerome Powell lacked for years: breathing room from the president. ‘The president trusts Warsh, so he’ll have some scope of action,’ a person familiar with Trump-Fed dynamics said…”
June 17 – New York Times (Julian E. Barnes and Dustin Volz): “Bill Pulte, a close ally of President Trump’s, appears set to take over as the acting director of national intelligence on Friday, despite deep opposition on Capitol Hill and apprehension inside the nation’s spy agencies. Mr. Pulte has used his current post as a top federal housing official to help with Mr. Trump’s campaign of retribution against his perceived enemies. Lawmakers are worried that Mr. Pulte could find ways to weaponize the spy office even in just a few days on the job.”
June 18 – Axios (Ben Geman): “Federal regulators… ordered grid operators across a vast swath of the country to show how they will speed connection of AI data centers to transmission systems. The Federal Energy Regulatory Commission’s orders aim to enable the AI boom, but without making power grids less reliable or raising consumer costs. The move takes place as tech giants are thirsty for power to fuel AI, but political and community backlash to massive new data centers is growing. The regulators issued their orders to six grid regions that together encompass over 200 million people in 30 states… The commission is demanding that the grid operators ‘justify or reform the rules that govern how data centers, manufacturing facilities, and other large energy users connect to the electric grid,’ a summary states. Chairwoman Laura Swett called the orders on data centers and other large new power demand sources an ‘historic action’ to push electricity markets into the future.”
June 17 – Bloomberg (Jennifer A. Dlouhy and Gregory Korte): “The Trump administration wants 400 dealmakers to help the US bolster its national security supply chains — and it’s offering salaries as high as $400,000 a year for Wall Street recruits… Under a new hiring initiative, the White House is targeting top dealmaking talent by dangling those potential salaries… with the promise that candidates won’t have to shed their private-sector stock options. The goal is to enlist the workers in helping the federal government develop financial agreements meant to cultivate critical supply chains and domestic industries critical for national security…”
June 18 – CNBC (Matt Peterson): “Federal Reserve Governor Lisa Cook incurred more than $1.3 million in legal and security expenses following President Donald Trump’s attempt to fire her in August from the Fed’s board… The filing showed those expenses were paid by other individuals and organizations. The Supreme Court is expected to rule within the next several weeks whether Trump has the power to fire Cook for the reasons he cited.”
Trade War Watch
June 18 – Reuters (Philip Blenkinsop): “European Union leaders were set to debate new and tougher measures on Thursday that could be needed to curb the bloc’s growing trade deficit with China and its heavy reliance on the world's second-largest economy for rare earths and other critical supplies. EU diplomats say there is a gradual convergence of views among the 27 EU members that there is a problem with the goods trade deficit with China… The situation is more critical as transatlantic tariffs diminish access to the U.S. market.”
Budget Watch
June 18 – Wall Street Journal (Lara Seligman, Yoko Kubota and Marcus Weisgerber): “The Pentagon needs $80 billion to cover costs from the Iran war as well as other non-war-related bills, Deputy Defense Secretary Stephen Feinberg told lawmakers… Lawmakers have been pressing the Trump administration to provide a comprehensive price tag for the war, which started Feb. 28. Among lawmakers’ concerns is that the military depleted valuable munitions that might be needed to confront threats elsewhere around the world.”
New World Order Watch
June 14 – New York Times (Jim Tankersley and Javier C. Hernández): “In 1940, the imperial regimes of Germany and Japan joined what would be known as the Axis powers, bound by mutual opposition to the United States. They fought a world war, and they lost it, and their populations spent the next 85 years with shrunken militaries and a heavy reliance on their former enemy, America, for security. Now, both countries’ wariness of America has resurfaced, alongside heightened fears about a surging world power, China, and an aggressive Russia. Tokyo and Berlin are rushing to rebuild their militaries. And, once again, they are strengthening ties.”
June 16 – Financial Times (Harry Dempsey and Leo Lewis): “One of Japan’s most senior executives has sounded the alarm over the country’s companies ‘endlessly’ investing in the US, as concerns grow about a lack of domestic investment needed to raise lagging productivity. The warning from Yoshimitsu Kobayashi, chair of the Japan Productivity Centre economic think-tank, comes as Tokyo pushes forward with a $550bn fund for investment in the US that it agreed under duress last year to ward off punitive tariffs imposed by the Trump administration. ‘Can this really go on forever, money at the scale of $550bn and domestic investment drying up? How we should evaluate these elements is a problem,’ said Kobayashi, who is also the outgoing chair of Tokyo Electric Power, Japan’s largest power utility, and a former president of Mitsubishi Chemical.”
U.S./Russia/China/Europe/Iran Watch
June 18 – Wall Street Journal (Daniel Michaels and Michael R. Gordon): “Defense Secretary Pete Hegseth ratcheted up pressure on European NATO allies, warning that the U.S. will review its military presence on the continent and would cut its payments to the alliance’s operating budget if Europeans didn’t meet their commitment to boost military spending. In a confrontational address Thursday at the headquarters of the North Atlantic Treaty Organization, Hegseth said the Pentagon was launching an assessment that would last as long as six months to ‘examine America’s force posture and basing in Europe.’”
Ukraine War Watch
June 18 – BBC (Laura Gozzi): “Specks of black oil have rained down on part of Moscow after a refinery was hit during the largest Ukrainian attack since the start of the full-scale war, with close to 200 drones fired towards the Russian capital. Columns of thick smoke billowed high into the sky and 17 people were wounded in the Moscow region… Residents in the south-east of Moscow region told the BBC that a fine drizzle had left ‘unpleasant black spots’ on their clothes.”
June 15 – Associated Press (Hanna Arhirova and Illia Novikov): “A cathedral in one of the oldest and most sacred landmarks in Eastern Orthodox Christianity was set ablaze early Monday as Russia bombarded Ukraine’s biggest cities, killing 11 people… Russia fired the barrage of hundreds of drones and dozens of missiles at the capital of Kyiv, and the second-largest city of Kharkiv, after Zelenskyy and Russian President Vladimir Putin spoke separately by phone with U.S. President Donald Trump…”
Taiwan Watch
June 18 – Associated Press (Didi Tang): “Taiwan needs to purchase American weapons to ensure its self-defense in the face of a growing threat from Beijing, the island’s top diplomat in the U.S. said… A $14-billion arms sale package to Taiwan is still in limbo after President Donald Trump returned from Beijing in May… ‘We need those arms for defensive purposes,’ Alexander Yui Tah-ray, who heads the Taipei Economic and Cultural Representative Office in the U.S., told The Associated Press… ‘We’re trying to increase our defense expenditure. We try to increase our ability to defend ourselves better and survive times of crisis.”
AI Bubble/Arms Race Watch
June 18 – Bloomberg (Jeran Wittenstein): “The artificial-intelligence race is becoming so expensive that it’s snuffing out one of the key forces that has helped keep Big Tech stocks soaring for years: steady share buybacks. Of the four biggest AI spenders — Alphabet Inc., Microsoft Corp., Meta Platforms Inc. and Amazon.com Inc. — only Microsoft bought back shares in the first quarter. And its $3.4 billion in repurchases was the lowest total among the group in nearly a decade… ‘The amount of capex that’s being spent is dramatically higher than even the high end of what anyone would have thought not just a year ago but three months ago,’ said Robert Schiffman, a senior credit analyst at Bloomberg Intelligence. ‘Buybacks are likely to continue to fall as capital is prioritized for capex.’”
June 18 – Financial Times (Jamie John, Rafe Rosner-Uddin and Ryan McMorrow): “Companies that raced to put AI tools in the hands of their workers are starting to rein in their use, as the cost of deploying the technology at scale begins to test corporate budgets. Amazon, Walmart, Cisco, Uber and Meta are among early adopters that have introduced caps, discouraged wasteful use or pushed employees to cheaper models in a bid to keep AI spending under control. The shift marks a new phase in corporate AI adoption. As workers move beyond chatbots to AI agents, which can perform complex tasks autonomously but require far more computing power, companies are being forced to scrutinise whether each query and task is worth the cost.”
June 18 – Bloomberg (Jan-Patrick Barnert, Michael Msika, Matthew Griffin and Abhishek Vishnoi): “Investors in the ever-hotter AI stock rally must suddenly consider a risk with the potential to be even more damaging than high valuations and big spending: Politics getting in the way. The US administration's move to block foreign nationals from accessing Anthropic PBC’s most advanced models over security fears was an unprecedented intervention in the affairs of a leading AI lab. In response, Anthropic disabled all access to the two models for everyone.”
June 13 – Politico (Samuel Benson and Andrew Atterbury): “The fight over artificial intelligence is here, and the populist right is lacing up its gloves. In recent weeks, the battle lines within the Republican Party over AI regulation have come squarely into view. Last week, Sen. Josh Hawley (R-Mo.) delivered a blistering rebuke of unfettered AI development and a call for defending working people in a speech… that elicited raucous applause. Florida Gov. Ron DeSantis again lambasted the Trump administration for attempting to preempt state-level regulation, calling it ‘bad policy’ and ‘even worse politics’… And a string of prominent GOP candidates, including Texas Attorney General Ken Paxton, have campaigned on taking on Big Tech. It all adds up to a muscular intervention by populist conservatives… These leaders on the ideological right see artificial intelligence as a defining issue for them in 2026 and beyond, and they’re willing to defy the GOP’s traditional preference for pro-business, deregulatory policies.”
June 16 – Financial Times (Julie Steinberg and Kieran Smith): “Data centre deals are weathering a storm of geopolitical tensions and attracting billions of dollars in funding, despite some investors’ wariness about backing certain tenants. Investors have poured in $58bn in financing for 42 data centre transactions this year, up from $34bn for 34 deals at the same point in 2025, according to Dealogic. Nearly 850 data centres are under construction globally worth some $7tn, according to consultancy Oxford Economics. The US and China are out in front, with 228 and 98 projects under way respectively.”
Bubble Watch
June 17 – Bloomberg (Shuli Ren): “During the Covid-19 pandemic, meme mania swept through the US stock market, short-squeezing and shuttering high-profile hedge funds. That is nothing compared to what we are witnessing in the agentic AI era. The latest breed is different. They are not struggling video-game or cinema chains — you might remember GameStop Corp. and AMC Entertainment Holdings Inc. — but trillion-dollar companies whose sheer size alone can distort and sink entire equity markets. These mega-caps are destined to become meme stocks, because traditional valuation methods don’t apply. It’s meaningless to talk about the earnings trajectory of SpaceX… given the fantastic dream trillionaire Elon Musk is selling. Fans are simply paying for a Musk premium, believing that they will be as handsomely rewarded as the early backers of Tesla Inc.”
June 16 – Bloomberg (Anders Melin): “By almost any measure, Monday June 15 was a superlative day for the world’s wealthiest. At the close of trading in New York, the 500 richest people on the globe had added $336 billion to their fortunes, the biggest haul ever recorded in a single day, according to the Bloomberg Billionaires Index. That brought their collective net worth to a record $13.3 trillion. Elon Musk… extended his lead over the group with his net worth rising more than 10% to $1.27 trillion. And the dozen people at the bottom of the list — the least wealthy of the world's superrich — each stood at $7.9 billion, the highest-ever bar to enter the index.”
June 14 – Bloomberg (Lu Wang and Carmen Reinicke): “For the better part of two decades, a defining feature of the US stock market has been scarcity. Year after year, shares disappeared from public hands, with buybacks by S&P 500 companies alone erasing nearly $12 trillion worth. Now, investors are about to discover what happens when the supply suddenly comes rushing back. According to JPMorgan…, IPOs, secondary offerings and other share sales are poised to add roughly $1.5 trillion of stock to the US equity market over the next two years, even after accounting for buybacks. If realized, it would mark the strongest period of net equity issuance since at least the late 1990s. This newfound abundance may reverse one of the market’s most enduring tailwinds and herald the start of a seismic shift across Wall Street: that after years of buying back stock to boost shareholder returns, or staying private altogether, companies are now turning to equity markets to raise capital instead.”
June 15 – CNBC (Lora Kolodny and Chris Eudaily): “SpaceX underwriters have officially exercised their overallotment of shares in the historic initial public offering, bringing the total raised to $85.7 billion… SpaceX’s brokers, which include Goldman Sachs and Morgan Stanley, had the option to buy an additional 83.3 million shares as part of the overallotment, which is commonly referred to as the ‘greenshoe.’”
June 13 – New York Times (Ben Casselman): “Two events from the past week help crystallize this strange, contradictory moment for the U.S. economy. On Wednesday, the Bureau of Labor Statistics reported that the surge in energy prices had wiped out a year and a half of wage gains for the average American worker. On Friday, the public-markets debut of SpaceX made Elon Musk the world’s first trillionaire. That stark juxtaposition helps explain why many Americans, in survey after survey, say they no longer believe the U.S. economy is working for them. A few people are getting fabulously, unimaginably wealthy at the same time that entire generations of families worry they will never be able to afford to buy a house, raise children or enjoy a comfortable retirement.”
June 19 – Bloomberg (Sophie Alexander): “One of Wall Street’s favored communities is poised for a record-breaking year in luxury real estate, fueled in part by a prolonged bull market. Greenwich, Connecticut… has recorded three public sales over $20 million so far this year, with two more under contract, according to… agent Mark Pruner. That almost matches last year’s record of six sold publicly in that price range. ‘A lot of what’s driving the market is Wall Street money — the Dow is up,’ said Pruner… ‘This year and last have really been remarkable.’”
June 17 – Wall Street Journal (Libertina Brandt): “SpaceX recently went public in the largest-ever initial public offering, and OpenAI and Anthropic are also gearing up for highly anticipated IPOs. Russ Savage is looking to seize the moment. The Rockstar Energy drink creator and real-estate investor is putting five homes he owns in Los Angeles, Aspen, Colo., and Park City, Utah, on the market for a combined total of about $297 million. He is betting that a wave of newly rich buyers will be looking for luxury homes. ‘We’re entering a new stratosphere of top-end wealth, where there’s no limit,’ said Savage, who has been buying, renovating, and selling homes across the country for decades. ‘Where are they going to buy properties? They’re going to want a ski house and they’re going to want a house in the sun.’”
June 15 – Financial Times (George Hammond and Bryce Elder): “OpenAI spent $34bn last year as the ChatGPT maker poured money into a race to dominate the fast-growing AI market ahead of a planned stock market listing. Audited financial figures… show the company spent about $19bn on research and development in 2025 and nearly $6bn on sales and marketing, as well as other costs. The spending figures… offer a rare glimpse into the economics underpinning the AI boom, particularly OpenAI’s lavish outlay to build models, fund data centres and recruit top researchers… OpenAI booked about $13bn in revenue last year. By the end of 2025 it was generating $2bn in monthly revenue, up from $1bn a quarter at the end of 2024, making it one of the fastest-growing businesses in history.”
June 14 – Wall Street Journal (Micah Maidenberg): “It isn’t just SpaceX. Encouraged by the Elon Musk-led company’s successes—and steadily climbing valuation—venture capitalists and private-market investors are stepping up bets on space startups, hoping to find the next breakout stars. Venture funding for U.S. space-technology firms excluding SpaceX shot up to $7.1 billion in 2025 from $2.5 billion a year earlier, according to… PitchBook… Observable Space, focused on laser communications and sensing, recently raised $90 million. Ground-system startup Northwood Space pulled in $100 million and CesiumAstro, a maker of space systems and electronics, recorded $470 million in equity and financing.”
June 18 – Wall Street Journal (Matt Wirz): “Individual investors accelerated their withdrawal requests from once-hot private-credit funds in the second quarter, adding to the squeeze the industry is facing as fundraising slows and money heads for the exit. So far, investors in four large credit funds, including those managed by Blackstone and BlackRock, have requested to redeem about $12 billion in the second quarter, up from $7.7 billion the previous quarter… The requests add to pressure on the industry, continuing months of turmoil that executives have tried to calm by arguing investors are overreacting to a few losses and a lot of scary headlines.”
Inflation Watch
June 16 – Bloomberg (Augusta Saraiva): “US import prices surged in May amid soaring costs of computer equipment, plastics and air travel… The import price index rose 1.9% last month after a similar advance in April… From a year ago, it increased 6.7%, marking the fastest pace in almost four years. Prices of imported plastic materials — key inputs into a vast array of consumer goods that are generated from byproducts of fossil fuels — jumped 6.5% in one of the biggest monthly advances on record. Import air passenger fares, a category that feeds directly into the Federal Reserve’s preferred inflation gauge, also surged.”
June 16 – CBS (Mary Cunningham): “Cooling costs are projected to reach record highs this summer amid rising electricity prices and hotter weather. A new analysis from the National Energy Assistance Directors Association estimates that Americans will spend an average of nearly $800 on electricity between June and September, up 10.5% from the same period last year. ‘Electricity prices continue to rise, and hotter summers mean households need to use more electricity simply to stay safe,’ Mark Wolfe, executive director of NEADA, said... ‘The result is that Americans are paying substantially more to cool their homes than they were just a few years ago.’”
June 17 – Reuters (Juby Babu): “Apple plans to raise prices on its products to offset increasing memory and storage chip costs, CEO Tim Cook told the Wall Street Journal... A surge in AI-driven demand for data centers has forced consumer electronics companies into a fierce competition for dwindling supplies of the key components, driving prices sharply higher. Groups representing automakers, retailers, electronic firms and others had warned earlier this month that the increasing demand for memory chips could lead to dramatic price hikes in U.S. consumer goods and disrupt supply chains. ‘Unfortunately, price increases are unavoidable… We’re doing our best to mitigate the huge increases that are being passed to us, and we’ve been trying to shield our customers from the increases, but the situation has become unsustainable.’”
June 19 – CNBC (Kif Leswing): “For the past few years, consumers have been swarming to AI chatbots and agents, taking advantage of powerful new artificial intelligence models that are transforming how we live and work. They’re now paying for it, but not in the way they probably expected. The AI boom has led to unconstrained demand for memory, creating a worldwide shortage that’s leading to increased prices. It’s a big enough problem that Apple is finally telling consumers to get ready to open their wallets. Apple CEO Tim Cook told the Wall Street Journal… the company plans price increases on its products due to the ongoing memory shortages. He called the hikes ‘unavoidable’ and the memory situation ‘unsustainable.’”
June 16 – Bloomberg (Suzanne Woolley): “The rising costs of housing, healthcare and education have pushed more Americans to tap into their retirement accounts despite high penalties and taxes for doing so. Vanguard Group Inc. said… a record 6% of the nearly 5 million participants in 401(k) plans it administers made hardship withdrawals in 2025. That’s up from 5% a year earlier. About two-thirds of the funds were used to avoid home foreclosure or eviction (36%) or to cover medical expenses (31%).”
Federal Reserve Watch
June 17 – Wall Street Journal (Nick Timiraos): “Kevin Warsh used his first meeting as Federal Reserve chairman to put his stamp on how the central bank operates and communicates. He trimmed its policy statement, declined to submit a rate forecast of his own, and launched five task forces to study everything from how the Fed communicates to how it analyzes the economy—a sweeping reach into how the central bank operates. About the things markets most wanted to understand—how the new chairman reads the economy and translates it into policy—he said almost nothing. Pressed later on inflation, on whether policy was restrictive and on the future of the so-called interest-rate dot plot, Warsh repeatedly demurred. ‘We have a task force for that.’”
June 18 – Reuters (Lewis Krauskopf and Laura Matthews): “The Kevin Warsh era at the Federal Reserve began with a jolt on Wall Street, with investors bracing for sharp moves as the central bank pulls back from signaling possible future interest rate moves. The Fed held interest rates steady as expected on Wednesday, but new projections and comments from Warsh… blindsided traders and led markets to price in a possible hike within months. Investors are now confronting a more opaque Fed under Warsh, one that is retreating from forward guidance and overhauling its messaging… ‘He’s hot out of the gate, and he’s putting his thumbprint on everything Fed-related,’ said Michael Reynolds, vice president of investment strategy at Glenmede.”
June 18 – Axios (Neil Irwin): “Less than four weeks after being sworn in as chairman of the Federal Reserve, Kevin Warsh left no doubt that the way the central bank shapes its policies and communicates is now going to be very different from the last 15 years. Warsh is already executing on his longstanding view that the Fed has been over-explaining, over-signaling and overly focused on fine-tuning the economy for years. Investors will need to quickly wrap their heads around this new regime. Out: Forward guidance and detailed descriptions of how the central bank is interpreting incoming data. In: Simpler policy statements, tighter (and maybe fewer) press conferences, little guidance as to what comes next and task forces to rethink broader aspects of how the Fed works.”
June 17 – Associated Press (Christopher Rugaber): “The Federal Reserve kept its key rate unchanged Wednesday yet almost half the central bank’s policymakers said they could support a rate hike later this year… Still, Warsh’s 18 colleagues on the Fed’s rate-setting committee sent a clear message in a set of quarterly projections released Wednesday: Nine signaled they supported higher rates this year, with six of those supporting two or more quarter-point increases.”
June 18 – Bloomberg (Jonathan Levin): “Rookie Federal Reserve Chair Kevin Warsh delivered on his most important task at Wednesday’s interest rate decision: He showed the American public that he wasn’t some stooge willing to kowtow to the president who nominated him and has long demanded easier monetary policy. It’s still early days, but that’s an encouraging sign. Speaking after holding rates steady at 3.5%-3.75%, Warsh repeatedly asserted his goal of getting inflation back to the Fed’s 2% target. ‘The commitment to deliver is strong, unanimous and unambiguous,’ he said…”
June 17 – Bloomberg (Catarina Saraiva): “Kevin Warsh began his tenure as chairman of the Federal Reserve with a solemn vow to curb inflation and a clear sign that he plans to swiftly revamp how the US central bank does its job. Missing was any clear guidance from him on what it means for interest rates… ‘There are a lot of questions that remain to be answered,’ said Seth Carpenter, global chief economist at Morgan Stanley and a former Fed staffer. ‘He made it clear that he is committed to bringing inflation down. But exactly how that was going to happen, I don’t think it was clear.’”
June 17 – Bloomberg (Ruth Carson, David Ingles, and Yvonne Man): “The Federal Reserve may need to raise interest rates as soon as September if inflation remains elevated, according to Rob Kaplan, vice chairman at Goldman Sachs… and former Dallas Fed president. ‘If inflation prints don’t cool between now and we get to September, I actually think the balance of risks suggests it would be wise to take some action, either in September or in the fall… That’d be the wiser thing to do.’”
June 14 – Financial Times (Ruchir Sharma): “This week Kevin Warsh leads his first meeting as chair of the Federal Reserve, and he should start by making the central bank do the job it has been failing at for years. That job is to set interest rates at a level that will maximise employment and stabilise prices. Over time, the Fed has come to worry only about jobs and make excuses for inflation — in short, showing a bias for easy money that has lately hit historic extremes. The economy has hovered near full employment for 55 consecutive months, yet the Fed has missed its inflation target for 63 straight months. Few central banks have matched that record of failure on inflation; in the US, the only comparable episode was during the Great Inflation of the 1970s.”
U.S. Economic Bubble Watch
June 18 – Associated Press (Matt Ott): “The number of Americans applying for jobless aid fell modestly last week as layoffs remained in the same historically low range of recent years. U.S. applications for unemployment benefits in the week ending June 13 dropped by 4,000 to 226,000… The total number of Americans filing for unemployment benefits for the previous week ending June 6 rose by 24,000 to 1.81 million…”
June 17 – Associated Press (Anne D’Innocenzio): “Shoppers stepped up their spending in May and surpassed expectations as temperatures warmed and gasoline prices leveled off. Retail sales rose 0.9%, up from a revised 0.4% gain in April… Sales got a boost from generous government tax refunds in both April and May, though economists say that cash cushion is starting to fade. Excluding sales at gas stations, retail sales in May rose 0.7%.”
June 17 – CNBC (Diana Olick): “A mixed week for mortgage rates resulted in less demand from both current homeowners and potential homebuyers… Applications for a mortgage to purchase a home fell 3% for the week and were 3% higher than the same week one year ago.”
June 16 – Reuters (Lucia Mutikani): “U.S. single-family homebuilding fell to an eight-month low in May... The decline combined with a plunge in multi-family housing starts to push down overall homebuilding to a six-year low last month… Labor and building lots are also scarce, making it difficult for builders to respond to a housing shortage that has created an affordability crisis… Single-family housing starts, which account for the bulk of homebuilding, fell 1.9% to a seasonally adjusted annual rate of 882,000 units… That level was the lowest since last September. Single-family homebuilding declined in the South and West regions, but increased in the Northeast and Midwest. It decreased 6.7% on a year-over-year basis in May.”
June 15 – Bloomberg (Michael Sasso): “Confidence among US homebuilders slipped in June, dragged down by rising mortgage rates and materials costs, as well as a sharp drop in sentiment across the South. An index of overall market conditions from the National Association of Home Builders and Wells Fargo fell 2 points to 35 this month…, lower than the 37 anticipated... The South… saw its biggest decline since November 2023. A reading below 50 means more builders see conditions as poor than good. June's level marks the 14th straight month sentiment was below 40, the longest such streak since 2011-2012, NAHB said.”
China Watch
June 16 – New York Times (Li Yuan): “Beijing has long built walls between Chinese citizens and the outside world: The Great Firewall blocks out information, and passport controls and exit bans restrict movement. But money had been different. In an unspoken bargain between the government and its people, political limits could be tolerated as long as families were largely free to accumulate, protect and quietly diversify their wealth. That bargain is fraying. Over the last couple of years, Chinese citizens have increasingly invested in overseas securities, and especially in the U.S. stock market. But in recent weeks, Beijing has moved to close informal channels between Chinese households and global capital markets.”
June 16 – Wall Street Journal: “Chinese authorities rolled out more measures to promote the use of the yuan globally, their latest effort to build more resilient financial infrastructure to shield its economy from external shocks. Pan Gongsheng, head of the People’s Bank of China, announced… Beijing will set up a new repo facility. This facility will let foreign monetary authorities, including sovereign-wealth funds, obtain yuan liquidity from the Chinese central bank with bonds as collateral. He also revealed that China will launch a pilot program for offshore yuan foreign exchange trading in the Shanghai Free Trade Zone…”
June 16 – CNBC (Anniek Bao and Evelyn Cheng): “China’s retail sales fell for the first time in more than three years in May while urban investment contracted more than expected, piling pressure on Beijing to roll out meaningful stimulus to spur consumption… Retail sales… declined in May for the first time since December 2022, dropping 0.6% from a year earlier…”
June 15 – Bloomberg: “China’s home prices fell at a quicker pace in May, halting green shoots seen at the start of the year that had raised hopes of a recovery. New-home prices in 70 cities… dropped 0.2% from April when they slid 0.19%... Resale home values, which are subject to less government intervention, decreased 0.26%, the most in three months.”
June 17 – Bloomberg: “As many as 100 million Chinese consumers are struggling to service their personal debt, fueling a largely hidden crisis that threatens Beijing’s efforts to revive the world’s second-largest economy. Bad consumer loans from credit cards to mortgages have surged over the past few years. Non-performing household debt soared 21% last year to a record of at least 2.22 trillion yuan ($329bn), according to Gavekal Dragonomics. The firm analyzed financial reports from 26 banks and other data sources after authorities stopped releasing aggregate figures on delinquent and defaulted personal loans. Analysis from Zhejiang University’s Institute of Financial Research said Chinese financial institutions could have non-performing personal debt totaling 2 trillion to 3 trillion yuan to dispose of annually.”
June 18 – Bloomberg: “A major Chinese stock gauge is on the cusp of a bear market, underscoring deepening concerns about the country's growth outlook and the underperformance of its heavily weighted Internet and consumer firms. The MSCI China Index dropped as much as 2.1% Thursday, and at one stage was down more than 20% from its Oct. 2 high… Alibaba Group Holding Ltd. and Tencent Holdings Ltd. were the biggest drags on the day. The Hang Seng China Enterprises Index slid 2.1%.”
Central Banker Watch
June 16 – Bloomberg (Heesu Lee): “South Korea’s artificial intelligence-driven semiconductor boom may wind up complicating the inflation outlook, with the central bank warning that soaring bonuses at major technology firms could fuel broader wage growth and stronger consumer demand. In a report…, the Bank of Korea said unusually large payouts at some chip firms could raise wage demands in other industries, boosting both consumer demand and business costs. The central bank warned that wage gains spreading beyond the technology sector could become an additional source of inflation pressure alongside elevated energy prices.”
June 19 – Bloomberg (Laura Noonan): “The Bank of England will stress test private markets against a doomsday scenario featuring 7% interest rates, a 35% collapse in UK share prices, a 400 bps increase in leveraged loan spreads and a wide range of artificial intelligence disruptions… In the stress test, 46 firms have agreed to take part, including alternative asset managers Apollo Global Management Inc., Ares Management Corp., Blackstone Inc., KKR & Co. and Pemberton. Traditional asset managers also participating include BlackRock Inc., Legal & General Investment Management and Fidelity International, institutional investors and banks that provide funding, according to the BOE.”
June 13 – Bloomberg (Sonja Wind): “Prices are likely to stay elevated for longer even if the war in Iran were to end soon, Bundesbank President Joachim Nagel said… ‘We may not even get back to building on the data we had before this conflict, because supply chains have obviously changed, and risk premiums may also increase,’ said Nagel…”
June 17 – Bloomberg (Alessandra Migliaccio and Mark Schroers): “Artificial intelligence can potentially lead to dangerous financial crises, and the European Central Bank is determined to ensure that doesn’t happen, President Christine Lagarde said. ‘We cannot stop artificial intelligence, even with our sound regulations,’ she said… ‘What we can do, however, is prepare ourselves so that our citizens can benefit from it and be protected from its dangers, and that’s what we’re doing.’ She warned that the true risk is not AI in-and-of itself, but the turmoil that can potentially be unleashed with such a disruptive new variable present in the world.”
Europe/UK Watch
June 19 – Financial Times (George Parker, Rachel Rees, Jim Pickard and Jennifer Williams): “Sir Keir Starmer has refused to quit as prime minister to make way for Andy Burnham after his by-election victory in Makerfield, taking a defiant stance as he warned that a leadership contest could ‘tear apart’ the Labour Party. Starmer used a call with Labour staff at lunchtime on Friday to urge colleagues to ‘pull together’ after Burnham’s success and avoid ‘plunging our party and our country into chaos by turning on each other’. Earlier on Friday, the prime minister insisted he would fight the outgoing Greater Manchester mayor to keep his job. ‘If there is a contest then yes, I will run, I will stand,’ he said.”
June 15 – Bloomberg (Zoltan Simon): “Hungary began dismantling former leader Viktor Orban’s self-styled illiberal rule by imposing term limits for premiers and winding up public trusts that wielded billions of dollars in assets in an extension of his political influence. Parliament approved the constitutional amendment on Monday, which will cap prime ministerial terms at two four-year stints and disqualify Orban from returning to power. He had served five overall terms, including four consecutive ones from 2010.”
Japan Watch
June 16 – Bloomberg (Toru Fujioka and Sumio Ito): “The Bank of Japan raised its benchmark interest rate to the highest since 1995 and pledged more hikes to come, fueling speculation of another move before the end of the year. The BOJ increased its benchmark rate by a quarter percentage point to 1% and said rates would keep going up in response to developments in the economy… Separately the central bank said it would stop paring back its bond buying from next April, an indication that it has largely returned to the status quo before the launch of its massive stimulus program in 2013.”
Emerging Market Watch
June 18 – Bloomberg (Heesu Lee): “South Korea’s producer prices rose in May at the fastest pace in nearly four years, as higher energy costs and a broad-based increase in industrial prices continued to filter through the economy. The price index climbed 8.5% from a year ago, marking the strongest annual increase since July 2022 and following an upwardly revised reading in the prior month… Prices rose 0.8% from April, extending gains for a ninth straight month.”
June 17 – Wall Street Journal (Paulo Trevisani and Nicholas G. Miller): “Brazil’s central bank cut interest rates for the third consecutive time as economic growth remains sluggish even as inflation stays high. The bank’s monetary committee… cut the Selic benchmark lending rate to 14.25% from 14.5%. But the monetary authority indicated that uncertainty around its inflation projections remains higher than usual.”
June 16 – Bloomberg (Harry Suhartono): “The highest volatility in rupiah corporate bonds in four years is threatening to dent record issuance by companies in Southeast Asia’s largest economy at a time when government policy swings have hurt international investor confidence in Indonesian assets. The 30-day annualized volatility of top-rated Indonesian corporate bonds climbed to 23% this week, the highest since mid-2022, after President Prabowo Subianto’s interventionist policies triggered a selloff in the nation’s assets.”
June 15 – Bloomberg (Jacob Gu and Chien-Hua Wan): “Taiwan’s yields have scope to climb further as tight cash conditions in the local market and concerns over rising inflation dampen demand for the island’s debt… Yields on Taiwan’s five-year bonds are already hovering near their highest level since 2008, while 10-year yields remain pinned close to a three-year peak.”
Social, Political, Environmental, Cybersecurity Instability Watch
June 13 – Financial Times (Ilena Peng): “The US’s best weapon against a deadly cattle parasite threatening the beef industry is more than a year away from showing meaningful results, raising concerns over how far the outbreak could spread before then. When the New World screwworm reached the US earlier this month after advancing across Mexico for more than a year, federal officials were prepared to quarantine animals and distribute treatments. But the country’s key tool for suppressing the pest — a facility that breeds sterile flies to halt reproduction of the parasite — isn’t slated to begin operating until November 2027.”