The spike in Treasury yields runs unabated. Ten-year Treasury yields rose another 10 bps this week to 1.72%, the high since January 23, 2020. The Treasury five-year “breakeven” inflation rates rose to 2.65% in Tuesday trading, the high since July 2008. The Philadelphia Fed’s Business Survey Prices Paid Index surged to a 41-year-high. In the New York Fed’s Manufacturing Index, indices of Prices Paid and Received both jumped to highs since 2011.
While crude oil’s notable 6.4% decline for the week spurred a moderate pullback in market inflation expectations (i.e. “breakeven rates”), this did not translate into any relief in the unfolding Treasury bear market.
Chairman Powell was widely lauded for his adept handling of Wednesday’s post-FOMC meeting press conference. He was well-prepared and could not have been more direct: The Federal Reserve will not anytime soon be contemplating a retreat from its ultra-dovish stance. It was music to the equities mania, as the Dow gained 190 points to trade above 33,000 for the first time. Treasury yields added a couple bps, but without any of the feared fireworks. Markets were breathing a sigh of relief.
Labored breathing returned Thursday. Ten-year Treasury yields spiked another 10 bps, trading above 1.75% for the first time since January 2020. And after trading as low as 0.76% during Powell’s press conference, five-year Treasury yields spiked to almost 0.90% in increasingly disorderly Thursday trading. The Nasdaq100 was slammed 3.1%, with the S&P500 sinking 1.5%.
The Treasury market would really like to take comfort from the Fed’s steadfast dovishness. It’s just been fundamental to so much. It’s worked incredibly well for so long. Clearly, it’s no longer working so well.
This raises a critical issue: Paradigm shift? Regime change? What’s driving Treasury yields these days? What is the bond market fearing? If it’s inflation, is Fed dovishness friend or foe?
March 16 – Financial Times (Joshua Oliver): “Coronavirus has been overtaken for the first time since the early days of the pandemic more than a year ago as the top risk that keeps investors up at night, according to a new poll of fund managers. Money managers polled by Bank of America now see inflation and an unruly rise in borrowing costs like that seen during the 2013 ‘taper tantrum’ as the key ‘tail risk’ that could unsettle global markets. The survey of investors with $597bn in assets… highlights investors’ concern that the economic recovery from Covid-19, backed by unprecedented stimulus, may unleash a surge of price growth that could be difficult to tame. Rising inflation expectations and bets that central banks, particularly the US Federal Reserve, may have to tighten policy sooner than planned have triggered a widespread sell-off in government bond markets — which investors worry could get worse.”
For the first time in years, bond markets face serious uncertainty with respect to inflation risk. The Fed’s balance sheet has doubled in only 79 weeks to $7.694 TN. Our Federal government is in the process of running consecutive years of $3.0 TN plus deficits. Chinese Credit (“aggregate financing”) expanded an unprecedented $5.4 TN last year and then added another Trillion in the first two months of 2021. On an unprecedented global basis, central bank balance sheets are expanding aggressively, while unbridled governments are running massive deficit spending programs. Forecasts are calling for upwards of 8.0% U.S. 2021 GDP growth, with an only moderately slower Chinese expansion. While the global economy is poised for recovery, it’s not at all clear governments will muster the resolve necessary to pull back meaningfully from unparalleled fiscal and stimulus. The world has never experienced such monetary inflation.
Long-term fixed-income securities have ample reason to fear a paradigm shift in inflation dynamics. And in this unfolding new environment, I don’t think the old “err on the side of ultra-dovishness” shtick is going to suffice.
I found the Powell press conference problematic. After less than glorious market responses to his recent congressional testimony and WSJ Q&A session, I would have thought some tinkering of his messaging was in order. But Powell doubled down. No tapering or a move on rates is being contemplated – and the Fed will be providing ample warning well ahead of time. The FOMC is not concerned by what it views as a fleeting pop in inflation. It’s now well dug into its bunker mandate of promoting full employment, while mouthing – and praying for – price stability.
Paul Kiernan from the Wall Street Journal (from Powell’s press conference): “My question is twofold. One, how high are you comfortable letting inflation rise? There is some ambiguity in your new target, as you mentioned – expectations driven. And do you think that that ambiguity might cause markets to price in a lower tolerance for inflation than the Fed actually has, thereby causing financial conditions to tighten prematurely? Is that a concern?”
Fed Chairman Jay Powell: “So, we’ve said we’d like to see inflation run moderately above 2% for some time. And we’ve resisted, basically, generally, the temptation to try to quantify that. Part of that just is talking about inflation is one thing. Actually having inflation run above 2% is the real thing. So, over the years, we’ve talked about 2% inflation as a goal, but we haven’t achieved it. So, I would say we’d like to perform. That’s what we’d really like to do is to get inflation moderately above 2%. I don’t want to be too specific about what that means, because I think it’s hard to do that. And we haven’t done it yet. When we’re actually above 2%, we can do that. I would say this: the fundamental change in our framework is that we were not going to act preemptively based on forecasts, for the most part. And we’re going to wait to see actual data. And I think it will take people time to adjust to that. And to adjust that new practice. And the only way we can really build the credibility of that is by doing it. So, that’s how I would think about that.”
Noland comment: The Fed picked an especially poor time to go rouge on inflation management. And this will not be the backdrop for Fed credibility to be on the ascend. With all the lip service paid to transparency, the Fed today cannot clarify its reaction function – what inflationary developments would spark concern at the FOMC as well as the measures the Fed would employ to counter mounting inflationary pressures. The Chair doesn’t “want to be too specific” because the FOMC doesn’t have a framework or a plan. Their latest experimental iteration – the adoption of an “inflation targeting” regime – was basically to ensure they retained the flexibility to remain ultra-dovish while disregarding their inflation target in the event of a breach above 2%. I doubt they ever contemplated how the committee would respond to a serious threat of entrenched inflationary pressures. No one believes the Fed will actually tighten policy.
Michael Derby from the Wall Street Journal: “I just wanted to get an updated view on your sense of your view on financial stability risks, and whether or not you see any pockets of excess out in financial markets that concern you either specifically to that area of the market or as in terms the threat that it can pose to the overall economy?”
Powell: “As you know, financial stability for us is a framework. It’s not one thing. It’s not a particular market or a particular asset or anything like that. It’s a framework that we have. We report on it semiannually. The board gets a report on it quarterly. And we monitor it every day. It has four pillars. And those are four key vulnerabilities: asset valuations; debt owed by businesses and households; funding risk; and leverage among financial institutions. Those four things, and I’ll just quickly touch on them.
If you look at asset valuations, you can say that by some measures some asset valuations are elevated compared to history, I think that’s clear. In terms of households and businesses, households entered the crisis in very good shape by historical standards. Leverage in the household sector had been just kind of gradually moving down and down and down since the financial crisis. Now, there was some negative effects on that. People lost their jobs and that sort of thing. But they’ve also gotten a lot of support now. So, the damage hasn’t been as bad as we thought. Businesses, by the same token, had a high debt load coming in. Many saw their revenues decline. But they’ve done so much financing, and there’s a lot of cash on their balance sheet. So, nothing in those two sectors really jumps out as really troubling.
Short-term funding risk as the last one. We saw, again, in this crisis, breakdowns in parts of the short-term funding markets – came under a tremendous amount of stress. And they’ve been quiet since the spring, and we shut down our facilities and all that. But we don’t feel like we can let the moment pass without just saying, again, that some aspects of the short-term funding markets – and more broadly nonbank financial intermediation – didn’t hold up so well under great stress – under tremendous stress. And we need to go back and look at that. So, a very high priority for us, as regulators and supervisors, is going to be to go back – this will involve all the other regulatory agencies. It does involve all of them… and see if we can strengthen those things. So, that’s a sort of a broader detailed look.”
Noland comment: This topic is worthy of a lengthy book. The Fed exhausts too much energy rationalizing its “full employment” and “stable prices” mandates, while neglecting it overarching responsibility to safeguard financial stability. Similar to its analytical approach to inflation, the Fed lacks a sound financial stability framework. “You can say that by some measures some asset valuations are elevated compared to history,” while a historic mania rages in equities, corporate Credit, ETFs, cryptocurrencies, NFT (“non-fungible tokens”), collectibles and such.
The Fed’s focus on household and corporate balance sheets needs to be supplanted by a more holistic approach to system finance. Treasury Securities have increased $17.55 TN, or almost 300%, since the end of 2007, with combined Treasury and Agency Securities up $20.3 TN. Over this period, the Fed’s balance sheet has inflated $6.7 TN, or over 700%. This unprecedented increase in government Credit has (almost singlehandedly) inflated incomes, asset prices and Household Net Worth. For the corporate sector, massive government monetary inflation has boosted cash-flows and earnings, while stoking loose financial conditions and associated gains to corporate equity and financing costs. Any legitimate analysis of financial stability must focus on profligate government finance while downplaying deceptive stability in the household and corporate sectors.
The Fed’s analytical framework is a contraption of the last war. The mortgage finance Bubble was chiefly fueled by a massive increase in household mortgage borrowings intermediated through the GSEs, the banking system, and securitization and derivatives marketplaces. All these sectors were heavily exposed to the bursting Bubbles in mortgage finance and housing.
Today’s “government finance Bubble” is fueled chiefly by government debt and Federal Reserve liabilities. This perceived safe and liquid “money”-like Credit requires minimal risk intermediation through the banking system or markets. As such, the nature of the risks to financial stability are different in kind to those of mortgage Credit. Superficially, the banking system today appears well-capitalized and robust. From the prism of 2008, financial institutions more generally do not appear over-levered or heavily exposed to risky Credit.
“We saw, again, in this crisis, breakdowns in parts of the short-term funding markets – came under a tremendous amount of stress.” Meanwhile, the government finance Bubble has spurred myriad and monumental “funding market” risks. For one, massive monetary inflation has fueled market manias, egregious speculation and unprecedented speculative leverage. This ensures illiquidity and dislocation in the event of any meaningful “risk off” de-risking/deleveraging episode. Zero rates and the search for yield have fomented speculative excess, leverage and epic market distortions – at home and internationally. Risk perceptions have been entirely subverted, from the standpoint of the Fed backstopping the securities markets and Washington, more generally, underpinning the U.S. Bubble Economy.
In particular, I would point to the proliferation and incredible popularity of ETF products and associated inevitable liquidity issues as integral to this Bubble cycle’s unique risks to financial stability. The perception of safety and liquidity (“moneyness”) is fundamental to the widespread adoption of ETF products. As we witnessed again last March, when this misperception of moneyness is exposed, these products immediately become vulnerable to dislocation, panic and “investor” runs. From a financial stability standpoint, the Fed should be extremely concerned by Bubble Dynamic risk misperceptions and accumulating excesses and imbalances. Yet the Fed’s repeated market bailouts only solidify precarious market distortions while exacerbating the risk of a market crash.
During the mortgage finance Bubble period, a “moneyness of Credit” dynamic was fundamental to market mispricing and risk distortions. Increasingly risky mortgage Credit was transformed into perceived safe and liquid “AAA” mortgage securities, allowing a prolonged period of Credit and risk intermediation excesses to impart deep structural impairment. When Ben Bernanke slashed rates to zero, adopted QE, and forced savers into the securities markets, I warned of a “moneyness of risk assets” dynamic.
More than a decade of historic market intrusions have created a major threat to financial stability. A crisis of confidence and run on perceived safe securities appears unavoidable, and this threat has inflated profoundly following a year of egregious monetary inflation and market manipulation. And while “leverage among financial institutions” is an area of Fed focus, from a financial stability standpoint I would argue that speculative leverage throughout global markets these days creates preeminent risk for a market crash, vanishing perceived wealth, and a resulting devastating tightening of financial conditions.
The perceived “moneyness” of government Credit – along with the willingness to recklessly expand the Fed’s and federal government’s liabilities ad infinitum – creates a unique capacity to finance a most prolonged Bubble period. This ensures the deepest of structural impairment, along with devastating consequences come the inevitable crisis of confidence in government finance and policymaking.
Michael McKee from Bloomberg: “Before 2019 you were focused on the problems with having interest-rates too low. Now are you saying we’re willing to live with it until we reach these goals, even if you hit your goal on maximum employment?”
Powell: “What I would say is we’re committed to giving the economy the support that it needs to return as quickly as possible to a state of maximum employment and price stability. And to the extent having rates low and support for monetary policy broadly – to the extent that raises other questions, we think it’s absolutely essential to maintain the strength and stability of the broader financial system and to carefully monitor financial stability questions…
We monitor that very carefully. I would point out that over the long expansion – longest in U.S. history; 10 years and eight months – rates were very low. They were at zero for seven years, and then never got above 2.4%, roughly. During that we didn’t see, actually, excess buildup of debt. We didn’t see asset prices forming to bubbles that would threaten the progress of the economy. We didn’t see a housing bubble.
The things that have tended to really hurt an economy – and have in recent history hurt the U.S. – we didn’t see them build up despite very low rates. Part of that just is that you’re in a low rate environment. You’re in a much lower rate environment, and a connection between low rates and the kind of financial instability issues is just not as tight as people think it is. That’s not to say we ignore it. We don’t ignore it. We watch it very carefully. And we think there is a connection. I would say there is, but it’s not quite so clear. We actually monitor financial conditions very, very broadly and carefully. And we didn’t do that before the global financial crisis 12 years ago. Now we do.
And we’ve also put a lot of time and effort into strengthening the large financial institutions that form the core of our financial system – are much stronger, much more resilient. That’s true of the banks. I think it’s true of the CCPs (central counterparties). We want it to be true of other non-bank financial intermediation markets and institutions.
Monetary policy should be, to me, provided for achieving our macroeconomic gains. Financial regulatory policy and supervision should be for strengthening the financial system so that it is strong and robust and can withstand the kind of things that it couldn’t, frankly. And we learned that in 2008, ’09, ‘10. This time around, the regulated part of the financial system held up very well. We found some other areas that need strengthening, and that’s what we’re working on now.”
Noland comment: I abhor historical revisionism. “Rates were very low. They were at zero for seven years… During that we didn’t see… excess buildup of debt. We didn’t see asset prices forming to bubbles… We didn’t see a housing bubble.”
When it comes to an excessive buildup of debt, I would direct Chairman Powell to his institution’s quarterly Z.1 reports. U.S. Non-Financial Debt (NFD) ended 2007 at $33.4 TN (230% of GDP). It closed out 2020 at $61.167 TN, or a record 292% of GDP. After ending ’07 at $8.1 TN (55% of GDP), Treasury Liabilities surged $18.4 TN, or 228%, to $26.4 TN, or a record 123% of GDP. And perhaps a comparable buildup of debt would be associated with “carry trades,” derivative-related leverage, margin debt, and myriad forms of speculative leverage.
Why did the Fed abandon its 2011 “exit strategy” – moving instead to again double its balance sheet in three years to $4.5 TN? Why was the Fed so petrified by “taper tantrums” and “flash crashes”? Why in 2013 was Bernanke compelled to assure the market the Fed would “push back against” a tightening of financial conditions, essentially signaling the Federal Reserve would not tolerate a pullback in equities prices? After one little baby-step off the zero bound in December 2015, why did the Yellen Fed then put rate “normalization” on hold for a full year?
And, Mr. Chairman, why did you so abruptly pivot back to dovishness in response to market instability back in December 2018? And why a year later would the Fed restart QE despite stocks at record highs and unemployment at multi-decade lows? Moreover, why in 2020 was the Fed forced to resort to in excess of $2.5 TN of QE over an about two month period – and then stick with $120 billion liquidity injections despite securities market recovery and conspicuous signs of a full-fledged mania? Why today such resolve to signal ultra-dovishness? Clearly, the Fed has for years understood the risks associated with piercing market Bubbles.
Don Lee from the Los Angeles Times. “As you know, households are sitting on a lot of excess savings. And I wonder if combined with that you have an unleashing of pent up demand, how much do you think that would affect inflation? And would you expect that to be transitory?”
Powell: “We, everyone who’s forecasting these, what we’re all doing is we are looking at the amount of savings – we have reasonably good data on that. And we’re looking at the government transfers that will be made as part of the various laws. And we’re trying to make an assessment on what will be the tendency of people to spend that money, the “marginal propensity to consume”.
And from that you can develop an estimate of the impact on spending, on growth, on hiring, and, ultimately, on inflation. So that’s what we’re all doing. And we can look at history, and we can make estimates, and those are all very transparent and public, and you can compare one to the other. And, of course, we’ve all done that. And I think we’ve made very conservative assumptions, and sensible mainstream assumptions at each step of that process.
And what it comes down to… is there very likely will be a step up in inflation as March and April of last year dropped out of the 12-month window, because they were very low inflation numbers. That’ll be a fairly significant pop in inflation. It will wear off quickly though, because it’s just the way the numbers are calculated. Past that, as the economy reopens, people will start spending more. You can only go out to dinner once per night, but a lot of people can go out to dinner. They’re not doing that now. They’re not going to restaurants; not going to theaters. That part of the economy – travel and hotels – that part of the economy is really not functioning at full capacity. But as that happens, people can start to spend.
It also wouldn’t be surprising if – and you’re seeing this now particularly in the goods economy – there’ll be bottlenecks. They won’t be able to service all of the demand, maybe for a period. So, those things could lead to – and we’ve modeled that, other people have to – and what we see is relatively modest increases in inflation. But those are not permanent things. What will happen is the supply side – the supply side in the United States is very dynamic – people start businesses, they reopen restaurants, the airlines will be flying again. All of those things will happen.
And so, it’ll turn out to be a one-time sort of bulge in prices. But it won’t change inflation going forward. Because inflation expectations are strongly anchored around 2%. We know that inflation dynamics do evolve over time. There was a time when inflation went up it would stay up. And that time is not now. That hasn’t been the case for some decades. And we think it won’t suddenly change to another regime. These things tend to change over time, and they tend to change when the central bank doesn’t understand that having inflation expectations anchored at 2% is the key to it all.
Having them anchored at 2% is what gives us the ability to push hard when the economy is really weak. If we saw inflation expectations moving materially above 2%, of course, we would conduct policy in a way that would make sure that that didn’t happen. We’re committed to having inflation expectations anchored at 2%, not materially above or below 2%. So, if you look at the savings, look at all of that, model it, that’s kind of what comes out of our assessment. There are different possibilities. I think it’s a very unusual situation to have all these savings, and this amount of fiscal support and monetary policy support. Nonetheless, that is our most likely case. As the data come in and the economy performs, we’ll of course adjust. Our outcome-based guidance will immediately adapt, we think, to meet whatever the actual path of the economy is.”
Noland comment: Powell’s response to this inflation question is near the top of my list of why I disagree with the consensus view of a successful press conference. I’ll cut the Fed Chair some slack. He’s not a trained economist, while consumer price inflation has been rather subdued now for three decades. But I don’t think his rudimentary explanation of why inflation is not a concern is going to suffice. There is no consideration for the monumental shift to massive open-ended central bank monetary inflation on a global scale. No mention of the structural shift to colossal fiscal deficits and spending – again globally. How could such unleashing of government finance not impact global inflation dynamics? In Powell’s assessment there was no recognition of spiking global food prices. How can one have a thoughtful discussion about inflation prospects without recognizing myriad risks associated with global climate change?
Future historians will look back to pandemic year 2020 as an inflection point of far-reaching consequence. It started with hording toilet paper. Now a global semiconductor shortage has entire industries scurrying to procure needed components. All types of supply chains have been disrupted. There are bottlenecks galore, and various shipping and transport channels are suffering disruptions and delays. From vaccines, to PPE, to semiconductors, shipping containers, rare earth metals, to food supplies and much beyond, I expect a major shift to nations taking pains to become more self-sufficient. Households, businesses and countries will hold more of many things in reserve. Hording – from foodstuffs to rare earths to semiconductors – is in. Just in time inventory management is out.
The prolonged Bubble period has greatly exacerbated wealth inequality. The inevitable swinging back of the pendulum has begun. Wealth redistribution policies will see mammoth transfer payments along with higher wages. And as our nation moves toward massive investments in renewable energy and to upgrade neglected infrastructure, the momentous change in the flow of finance from the asset markets to real economy investment will further promote a transformation of inflation dynamics.
Risks to the inflation outlook are real. The odds that we are at the precipice of a major shift in inflation dynamics are not low. At the same time, the Fed is completely unprepared – both intellectually and from a policy perspective. Historic Bubbles have left the Federal Reserve lacking flexibility and objectivity: it will doggedly dismiss inflation risk and hope for the best.
For the Week:
The S&P500 declined 0.8% (up 4.2% y-t-d), and the Dow slipped 0.5% (up 6.6%). The Utilities dipped 0.6% (down 2.1%). The Banks fell 1.7% (up 23.9%), and the Broker/Dealers declined 0.9% (up 19.6%). The Transports added 0.2% (up 13.4%). The S&P 400 Midcaps lost 1.2% (up 13.3%), and the small cap Russell 2000 dropped 2.8% (up 15.8%). The Nasdaq100 declined 0.5% (down 0.2%). The Semiconductors rose 1.6% (up 7.7%). The Biotechs gained 0.6% (down 2.8%). With bullion gaining $18, the HUI gold index rallied 3.0% (down 6.8%).
Three-month Treasury bill rates ended the week at negative 0.0025%. Two-year government yields were little changed at 0.15% (up 3bps y-t-d). Five-year T-note yields rose four bps to 0.88% (up 52bps). Ten-year Treasury yields jumped 10 bps to 1.72% (up 81bps). Long bond yields rose six bps to 2.44% (up 79bps). Benchmark Fannie Mae MBS yields surged 14 bps to 2.10% (up 76bps).
Greek 10-year yields jumped 10 bps to 0.91% (up 29bps y-t-d). Ten-year Portuguese yields increased three bps to 0.23% (up 20bps). Italian 10-year yields gained four bps to 0.66% (up 12bps). Spain’s 10-year yields increased two bps to 0.35% (up 30bps). German bund yields added a basis point to negative 0.29% (up 28bps). French yields gained two bps to negative 0.05% (up 29bps). The French to German 10-year bond spread widened slightly to about 25 bps. U.K. 10-year gilt yields increased two bps to 0.84% (up 64bps). U.K.’s FTSE equities index declined 0.8% (up 3.8% y-t-d).
Japan’s Nikkei Equities Index added 0.2% (up 8.6% y-t-d). Japanese 10-year “JGB” yields slipped a basis point to 0.11% (up 9bps y-t-d). France’s CAC40 declined 0.8% (up 8.0%). The German DAX equities index increased 0.8% (up 6.6%). Spain’s IBEX 35 equities index dropped 1.8% (up 5.2%). Italy’s FTSE MIB index added 0.4% (up 8.8%). EM equities were mostly lower. Brazil’s Bovespa index rallied 1.9% (down 2.3%), while Mexico’s Bolsa fell 1.6% (up 6.7%). South Korea’s Kospi index declined 0.5% (up 5.8%). India’s Sensex equities index dropped 1.8% (up 4.4%). China’s Shanghai Exchange declined another 1.4% (down 2.0%). Turkey’s Borsa Istanbul National 100 index fell 1.8% (up 3.5%). Russia’s MICEX equities index dropped 1.8% (up 5.7%).Investment-grade bond funds saw inflows of $5.430 billion, and junk bond funds posted positive flows of $410 million (from Lipper).
Federal Reserve Credit last week surged $105.4bn to a record $7.636 TN. Over the past 54 weeks, Fed Credit expanded $3.492 TN, or 84.3%. Fed Credit inflated $4.826 Trillion, or 172%, over the past 436 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt last week rose $6.472bn to a record $3.576 TN. “Custody holdings” were up $165.4bn, or 4.8%, y-o-y.
Total money market fund assets slipped $6.5bn to $4.386 TN. Total money funds surged $450bn y-o-y, or 11.4%.
Total Commercial Paper added $5.3bn to $1.116 TN. CP was down $30bn, or 2.7%, year-over-year.
Freddie Mac 30-year fixed mortgage rates rose four bps to an almost nine-month high 3.09% (down 56bps y-o-y). Fifteen-year rates increased two bps to 2.40% (down 66bps). Five-year hybrid ARM rates added two bps to 2.79% (down 32bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up five bps to 3.28% (down 80bps).
For the week, the U.S. dollar index added 0.3% to 91.919 (up 2.2% y-t-d). For the week on the upside, the South African rand increased 1.2%, the Brazilian real 1.2%, the Mexican peso 0.9%, the South Korean won 0.2%, the Singapore dollar 0.2%, the Swiss franc 0.2% and the Japanese yen 0.1%. For the week on the downside, the Norwegian krone declined 1.2%, the Swedish krona 0.7%, the euro 0.4%, the British pound 0.4%, the Australian dollar 0.3%, the Canadian dollar 0.2%, and the New Zealand dollar 0.2%. The Chinese renminbi was about unchanged versus the dollar this week (up 0.28% y-t-d).
The Bloomberg Commodities Index fell 1.7% (up 8.3% y-t-d). Spot Gold gained 1.0% to $1,745 (down 8.1%). Silver rose 1.3% to $26.2461 (down 0.6%). WTI crude sank $4.19 to $61.42 (up 27%). Gasoline dropped 9.6% (up 38%), and Natural Gas fell 2.5% (unchanged). Copper declined 0.7% (up 17%). Wheat fell 1.8% (down 2%). Corn jumped 3.5% (up 15%). Bitcoin added $1,444, or 2.5%, this week to $58,410 (up 100%).
March 13 – Bloomberg (Suzi Ring and Michelle Fay Cortez): “AstraZeneca Plc’s vaccine for Covid-19, once expected to be a mainstay of protection for much of the world, remains shrouded in controversy as more countries limit its use even as scientists warn of the need for governments to tread carefully. The Netherlands joined a growing list of about a dozen places, including northern Italy and Ireland, moving to suspend the shot over concerns about possible side effects from two batches.”
Market Mania Watch:
March 13 – Bloomberg (Brandon Kochkodin): “A digital artwork by Beeple set auction records… when it sold at Christie’s for a mind-bending $69 million. Twitter Inc. co-founder Jack Dorsey is auctioning the non-fungible token for the first tweet ever, ‘just setting up my twttr,’ with the highest bid coming in at $2.5 million, so far. LeBron James highlights are fetching six figures. If you were somehow unaware, digital assets are booming, with buyers paying up for so-called NFTs that give them exclusive ownership of electronic tchotchkes. Explanations for why, say, a GIF of a cat with a rainbow trail commands a king’s ransom aren’t hard to come by. The more prosaic theories say the price per pixel is surging as Bitcoin and other cryptocurrencies mint new millionaires every day and those newly rich digital natives look to spend in their adopted domain. And sure, it could be as simple as a good old mania around the latest shiny object that’s caught people’s attention.”
March 13 – New York Times (Erin Griffith): “This past week, a trading card featuring the quarterback Tom Brady sold for a record $1.3 million. The total value of the cryptocurrency Bitcoin hit $1 trillion. And Christie’s sold a digital artwork by an artist known as Beeple for $69.3 million after bids started at just $100. These seemingly singular events were all connected, part of a series of manias that have gripped the financial world. For months, professional and everyday investors have pushed up the prices of stocks and real estate. Now the frenzy has spilled over into the riskiest — and in some cases, wackiest — assets, including digital ephemera and media, cryptocurrencies, collectibles like trading cards and even sneakers.”
March 16 – Reuters (Chibuike Oguh): “Private equity firms are paying more for leveraged buyouts to keep pace with soaring valuations of acquisition targets, making some investors leery of whether the industry can keep delivering on promises of lucrative returns. The booming stock market and cheap debt financing have helped push leveraged buyout prices to a record high… Private equity firms paid an average 13.2 times a company’s annual earnings before interest, tax, depreciation, and amortization (EBITDA) for U.S. leveraged buyouts in 2020, an all-time high, up from 12.9 times in 2019, according to… Refinitiv.”
March 18 – New York Times (Matt Phillips): “It didn’t look like a very promising investment opportunity. SpectraScience’s phone number was out of service. So was its website. And it hadn’t disclosed financial results since late 2017, when the San Diego medical equipment company reported a quarterly loss — its 12th in a row. But early this year, SpectraScience’s nearly worthless shares — priced in hundredths of a penny and too minor to trade on a major stock exchange — sprang to life. On Jan. 27, their price doubled, with over 900 million shares traded. The next day, amid a flurry of social-media cheerleading, more than 3.5 billion shares of the company changed hands — a volume roughly equal to half that day’s trading on the New York Stock Exchange. After soaring 500% as trading opened, just as quickly SpectraScience collapsed. Penny stocks — the name given to more than 10,000 tiny companies like SpectraScience — have been around forever, but they’re booming as small investors flood the market. And this time around, social media is fueling the craze.”
March 17 – Reuters (Joshua Franklin): “Yet with more than nine months to go until the end of 2021, initial public offerings (IPOs) of U.S. SPACs this week surpassed the $83.4 billion the sector raised in all of 2020… This is also more than the $29.5 billion that IPOs of companies that operate businesses – as opposed to being empty shells like SPACs – have raised since the start of the year… The breakneck growth of what was once an obscure backwater of capital markets reflects the popularity of SPACs as an alternative vehicle to traditional IPOs.”
Market Instability Watch:
March 18 – Bloomberg (Liz Capo McCormick, Daniela Sirtori-Cortina and John Ainger): “Bond traders ramped up bets on faster growth and inflation after Federal Reserve officials reiterated projections that they’ll hold rates near zero through 2023. The signal of continued ultra-loose policy drove the Treasuries yield curve sharply steeper, with 30-year yields breaking above 2.5% for the first time since 2019. The premium over five-year debt was within touching distance of the highest level in nearly seven years. Market measures of inflation expectations also surged to multiyear highs… Those moves came after Fed Chair Jerome Powell again indicated he wasn’t concerned over the recent surge in long-term yields — with his focus still on whether financial conditions remained accommodative.”
March 16 – Bloomberg (Timothy Murphy, Stephen Spratt and Kyoungwha Kim): “Worsening liquidity is making it harder for U.S. bond traders to fix price anomalies. That raises the risk of a spike in yields as the Federal Reserve meets to decide monetary policy. A gauge of bond liquidity has deteriorated in the U.S., France and Italy, while improving in the U.K. and Japan. Reflation and rising bond sales look like a recipe for higher yields. Yet the Fed has signaled no hurry to raise rates, even as President Joe Biden’s $1.9 trillion stimulus deal boosts the growth outlook.”
March 15 – Reuters (Thyagaraju Adinarayan): “It’s a year since COVID-19 mayhem sent the S&P 500 index reeling 12% for its second-worst day ever, yet the bull market born from that selloff has in the subsequent 12 months added more than $40 trillion to the value of world stocks. On March 16, 2020, when the S&P 500 endured its worst one-day fall since the ‘Black Monday’ of October 1987, MSCI’s global equity index plunged almost 10%, only to rise back thanks to huge central bank support. As COVID-19 spread around the world between late February and the end of March 2020, triggering unprecedented lockdowns, world stocks saw their market value collapse by $21 trillion. Markets troughed on March 23, then claimed a record high five months later. The market capitalisation of the MSCI global index has risen $40 trillion between March 23 and now, making it a $65 trillion round-trip.”
March 15 – Financial Times (Steve Johnson): “Lossmaking pharmaceutical and biotech companies dominate the list of US stocks most owned by exchange traded funds following a dramatic buying spree in 2020. The unprofitable companies are particularly dominant in thematic ETFs, which focus on narrow investment areas, particularly those run by Ark Invest… As many as 13 of the 50 stocks for which ETFs accounted for the largest chunk of free float ownership at the end of last year are pharmaceuticals companies, according to… Citi… Ten of the 13 made a loss over their last 12-month period, Financial Times analysis found, including nine of the 10 most intensively held.”
March 16 – Financial Times (Joe Rennison and Colby Smith): “The ferocious sell-off in US government debt markets has spilled into corporate bonds, nudging companies’ borrowing costs higher during a time when the economy is still recovering from the pandemic shock. The average yield across US investment-grade bonds hit 2.28% at the end of last week…, up 0.17 percentage points since the end of February and 0.5 points so far in 2021. The rise in yields… marks the bonds’ worst performance since Covid-19 struck a year ago.”
March 15 – Financial Times (Aziza Kasumov and Colby Smith): “America’s vast spending programme has added fuel to a powerful upheaval in global stocks, boosting shares in companies that were shunned during the height of the pandemic… The shake-up suggests that the $1.9tn US spending bill passed by America’s Congress and signed into law by the president last week, combined with vaccine rollouts and the reopening of the world’s major economies, will kick off a markedly different phase in markets to the rally of the past year. ‘There’s not all that much going on on the surface but underneath it is violent and ugly,’ said Meghan Shue, head of investment strategy at Wilmington Trust.”
March 16 – Bloomberg (Joanna Ossinger): “The stock market’s fear gauge is struggling to breach a key resistance level despite nearing its lowest since the onset of the pandemic — and such behavior has precedent. The Cboe Volatility Index closed Monday at 20.03. That was its lowest since Feb. 12… The index has had similar difficulties in breaching that level in other times of stress, according to strategists… Susquehanna International Group derivatives strategist Chris Murphy pointed out the ‘pretty shocking’ similarities between the VIX’s behavior during the Global Financial Crisis and now, in a note… ‘Part of the reason the medium-term VIX futures are remaining elevated now is likely due to concerns regarding potential ‘mini shocks,’ Murphy wrote.”
March 18 – Bloomberg (Vince Golle): “The Federal Reserve Bank of Philadelphia’s latest survey of factories showed conditions in the region jumped in March to the highest level since 1973 as orders and shipments improved, while a measure of prices paid for materials soared to a 41-year high. The general activity index surged by 28.7 points to 51.8… That well exceeded all forecasts… The Fed bank’s gauge of prices paid increased to 75.9 from 54.4, while an index of prices received by the region’s manufacturers rose by 15.1 points to 31.8 in March. More factories reported increases in orders, shipments and the number of employees. The index of bookings was the second-highest in data back to 1968.”
March 15 – Bloomberg (Vince Golle): “Manufacturing in New York expanded in March by the most since November 2018 as a growing number of factories in the state reported paying more for materials and charging higher prices. The Federal Reserve Bank of New York’s general business conditions index rose to 17.4 from 12.1 a month earlier… Prices paid for materials increased 6.6 points to 64.4, while a gauge of prices received edged up 0.8 point to 24.2 — both the highest since May 2011. More manufacturers also said they expect higher input costs and prices received in the next six months.”
March 18 – Wall Street Journal (Sean McLain, Christopher M. Matthews and Costas Paris): “Supply chain woes mounted world-wide for makers of everything from cars and clothing to home siding and medical needle containers, as the extreme Texas weather and port backlogs compounded problems for manufacturers already beset by pandemic disruptions. Toyota Motor Corp., Honda Motor Co. and Samsung Electronics Co. were the latest multinational companies to chime in about setbacks, with the two auto makers saying Wednesday they would halt production at plants in North America. Toyota cited a shortage of petrochemicals, manufacturing of which has been hobbled by last month’s Texas freeze. Honda pointed to a combination of port issues, the semiconductor shortage, pandemic-related problems and the crippling U.S. weather.”
March 18 – Bloomberg (Anjani Trivedi): “When Samsung Electronics Co. says there is a ‘serious imbalance in supply and demand’ for chips, there can be little doubt that we are dealing with a severe semiconductor shortage. The warning from the world’s largest smartphone maker — and a major producer of chips — was the loudest in the recent litany of complaints from carmakers, auto parts and electronics manufacturers as well as other microprocessor companies. The underlying data from some of the biggest chipmakers continue to show lead times at factories getting longer for products across the board. On average, it’s gone from 10 weeks to about 17 weeks for certain types of microprocessors over the last year… In addition, around 75% of all semiconductor parts had an overall jump in lead times… Capacity utilization numbers remain elevated… And there are a variety of chips that have lead times of as long as 52 weeks. If you need a different types of chips in your car or phone or flat screen panel, then the problems just multiply.”
March 14 – Wall Street Journal (Paul Hannon, Bob Tita and Eun-Young Jeong): “Sales at Honey-Can-Do International LLC are soaring, as homebound Americans snap up the Chicago-area company’s clothes racks, shelves and other housewares. But the company’s contract manufacturers in China and Southeast Asia are so busy that they are struggling to meet ‘exceptionally high’ demand… The shortages are most acute and potentially costly in the supply of semiconductors, demand for which has surged as workers bought new laptops and other electronics to turn their homes into their offices. But surveys of manufacturers indicate that lengthening delivery times—a sign that capacity is under strain—are now a near-ubiquitous problem. Data firm IHS Markit reported that global delivery times were the second-longest on record in February…”
March 17 – Wall Street Journal (Ryan Dezember and Marco Quiroz-Gutierrez): “Prices are surging for the raw materials used to build American homes. Lumber, one of the biggest costs in home-building after land and labor, has never been more expensive and is more than twice the typical price for this time of year. Crude oil, a starting point for paint, drain pipe, roof shingles and flooring, has shot up more than 80% since October. Copper, which carries water and electricity throughout houses, costs about a third more than it did in the autumn. Prices for granite, insulation, concrete blocks and common brick have all pushed to records in 2021… Drywall and ceramic tiles are short of records but have also climbed.”
March 18 – Bloomberg (Kevin Crowley): “For anyone looking for examples of inflation these days, raw materials are a good place to start. Copper, steel — even lumber — are either near or at record highs. And so too are plastics, which are often overlooked but are on a tear right now. Although they’re the building blocks of thousands of everyday products, plastics and their chemical ingredients don’t trade on major commodity exchanges, and large price moves are largely invisible to the wider world. Yet polyvinyl chloride, or PVC, is in the midst of a dramatic rally, driven by a combination of rebounding global consumer demand and production outages from last month’s Texas freeze.”
March 17 – Wall Street Journal (Dan Strumpf and Sean McLain): “Toyota Motor Corp, Honda Motor Co. and Samsung Electronics Co. said supply-chain problems were complicating their businesses, as freak weather, port blockages and the continued impact of Covid-19 combine to disrupt global supply chains. Toyota and Honda said… they would halt production at plants in North America because of a squeeze in crucial supplies, including plastic components, petrochemicals and semiconductors. Honda also blamed port backlogs and severe winter weather that has frozen plants and pipes across the central U.S. for the disruption.”
March 16 – Bloomberg (Justina Lee): “The world is on the verge of a new inflationary wave that could force the Federal Reserve to raise rates earlier than planned, according to the co-chief investment officer of the world’s largest hedge fund. The Biden administration’s ‘extreme’ approach to fiscal stimulus looks set to turbocharge consumer prices while threatening the post-crisis bond and stock rally, Greg Jensen at Bridgewater Associates said… ‘The pricing-in of inflation in markets is actually the beginning of a major secular change, not an overreaction to what’s going on,’ Jensen said. ‘Economic conditions and inflation will adjust faster than either markets or the Fed are expecting.’”
Biden Administration Watch:
March 14 – Wall Street Journal (Kate Davidson): “The Biden administration is looking past its $1.9 trillion coronavirus relief bill and starting to consider how to pay for the next round of programs meant to bolster long-term economic growth with investments in infrastructure, clean energy and education. The challenges are twofold. Officials face a decision over how much of the bill to pay for with tax increases and which policies to finance with more borrowing. In a narrowly divided Congress, they must also craft a bill that can win support from nearly every Democrat. The decision will help determine how much of President Biden’s Build Back Better economic agenda he can advance in his first year in office.”
March 15 – Bloomberg (Nancy Cook and Laura Davison): “President Joe Biden is planning the first major federal tax hike since 1993 to help pay for the long-term economic program designed as a follow-up to his pandemic-relief bill… Unlike the $1.9 trillion Covid-19 stimulus act, the next initiative, which is expected to be even bigger, won’t rely just on government debt as a funding source. While it’s been increasingly clear that tax hikes will be a component — Treasury Secretary Janet Yellen has said at least part of the next bill will have to be paid for, and pointed to higher rates — key advisers are now making preparations for a package of measures that could include an increase in both the corporate tax rate and the individual rate for high earners.”
March 16 – Bloomberg (Steven T. Dennis, Erik Wasson, and Laura Davison): “President Joe Biden’s next major economic package will almost certainly have to rely once again on a Democrat-only approach after Senate Minority Leader Mitch McConnell shut the door Tuesday on Republican support for tax hikes to pay for it. While West Virginia Democrat Joe Manchin has insisted Democrats at least try to work with Republicans on an infrastructure package — and Biden also continues to hold out hope — there’s little expectation now that such a bipartisan path exists for anything close to the scale the White House wants, and certainly not for the taxes on the wealthy and corporations they envision will pay for it.”
March 15 – Reuters (Jarrett Renshaw and Trevor Hunnicutt): “With a $1.9 trillion COVID relief package finally passed, U.S. President Joe Biden’s next big spending push is already on the horizon – repairing the nation’s ailing bridges, roads and airports and investing billions in new projects like broadband internet… The White House has added infrastructure experts to the administration in recent weeks, and called in lawmakers and companies to discuss the topic. With a narrow majority in Congress, Biden and Democrats need to either move all or parts of the package through a budget process that would only require party-line votes known as reconciliation, or attract Republican votes and make it a bipartisan effort.”
March 15 – Financial Times (Patti Waldmeir): “Republicans and Democrats in the US Congress agree on few things, but they concur on one issue: the poor state of America’s infrastructure, from roads and bridges to electricity grids, public transit and broadband. A report released this month by the American Society of Civil Engineers gave the country’s infrastructure a grade of C-, lifting it from the D range for the first time in 20 years… Last month, President Joe Biden warned that unless the US makes significant improvements in infrastructure, it risks falling behind China which could, in his words, ‘eat our lunch’… Many US roads, bridges, ports, and water supply systems were built in the 1950s and 1960s, so they are outdated and in need of replacement. On that, deeply divided Republicans and Democrats can easily agree. However, they are squaring up for a fight over who will pay for it. Biden has made it clear that fixing America’s infrastructure is a priority for his new administration…”
March 14 – Financial Times (Tony Czuczka and Christopher Condon): “Treasury Secretary Janet Yellen said U.S. inflation risks remain subdued as the Biden administration pumps $1.9 trillion in pandemic relief into the economy and a return to full employment comes into view. ‘Is there a risk of inflation? I think there’s a small risk and I think it’s manageable,’ Yellen said… Some prices that fell last year when the Covid-19 pandemic spread across the U.S. will recover, ‘but that’s a temporary movement in prices,’ she said. ‘I don’t think it’s a significant risk,’ said Yellen… ‘And if it materializes, we’ll certainly monitor for it but we have tools to address it.’”
March 12 – Reuters (David Shepardson): “U.S. House Speaker Nancy Pelosi said… she has directed key Democratic lawmakers to begin working with Republicans on a major infrastructure package. Democrat Pelosi, who met… with the chairs of U.S. House of Representatives committees that will oversee the infrastructure package, said…: ‘Congress must work swiftly … to craft a big, bold and transformational infrastructure package.’”
March 17 – Reuters (Andrea Shalal): “The U.S. government will marshal all of its resources to address climate change as the country recovers from the COVID-19 pandemic, Treasury Secretary Janet Yellen said…, as she stressed that the poor suffer the most from climate change. President Joe Biden has tasked the Treasury Department with using the ‘vote and voice’ of the United States to advance emissions reduction goals, and working to end international financing of carbon-intensive fossil-fuel-based energy sources.”
March 18 – Bloomberg (Jarrell Dillard and Leslie Kaufman): “Progressives in the House and Senate plan to set down a marker Thursday for President Joe Biden’s infrastructure plans, introducing a $500 billion proposal to shift U.S. transportation away from fossil fuels. Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez, two proponents of the Green New Deal, are behind the bill, joined by Senator Edward Markey of Massachusetts and Representative Andy Levin of Michigan.”
March 15 – Bloomberg (Jeff Kearns): “Republican Senator Pat Toomey released a set of guidelines to end government control of Fannie Mae and Freddie Mac that would need support from Democrats to advance, the latest stab at resolving the biggest outstanding issue from the 2008 financial crisis. Legislation to overhaul Fannie and Freddie must ‘foster a liquid secondary mortgage market while protecting taxpayers and promoting equitable access for all lenders,’ Pennsylvania’s Toomey, the Senate Banking Committee’s top Republican, said…”
Federal Reserve Watch:
March 19 – Wall Street Journal (Andrew Ackerman): “The Federal Reserve said… it would allow a yearlong reprieve for the way big banks account for ultrasafe assets such as Treasury securities to expire as scheduled at the end of the month, a loss for Wall Street firms that had pressed for an extension to the relief. The decision means banks will lose the temporary ability to exclude Treasurys and deposits held at the central bank from lenders’ so-called supplementary leverage ratio. The ratio measures capital—funds that banks raise from investors, earn through profits and use to absorb losses—as a percentage of loans and other assets. Without the exclusion, Treasurys and deposits count as assets. The Fed said it would soon propose longer-term changes to the rule to address its treatment of ultrasafe assets.”
March 18 – Bloomberg (Craig Torres): “Federal Reserve Chair Jerome Powell repeatedly stressed… that the central bank won’t raise interest rates until the U.S. economy shows tangible evidence it has fully healed from Covid-19. In doing so, he discarded a cardinal tenet of monetary policy to pre-emptively strike against inflation. It’s a significant shift that follows the Fed’s new framework announced last year that markets have tested in recent weeks by pushing yields higher. ‘He came out swinging,’ said Roberto Perli, a former Fed economist who is now a partner at Cornerstone Macro… The press conference ‘was an exercise in hammering through the same message over and over: we are committed to the new framework and what we are doing.’ As a result, the Fed will wait for accumulating proof of “substantial further progress” on its employment and inflation goals before paring back its $120 billion in monthly bond purchases.”
March 17 – Financial Times (James Politi and Colby Smith): “Federal Reserve officials signalled that they expect to keep interest rates close to zero until at least 2024, even as they sharply upgraded their US growth forecasts because of a massive fiscal stimulus and an accelerating vaccine rollout. The Fed maintained its dovish stance at the end of a two-day meeting of its top policymakers… ‘While we welcome these positive developments, no one should be complacent,’ Jay Powell, the Fed chair, said… ‘At the Fed, we will continue to provide the economy the support that it needs for as long as it takes.’”
March 17 – Associated Press (Christopher Rugaber and Martin Crutsinger): “The Federal Reserve foresees the economy accelerating quickly this year yet still expects to keep its benchmark interest rate pinned near zero through 2023, despite concerns in financial markets about potentially higher inflation. With its brightening outlook, the Fed… significantly upgraded its forecasts for growth and inflation. It now expects the economy to expand 6.5% this year, up sharply from its previous projection in December of 4.2%. And the Fed raised its forecast for inflation by the end of this year from 1.8% to 2.4%… The Fed also said it would continue its monthly purchases of $120 billion in bonds, which are intended to keep longer-term borrowing costs low.”
March 17 – New York Times (Neil Irwin): “It was once said that the governor of the Bank of England had the power to guide the behavior of Britain’s banks with the mere raise of an eyebrow. For the Federal Reserve in 2021, the equivalent may be Jerome Powell’s chuckle. Mr. Powell, the Fed chair, was asked at a news conference Wednesday whether — in light of its forecast that the economy would recovery quickly in the months ahead — it was time to ‘start talking about talking about’ slowing the central bank’s buying of $80 billion in bonds each month. He let out a half-laugh before answering, ‘Not yet.’ His dismissiveness at the idea that the Fed would even consider slowing its efforts to strengthen the economy was one of many chances he took in Wednesday’s session to convey one simple message: The central bank will not waver in its aggressive efforts to encourage growth until the economy is truly and unquestionably back to health.”
U.S. Bubble Watch:
March 18 – Reuters (Lucia Mutikani): “The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but the labor market is regaining its footing as an acceleration in the pace of vaccinations leads to more businesses reopening… Initial claims for state unemployment benefits increased 45,000 to a seasonally adjusted 770,000…, from 725,000 in the prior week…”
March 16 – Reuters: “U.S. retail sales fell more than expected moderately in February amid bitterly cold weather across the country, but a rebound is likely as the government disburses another round of pandemic relief money… Retail sales dropped by a seasonally adjusted 3.0% last month… Data for January was revised up to show sales rebounding 7.6% instead of 5.3% as previously reported.”
March 17 – Reuters (Lucia Mutikani): “U.S. homebuilding dropped to a six-month low in February as severe cold gripped many parts of the country, in a temporary setback for a housing market that remains supported by extremely lean inventories amid strong demand for larger homes… Housing starts fell 10.3% to a seasonally adjusted annual rate of 1.421 million units last month, the lowest level since last August. Economists… had forecast starts would decrease to a rate of 1.560 million units… Starts were down 9.3% on a year-on-year basis in February. Groundbreaking activity plunged in the Northeast, Midwest and South, but surged in the West. Permits for future home building tumbled 10.8% to a rate of 1.682 million units last month. They, however, jumped 17.0% compared to February 2020…”
March 16 – Bloomberg (Julia Fanzeres): “Confidence among U.S. homebuilders declined in March to a seven-month low as sales eased and construction-materials costs remained elevated. A gauge of builder sentiment fell to 82 from a February reading of 84… The figures show the extent to which higher building-materials costs, particularly lumber, are weighing on builder sentiment. Despite the decline, builders are still upbeat about their prospects as buyer traffic remained steady and sales expectations improved. With limited resale inventory, new housing construction is projected to remain firm.”
March 15 – Wall Street Journal (Nicole Friedman): “The residential real-estate market is on its biggest tear since 2006, just before the housing bubble burst and set off a global recession. Yet in nearly every meaningful way, today’s market is the inverse of the previous boom. Anthony Lamacchia, a broker and owner of a real-estate company near Boston, entered the industry in 2004. Home buyers were trading up to bigger, more expensive houses after barely a year, he said. Many buyers paid small down payments, or none at all. When housing prices stopped rising, the market collapsed. By 2009, Mr. Lamacchia was working with clients desperate to dump the homes he had just helped them buy. Now, he said, housing demand in the Boston suburbs is stronger than he has ever seen. Lamacchia Realty reached $1 billion in sales last year for the first time. Buyers have higher credit ratings these days. They are flusher and are putting down more cash up front. ‘On $1 million purchases, people are putting down $500,000,’ he said. ‘You didn’t see that before.’ In 2020, sales of previously owned U.S. homes surged to their highest level in 14 years, and many economists forecast sales to rise again this year.”
March 19 – Bloomberg (Christopher Maloney, Adam Tempkin and Shahien Nasiripour): “There are few easier ways to make a quick buck in America today than flipping houses. The real-estate market is red hot, profits on flips are at a record high — some $66,000 on average per home — and throngs of HGTV-inspired wannabes have been piling into the business for months. And now, America’s financiers are too. There are more than 60 banks and other firms financing flippers today, according to AlphaFlow… That’s an increase of almost 50% in a little more than two months. It was always just a matter of time before lenders set aside their apprehensions and began writing checks to the fix-and-flip crowd again.”
March 17 – CNBC (Diana Olick): “Higher mortgage rates are cutting into demand for refinances, as fewer and fewer borrowers can now get worthwhile savings. Applications to refinance a home loan fell 4% for the week and were down 39% compared with the same week one year ago… Just a few months ago, refinance volume was more than 100% higher than the previous year. In addition, the refinance share of mortgage activity decreased to 62.9% of total applications from 64.5% the previous week… Mortgage applications to purchase a home, which are less sensitive to weekly rate moves, increased 2% for the week and were 5% higher than the same week one year ago.”
March 15 – Bloomberg (Michael Sasso): “Government relief programs and lenders’ forbearance have kept U.S. small businesses from defaulting on their debt en masse as revenue slumped during the pandemic crisis… Among small firms nationwide, 18.3% of business payments were past due in January, a modest increase from 17.7% in February 2020, the Urban Institute said… Somewhat more affected were two big cities on the coasts, New York and San Francisco, which saw increases of 2.5 and 4.3 percentage points… For now, businesses are sitting on enough cash to pay their bills. Cash balances were up as much as 41% at their peak in late August, as the federal Paycheck Protection Program pumped out forgivable loans to keep small firms afloat.”
March 14 – CNBC (Jessica Dickler): “College dreams are not what they used to be… A recent survey of high school students found that the likelihood of attending a four-year school sank nearly 20% in the last eight months — down to 53%, from 71%, according to ECMC Group, a nonprofit aimed at helping student borrowers. High schoolers are putting more emphasis on career training and post-college employment, the report found. More than half said they can achieve professional success with three years or less of college…”
Fixed Income Watch:
March 16 – Reuters (Bhargav Acharya): “Rating agency S&P… affirmed the United States’ AA-plus/A-1-plus sovereign rating, citing the country’s resilient economy and extensive monetary policy flexibility as the U.S. fights to bounce back from last year’s pandemic-fueled slump. The global rating agency said its outlook for the United States remains stable, reflecting expectations of rapid economic growth as the pandemic recedes, as well as growing fiscal deficits. ‘The stable outlook indicates our view that the negative and positive rating factors for the U.S. will be balanced over the next three years,’ the agency said… ‘We expect that, despite large projected fiscal deficits in the near term, the government will enact countervailing measures to begin addressing longer-term fiscal challenges.’”
March 16 – Reuters (Patturaja Murugaboopathy): “U.S. companies are opting to issue bonds with fixed coupons rather than floating rates as the spectre of a rapid rise in yields impels them to lock in their costs of borrowing. Refinitiv data showed U.S. companies have issued $456 billion through fixed-coupon bonds until March 15, a 12% increase over the same period last year. At the same time, they have borrowed just $77 billion through floating-rate bonds in that period, a 33% decline. In particular, the issuance of fixed-rate junk bonds… almost doubled this year to $108.8 billion…”
March 15 – Wall Street Journal (Sebastian Pellejero): “Investors are scooping up low-rated corporate loans, fueling a rally that is lowering borrowing costs for highly indebted companies. Investors poured more than $8 billion into funds of so-called leveraged loans in January and February, according to Lipper… —the most in more than two years and a notable reversal from more than $26 billion in net outflows last year. That has helped boost loan prices to around their highest levels since November 2018, beating returns on corporate bonds and Treasurys.”
March 16 – Bloomberg (Esteban Duarte): “Verizon Communications Inc.’s worldwide bond issuance to help finance purchases of 5G airwaves reached over $30 billion… after it sold debt in Canadian dollars. The U.S. telecommunications giant priced C$1.5 billion ($1.2bn) in two parts maturing in seven and 30 years… Today’s Maple bond deal, or debt issued by foreign companies in Canadian dollars, is the firm’s second in the currency after raising C$1.3 billion last year.”
March 14 – Wall Street Journal (Stella Yifan Xie): “As the first major economy to beat back Covid-19, China is now taking the global lead in moving to unwind its pandemic-driven economic stimulus efforts. Unlike the U.S. and Europe, which are still flooding their economies with liquidity and spending, China has started reining in credit in some corners. The shift puts China at the vanguard in confronting a challenge other economies will face in coming years as their economies recover: how to withdraw stimulus without snuffing out growth or causing broader market instability. China’s policy makers have expressed concern about an overheating housing market and want to prevent bigger imbalances. They are also eager to resume a multiyear campaign to curb debt that started building during the previous global recession.”
March 18 – Bloomberg: “It’s becoming clearer which parts of China’s corporate sector are most at risk of credit-market stress as Beijing pulls back liquidity: property firms, local government financing vehicles and energy producers. Developers account for a fifth of the $10 billion worth of delinquencies in China this year, while some concern is growing over local state-linked firms after one based in Chongqing missed payments on commercial bills. Coal companies in the country’s northeast are struggling to refinance in the wake of a shock default by a state-owned firm late last year. Beijing is walking a tightrope of allowing struggling companies to default while trying to avoid stress spilling over into the broader credit market.”
March 16 – South China Morning Post (Frank Tang): “China’s central bank is stepping up liquidity support for domestic businesses and increasing its monitoring of cross-border capital flows as concerns persist over the side effects of Washington’s massive new fiscal stimulus plan. The moves by the People’s Bank of China come amid a growing divergence in the recent economic policy responses by the United States and China, with Washington boosting stimulus significantly while Beijing starts to taper off its economic-support policies enacted last year… Beijing officials and policy advisers have been highly critical of US President Joe Biden’s newly signed US$1.9 trillion American Rescue Plan, warning that it could cause massive capital flows and imported inflation that could exacerbate domestic financial risks from already high debt levels. ‘The [US Treasury bond] yield hike driven by inflation expectations will lead to a revaluation of asset prices, or even turmoil in financial markets. Domestic markets are unlikely to remain unresponsive,’ Zhang Xiaohui, former assistant governor of the central bank, said…”
March 15 – Reuters (Lusha Zhang and Kevin Yao): “China will keep the macro leverage ratio basically stable, and appropriately lower the government’s leverage ratio, the state media reported…, citing the state council meeting. China will fine tune economic policies in a timely and preemptive way to stabilise employment and inflation, the cabinet added.”
March 14 – Bloomberg: “China’s home prices grew at the fastest pace in six months in February, as a lower supply of projects during a holiday season added to a fear of missing out among buyers. New home prices in 70 major cities… rose 0.36% last month from January, when they gained 0.28%… Red-hot sentiment has persisted in the face of stricter curbs imposed in some large cities. More prospective homebuyers stayed in cities where they work last month — a period that included the Chinese New Year holiday — due to a renewed surge of coronavirus cases, spurring home purchases.”
March 16 – Wall Street Journal (Chong Koh Ping): “To tame a frothy real-estate market, China is turning to one of its root causes: the way land is sold in big cities. From a standing start in the 1990s—when employers still provided housing for many—China’s property market has experienced phenomenal growth, with homeownership rates soaring and affordability plunging. A 2018 study found Chinese home prices averaged 9.3 times annual incomes, outstripping San Francisco’s 8.4 times. With the yearslong boom continuing despite the coronavirus pandemic, authorities are now sounding the alarm and pushing big cities to coordinate land auctions… Key cities should coordinate residential-land auctions and hold them at a few specific times each year, state media quoted China’s Ministry of Natural Resources as saying… That would mark a big change from the current setup…”
March 16 – Bloomberg (Tom Hancock): “China will risk ‘huge economic losses’ if it tries to curb asset bubbles through monetary policy tightening, a former central bank official warned, adding to a debate that’s roiled financial markets this year. Sheng Songcheng, a former director of the People’s Bank of China’s statistics and analysis department, said closer market supervision would be better than policy tightening measures to reduce speculation in financial assets. Investors are watching closely for signs the PBOC will tighten liquidity this year, with a senior official at the bank fueling a market selloff in January by calling for monetary tightening to curb bubbles in property and equity markets… He said in a written response to questions from Bloomberg News that ‘tightening monetary policy cannot effectively prevent asset bubbles, but will puncture the bubbles and bring huge economic losses.’”
March 16 – Bloomberg (Zheping Huang): “China’s top leader warned that Beijing will go after so-called ‘platform’ companies that have amassed data and market power, a sign that the months-long crackdown on the country’s internet sector is only just beginning. President Xi Jinping… chaired a meeting of the communist party’s top financial advisory and coordination committee, ordering regulators to step up oversight of internet companies, crack down on monopolies, promote fair competition and prevent the disorderly expansion of capital… Internet companies need to enhance data security and financial activities need to come under regulatory supervision… The unusually strongly worded comments from Xi and his lieutenants suggest Beijing is preparing to amplify a campaign to curb the influence of its largest and most powerful private corporations…”
March 13 – Wall Street Journal (Xie Yu): “Chinese regulators attempting to rein in Ant Group Co. and a swelling online-lending industry have a target in their sights: the excessive, debt-fueled lifestyles of the country’s youth. Leading up to last year’s coronavirus pandemic, a new generation of tech-savvy and free-spending citizens helped power rising consumption, a growing driver of China’s economy. Many used short-term loans to pay for expenses such as prestige cosmetics, electronic gadgets and costly restaurant meals. They found credit easy to obtain, thanks to Ant and other Chinese financial-technology companies that provided unsecured loans to millions of people who didn’t have bank-issued credit cards. In 2019, online loans accounted for as much as half of short-term consumer loans in China…”
March 18 – Bloomberg: “China, the world’s biggest importer of corn and soybeans, is seeking to reduce their use in livestock feed in an attempt to curb the country’s dependence on foreign supplies… The top global pork producer has been buying record amounts of both commodities as demand for animal feed, cooking oil and industrial products outstrips the nation’s ability to produce them… The agriculture ministry has drafted a plan to partly replace usage of corn and soybean meal with alternatives such as rice, wheat, potatoes and other oilseed meals…”
March 15 – Bloomberg: “Five months after billionaire Hui Ka Yan navigated a liquidity scare at his China Evergrande Group, investors are about to get a fresh read on the financial health of the conglomerate. Evergrande’s four main listed units will report earnings this month… The results will offer the biggest clues on how the group is doing since its cash crunch in September sent investors running for the exit and spooked China’s top financial officials. Since the crisis, Hui’s empire has won more shareholder support, more than doubling its combined market size to $121 billion as of Monday’s close.”
Global Bubble Watch:
March 17 – Bloomberg (Sohee Kim): “Samsung Electronics Co. warned it’s grappling with the fallout from a ‘serious imbalance’ in semiconductors globally, becoming the largest tech giant to voice concerns about chip shortages spreading beyond the automaking industry. Samsung, one of the world’s largest makers of chips and consumer electronics, expects the crunch to pose a problem to its business next quarter… Industry giants from Continental AG to Renesas Electronics Corp. and Innolux Corp. have in recent weeks warned of longer-than-anticipated deficits thanks to unprecedented Covid-era demand for everything from cars to game consoles and mobile devices.”
March 17 – Financial Times (Joshua Oliver): “Investors have been toppling records this year with outsized orders for a rush of new eurozone government debt, but bankers say the true scale of demand for the bonds is becoming harder to discern. Spain attracted more than €130bn of orders for a 10-year syndication in January, the second record deal in 12 months. In February, an Italian 10-year sale drew €108bn in orders, breaking a record set last summer. Former bailout recipient Greece has also drawn a crowd with new 30-year debt — its first since the financial crisis. The supersized order books have helped countries’ public debt offices secure more favourable borrowing costs, but have also made what was typically a staid process of ‘book building’ more fickle, and made it harder to judge whether orders really reflect demand for the bonds.”
March 17 – Reuters (Leika Kihara and Christian Kraemer): “G7 advanced economies are still discussing a proposal to boost International Monetary Fund reserves for pandemic relief, several sources close to the discussion said… Earlier, Japan’s Kyodo news agency reported they had secured agreement for increased reserves of around $650 billion through a new allocation of the fund’s special drawing rights ahead of a meeting of G7 finance leaders to be hosted by Britain on Friday. ‘We are still continuing debates with the aim of agreeing on boosting SDR to help low-income countries… but we have not yet firmed up details as to the size of SDR boost and the timing of agreement,’ said a government official…”
March 18 – Bloomberg (Patrick Winters): “Credit Suisse Group AG said it’s expecting defaults in a $10 billion group of supply-chain funds that were run together with Greensill Capital, and investors have already begun threatening litigation. ‘There remains considerable uncertainty regarding the valuation of a significant part of the remaining assets,’ the bank said… ‘The portfolio manager has been informed that certain of the notes underlying the funds will not be repaid when they fall due.’”
March 13 – Financial Times (Jeremy Grantham): “We are in a global baby bust of unprecedented proportions. It is far from over and its implications are gravely underestimated. The worldwide fertility rate has already dropped more than 50% in the past 50 years, from 5.1 births per woman in 1964 to 2.4 in 2018, according to the World Bank. In 2020, the 20% shortfall below replacement rate in US fertility, together with low net immigration, produced the lowest population growth on record of 0.35%, below even the flu pandemic of 1918. Many countries, including Italy, South Korea and Japan, are predicted to see their populations drop by more than half by the end of this century.”
Central Bank Watch:
March 18 – Bloomberg (Matthew Malinowski and Andrew Rosati): “For Brazil’s central bank chief Roberto Campos Neto, it was time for a swift change of course. With inflation expectations quickly deteriorating, Campos Neto not only delivered the biggest interest rate increase in more than a decade but also signaled for the next meeting another hike of the same magnitude: 75 bps, which boosted the Selic to 2.75% on late Wednesday… The move surprised all but one of the 42 economists surveyed… — most of them expected a half-point increase… It also showed the central bank’s independence from a recent interventionist shift by President Jair Bolsonaro.”
March 18 – Bloomberg (Cagan Koc and Tugce Ozsoy): “The lira surged after Turkey’s central bank hiked interest rates more than forecast, driving home Governor Naci Agbal’s pledge to tame inflation and defend the currency. The Monetary Policy Committee lifted the one-week repo rate to 19%, double the 100-bps hike predicted… That sparked the biggest intraday advance in more than a week for the lira… Despite ‘political pressure’ against further increases, Agbal ‘delivered a resounding home run,’ said Phoenix Kalen…, director of emerging-market strategy at Societe Generale.”
March 15 – Bloomberg (Anya Andrianova, Evgenia Pismennaya and Áine Quinn): “The Bank of Russia is considering moving faster than previously signaled to tighten monetary policy and may bring its key interest rate up by 125 bps or more before the end of the year… A surge in inflation and concerns about government plans to increase spending mean the central bank may raise the rate in several steps to 5.5% or possibly even 6% — though that’s currently seen as less likely — by the end of the year, the person said, speaking on condition of anonymity to discuss deliberations that aren’t public. The rate now stands at a record low of 4.25%.”
March 16 – Reuters (Francesco Canepa): “The European Central Bank is aiming to stop bond yields from rising before the pandemic-hit euro zone economy is ready to digest higher borrowing costs, the ECB’s chief economist Philip Lane said… The ECB’s decided last week to accelerate bond purchases for the next three months to counter a rise in bond yields, which policymakers deem at least partly unwarranted for an economy still struggling under the COVID-19 pandemic. ‘Our objective is basically to make sure the yield curves, which play an important role in determining overall financing conditions, do not move ahead of the economy,’ Lane told the Financial Times.”
March 13 – Bloomberg (Carolynn Look, Aaron Eglitis and Jana Randow): “The European Central Bank’s faster pace of emergency bond buying to rein in bond yields is a temporary strategy that will only last until the economy is stronger, Governing Council member Martins Kazaks said. ‘If the economy performs better, it could be possible to provide less support,’ Kazaks said… A ‘rise in yields will need to be accepted. But it should be gradual to avoid premature tightening.’”
March 17 – Bloomberg (Birgit Jennen): “Germany’s economy will grow less than expected this year and the recovery could be jeopardized by a renewed spike in Covid-19 infections, according to Chancellor Angela Merkel’s panel of economic advisers. Europe’s biggest economy will expand by 3.1% in 2021…, trimming a forecast of 3.7%… in November. Next year, they expect growth to accelerate to 4%…”
March 14 – Politico (Laurenz Gehrke): “The results in the two western states dealt a blow to new CDU leader Armin Laschet’s chances of securing the nod to be the center-right candidate to succeed Merkel, who plans to end her 16-year tenure after a general election in September. The Green Party came in first in Baden-Württemberg… The CDU’s score in the state represented a drop of around three percentage points. In Rhineland-Palatinate, the Social Democrats maintained first place with about 34.5% of the vote, while the CDU lost some six percentage points compared with the last election in 2016.”
March 15 – Reuters (Jamie McGeever): “Brazil’s expected inflation for 2021 shot up to a new high of 4.6%…, significantly above the bank’s year-end target of 3.75%. It was the tenth rise in a row, and was accompanied by a further increase in the average forecast for official interest rates at the end of this year, by 50 basis points to 4.50%.”
March 16 – Financial Times (Robin Harding): “The Bank of Japan will this week unveil the results of its biggest policy review since 2016 as the central bank grapples with the consequences of a monetary stimulus that has gone on for longer than anybody imagined. Officials at the BoJ insist the review is not intended to ease or tighten monetary policy…. with governor Haruhiko Kuroda promising in advance that it will continue to peg 10-year bond yields at ‘around zero’. Instead, the goal is to make the central bank more ‘nimble’. Like a boxer who missed an early knockout, the BoJ finds itself in a drawn-out struggle to reach 2% inflation. The purpose of the review is to take a breather, regain a sense of control and devise a plan for final victory.”
Leveraged Speculation Watch:
March 15 – Bloomberg (Stephen Spratt): “Hedge funds offloaded the most Treasuries in nine months in January… The Cayman Islands, seen as a proxy for hedge funds and other leveraged accounts, dumped $49 billion of U.S. sovereign bonds, making it the largest net seller of the debt that month, according to the latest data from the Treasury Department. The selling came on the back of the Democratic victories in the January 5 Georgia run-off race which paved the way for bumper stimulus spending… Bets for growth and inflation to quicken have since gained traction, fueling a jump in Treasury yields to the highest in over a year.”
March 13 – Financial Times (Eric Platt and Ortenca Aliaj): “The world’s biggest hedge fund is warning that the recent sell-off in US government bonds could accelerate, in a shift that threatens high-flying assets including blank cheque companies and cryptocurrencies. Bob Prince, who runs Bridgewater Associates with Ray Dalio, told the Financial Times that a new phase of the downturn in the $21tn Treasury market looms as economic growth improves and inflationary pressures push the Federal Reserve to consider reeling back its stimulus measures. The rally in risky assets… ‘really depends on . . . whether [the Fed] bumps into constraints’, said Prince, ‘which will typically be inflation, currency deflation or call it the bond vigilantes, where people just say, ‘Hey, forget it. With that much [money] printing I just don’t want to own bonds.’”
March 16 – Bloomberg (Justina Lee): “Before things went south, Bastian Bolesta made easy money from a quant strategy that worked for years thanks to the rise of automated stock traders on Wall Street. If S&P 500 futures rise, his trading program goes long. If the index drops, it duly puts on a short. Then the money manager just waits for the 4 p.m. bell and closes the position. And repeat. Known as intraday trend-following, systematic players like Bolesta have long exploited one-way trading patterns in the world’s most-watched stock index. But in 2020, the strategy posted the worst decline in two decades — seemingly out of nowhere. With no sign yet of a spirited revival, quants are trying figure out what’s causing this once reliable options-powered trade to misfire.”
Social, Political, Environmental, Cybersecurity Instability Watch:
March 18 – Reuters (Marc Jones): “A new algorithm-based study by a group of UK universities has predicted that 63 countries – roughly half the number rated by the likes of S&P Global, Moody’s and Fitch – could see their credit ratings cut because of climate change by 2030. Researchers from Cambridge University, the University of East Anglia and London-based SOAS looked at a ‘realistic scenario’ known as RCP 8.5, where carbon and other polluting emissions continue rising in coming decades. They then looked at how the likely negative impact of rising temperatures, sea levels and other climate change effects on countries’ economies and finances might affect their credit ratings.”
March 19 – Financial Times (Demetri Sevastopulo and Tom Mitchell): “US and Chinese officials engaged in a fiery exchange at the start of the first-high level meeting between Washington and Beijing since Joe Biden took office… Antony Blinken, US secretary of state, accused China of undermining global stability with its actions towards Hong Kong, Xinjiang and Taiwan at the start of the two-day event in Alaska. ‘Each of these actions threaten the rules-based order that maintains global stability,’ Blinken said…, sitting across the table from Yang Jiechi, his Chinese counterpart. ‘The alternative to a rules-based order is a world in which might makes right and winners take all,’ he added. ‘That would be a far more violent and unstable world.’ Yang fired back by accusing the US of having a ‘cold war mentality’, and saying Washington had used its military and financial clout to ‘suppress’ other nations and to ‘incite some countries to attack China’. He added that many Americans no longer had confidence in their democracy due to the treatment of minorities in the country and incidents of racism. ‘We do not believe in invading, through the use of force or to topple other regimes . . . or to massacre the people of other countries,’ Yang said…”
March 16 – Reuters (Humeyra Pamuk, Kiyoshi Takenaka, Ju-min Park, Antoni Slodkowski, and Elaine Lies): “U.S. Secretary of State Antony Blinken warned China… against using ‘coercion and aggression’ as he sought to use his first trip abroad to shore up Asian alliances in the face of growing assertiveness by Beijing. China’s extensive territorial claims in the East and South China Seas have become a priority issue in an increasingly testy Sino-U.S. relationship and are an important security concern for Japan. ‘We will push back, if necessary, when China uses coercion and aggression to get its way,’ Blinken said. His visit to Tokyo with Defense Secretary Lloyd Austin is the first overseas visit by top members of President Joe Biden’s cabinet. It follows last week’s summit of the leaders of the Quad grouping of the United States, Japan, Australia and India.”
March 19 – Reuters (Yimou Lee and Ben Blanchard): “China is bolstering its ability to attack and blockade Taiwan, deploying long-range missiles to prevent foreign forces helping in the event of war and using psychological warfare to undermine faith in Taiwan’s military, the island’s defence ministry said. The ministry, in its once-every-four-years defence review…, warned China was deploying ‘grey zone’ warfare tactics to subdue the Chinese-claimed island, seeking to wear Taiwan down with repeated drills and activities near its airspace and waters.”
March 17 – Bloomberg (Magan Crane): “President Joe Biden agreed that Russian President Vladimir Putin is a ‘killer,’ and said in an interview with ABC News that Russia would pay for alleged interference in U.S. elections. His comments… came the same day as a U.S. intelligence community report that Putin ordered influence operations to hurt Biden’s candidacy, favoring former President Donald Trump just as the intelligence community says the Russian leader did in 2016 against… Hillary Clinton. Putin ‘will pay a price’ for the interference, Biden said. In a ‘long talk’ with the Russian leader, Biden said he told him, ‘I know you and you know me. If I establish this occurred, then be prepared.’ After ABC News Chief Anchor George Stephanopoulos asked Biden if he believes Putin is ‘a killer,’ Biden murmured agreement and said ‘I do,’ without elaborating.”
March 16 – Reuters (Eric Beech and Jan Wolfe): “The United States is expected to unveil sanctions on Russia as soon as next week over its alleged meddling in the 2020 U.S. presidential election, CNN reported… Iran will also likely face sanctions, CNN reported… U.S. intelligence officials said in a report… that Russian President Vladimir Putin knew of and likely directed a Russian effort to manipulate the U.S. presidential campaign to benefit former President Donald Trump with ‘misleading or unsubstantiated allegations’ against challenger Joe Biden.”
March 14 – Reuters: “Myanmar’s ruling junta has declared martial law in parts of the country’s largest city as security forces killed more protesters in an increasingly lethal crackdown on resistance to last month’s military coup. At least 38 people were killed Sunday and dozens were injured in one of the deadliest days of the crackdown…”
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