March 11 – Reuters (Steve Holland and Susan Heavey): “President Joe Biden… took new steps along with U.S. allies to punish Russia economically over its invasion of Ukraine, targeting trade and shutting down development funds while also announcing a ban on imports of Russian seafood, vodka and diamonds. Biden also criticized voices in the United States clamoring for an active U.S. military presence in Ukraine or American backing of a ‘no-fly zone’ to protect Ukrainians from Russian forces. ‘The idea that we're gonna send in offensive equipment and have planes and tanks and trains going in with American pilots and American crews ...that's called World War Three, OK? Let's get it straight here, guys,’ Biden told Democrats… ‘We will defend every inch of NATO territory, every single inch,’ including NATO members bordering Russia... ‘Granted, if we respond it is World War Three, but we have a sacred obligation on NATO territory ... although we will not fight the Third World War in Ukraine.’”
What a distressingly Ugly week. The Russian military increased bombardment of Ukrainian cities, as 2.5 million refugees inundated neighboring countries. Peace negotiations made little or no progress, while the Ukrainian military’s success in inflicting damage likely ensures Putin doubles-down with “scorched earth” measures.
Contemporary finance showed its Ugly side. Acute instability is worrying, to say the least. WTI crude traded to $130 in early Monday trading, before reversing sharply lower to end the week down 5.5% at $109.33. Aluminum was up as much as 6%, before ending the week down 9.5%. Palladium spiked 14% higher Monday – then ended the week down 6.8%. Platinum gave up its earlier 5% advance to close the week 4% lower. After trading as high as $2,070, Gold ended the week up $18 to $1,988. Copper traded with a 10% high-to-low range for the week, while wild Wheat saw a 23% swing. But this was all little sissy volatility compared to nickel. One (fiasco) for the history books.
March 8 – Wall Street Journal (By Jing Yang, Rebecca Feng and Joe Wallace): “Chinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after Russia’s war in Ukraine set off an unprecedented rise in the price of a key metal used in stainless steel and electric-vehicle batteries. The paper loss stood at $8 billion on Monday, before violent moves in nickel prices led the London Metal Exchange to suspend trading…”March 10 – Financial Times (Helen Thomas): “After the collapse of Lehman Brothers, pushing more financial contracts on to exchanges backed by a central counterparty was important in the regulatory recovery plan. Exchange trading brought transparency about exposures for different players. Clearing gave certainty and protection in the event of a default. What could possibly go wrong? Plenty, it seems, given the disarray at the London Metal Exchange which on Tuesday suspended trading in nickel after a 250% spike in the price and cancelled several hours of trades.”March 10 – Financial Times (Andy Home): “The global nickel market is in a pricing black-out. The London Metal Exchange (LME) three-month nickel price sits in suspended animation at $48,048 per tonne, Monday's closing price and the last trade with even a semblance of legitimacy. Tuesday's mayhem and the resulting decision by the LME to suspend all trading has frozen what is the core reference price for the global supply chain stretching from miners to stainless steel mills and electric vehicle battery makers. China is also in black-out. The Shanghai Futures Exchange has suspended trading until Friday. Today there is no global nickel trading and no price formation.”March 11 – Bloomberg (Jack Farchy and Alfred Cang): “JPMorgan... is the largest counterparty to the nickel trades of the Chinese tycoon caught in an unprecedented short squeeze, putting the bank at the center of one of the most dramatic moments in metals market history. About 50,000 tons of Xiang Guangda’s total nickel short position of over 150,000 tons is held through an over-the-counter position with JPMorgan, according to people familiar with the matter. Based on that figure, the tycoon’s company, Tsingshan Holding Group Co., would have owed JPMorgan about $1 billion in margin on Monday. The nickel producer has been struggling to pay margin calls to its banks and brokers…”Commodities markets were an absolute mess, with those hedging derivatives exposures facing the harsh reality of illiquid and discontinuous markets. Meanwhile, the specter of a $40 billion Russian debt default – with zero liquidity in the underlying instruments – threw a big monkey wrench into hedging strategies.
March 10 – Bloomberg (Loukia Gyftopoulou and Laura Benitez): “Pacific Investment Management Co. built up billions of exposure to Russian debt, opening up its funds to losses as markets price in a default by the sovereign. The… asset manager had at least $1.5 billion of sovereign debt, according to the latest fund filings... It had also placed about $1 billion of bets on Russia via the credit-default swap market as of Dec. 31, according to fund documents on its website. The Financial Times… said Pimco faces billions of dollars of losses should Russia default on its debt.”And how did so-called “safe haven” sovereign bonds fare in all the chaos? Bloodied. Ten-year Treasury yields jumped 26 bps to end the week at 1.95%. German bund yields surged 32 bps to 0.25%. French yields were up 29 bps (0.72%), Spanish yields 27 bps (1.24%), and Italian yields 31 bps (1.85%). Yields were up 28 bps (1.49%) in the UK; 27 bps (1.99%) in Canada; 26 bps (2.39%) in Australia; and 25 bps in New Zealand (2.97%). Even Swiss 10-year yields more than doubled this week to 0.29%. Myriad levered strategies (including “risk parity”) are faltering badly, while the vulnerability of the conventional 60-40 stock and bond portfolio is being exposed. And the hawks finally take a stand at the ECB...
It was an alarming week with respect to a problematic dynamic for (over-levered, untenable derivatives risk intermediation, and trend-following-dominated) contemporary finance: surging sovereign yields, widening Credit spreads and rising CDS/risk hedging prices. Investment-grade corporate spreads (to Treasuries) jumped this week to the high since July 2020, with high-yield spreads widening to 16-month highs. ETF bond outflows are gathering problematic momentum. Notably, investment-grade bonds are performing poorly, with the popular iShares Investment-Grade Corporate Bond ETF’s (LQD) 2.8% decline for the week boosting y-t-d losses to 8.95%.
This week witnessed market function beginning to break down. The highly unstable and uncertain backdrop dictates de-risking/deleveraging, a problematic dynamic for a Fragile Bubble Market Structure. Ominously, the big U.S. financial institutions led the global bank CDS leaderboard this week. Citigroup CDS jumped 12 to 102 bps; JPMorgan eight to 85 bps; Morgan Stanley 10 to 100 bps; and Goldman Sachs eight to 103 bps. Bank CDS are now at the highs since the spectacular 2020 pandemic panic.
It’s surreal; no longer is it wachoism to contemplate the use of nuclear weapons or even nuclear war. Certainly bolstering Crisis Dynamics, there is today the clear and present danger of full-fledged Economic Warfare. With all the talk of mounting risk for World War III, history will view this week as the start of an international war of finance and economics.
March 5 – Reuters: “President Vladimir Putin said… that Western sanctions on Russia were akin to a declaration of war, and warned that any attempt to impose a no-fly zone in Ukraine would lead to catastrophic consequences for the world. Putin reiterated that his aims were to defend Russian- speaking communities through the ‘demilitarisation and de-Nazification’ of the country so that Russia’s former Soviet neighbour became neutral and no longer threatened Russia… ‘These sanctions that are being imposed are akin to a declaration of war but thank God it has not come to that,’ Putin said…”March 9 – Reuters (Guy Faulconbridge): “The Kremlin accused the United States… of declaring an economic war on Russia that was sowing mayhem through energy markets, and put Washington on notice it was considering its response to a ban on Russian oil and energy. Russia's economy is facing the gravest crisis since the 1991 fall of the Soviet Union after the West imposed heavy sanctions on almost the entire Russian financial and corporate system following Moscow's invasion of Ukraine. Kremlin spokesman Dmitry Peskov cast the West's sanctions as a hostile act that had roiled global markets and he said it was unclear how far turbulence on global energy markets would go.” March 10 – Wall Street Journal (Josh Zumbrun): “The U.S.-led effort to expel Russia from international commerce marks another fracture in the free-trade vision that guided American policy for nearly 30 years, signaling a future where nations and companies shift away from trading with adversaries and focus more on like-minded partners. The actions taken by the U.S. and Western European allies since Russia invaded Ukraine have been swift and punishing—including banning or scaling back purchases of Russian oil, gas and coal to pressure Russian President Vladimir Putin to call off his troops. The West has also moved to oust Russian banks from international financial networks, while a bipartisan coalition of U.S. lawmakers has introduced legislation calling on the U.S. to press for Russia’s suspension from the World Trade Organization—an action that would have no precedent in WTO history. ‘The trading system as we’ve known it, with the World Trade Organization at its core and with a basic set of rules that everyone traded under, is coming apart,’ said Jennifer Hillman, a trade lawyer and former jurist on the WTO’s trade court…”There will be no putting Humpty Dumpty back together. The question is only the dimensions and ramifications of the developing financial and economic “iron curtain.” With sanctions in the process of strangling the Russian economy, how aggressively will the West penalize nations subverting sanctions to trade with or assist Russia?
March 7 – Associated Press (Ken Moritsugu): “China's foreign minister… called Russia his country’s ‘most important strategic partner’ as Beijing continues to refuse to condemn the invasion of Ukraine… Wang Yi said Chinese ties with Moscow constitute ‘one of the most crucial bilateral relationships in the world.’ China has broken with the U.S., Europe and others that have imposed sanctions on Russia after its invasion of Ukraine… ‘No matter how perilous the international landscape, we will maintain our strategic focus and promote the development of a comprehensive China-Russia partnership in the new era,’ Wang said at a news conference on the sidelines of the annual meeting of China’s ceremonial parliament. ‘The friendship between the two peoples is iron clad,’ he added.”March 10 – Financial Times (Tom Mitchell, Demetri Sevastopulo, Sun Yu and James Kynge): “When the Russian invasion of Ukraine started two weeks ago, Jane Yan, a senior executive at a machine parts maker in eastern China, said she was not too worried about the impact. After all, buyers in Russia and Ukraine accounted for less than 5% of the company’s overseas sales... But as the full ferocity of the Russian onslaught started to become apparent, the outlook shifted dramatically. Important clients in countries such as Poland and Germany cancelled orders... ‘A Munich-based client said ‘it feels terribly wrong to send money to a country that is tolerating war in Ukraine — sorry’,’ said Yan… She added that inquiries from European buyers have also fallen sharply since the conflict started… For Xi Jinping, some of the very same pressures are starting to build. In the early days of the Russian invasion, China tried to keep its head down — perhaps in the hope that a short, sharp incursion would not cause too many reverberations. But over the past week, as Russia has intensified its bombardment of urban areas, Xi has found himself facing the potential for two interlocking crises. As the biggest importer of oil and a big buyer of food from around the world, China’s economy is very exposed to the market turmoil that the war and subsequent sanctions have unleashed. It also risks a deep diplomatic backlash, especially in Europe, where many see it as little short of an accomplice to the invasion.”“Many see [China] as little short of an accomplice to the invasion.” Putin and Xi, after all, did vociferously proclaim their anti-West partnership with “no limits” only days ahead of the invasion. Resulting military and economic wars come at a critical juncture for China’s historic Bubble.
While attention was elsewhere, China’s developers were in meltdown this week. Evergrande bond yields surged 22 percentage points to a record high 116.7%. More alarmingly, Country Garden (China’s largest developer) yields surged a stunning 922 bps to 24.88%. Bonds that traded at par (100) in September - and in the 80s last month - closed Friday at 50. Kaisa yields were up 20 percentage points to 114%; Longfor 32 percentage points to 110%; and Sunac nine percentage points to 66.9%. An index of Chinese high-yield bonds (trading at 12% in September) saw yields surge 345 bps this week to a record high 26.29%. Panic, as Bubble collapse gathers a head of steam. Meanwhile, China's zero-tolerance policies will be challenged by the worst Covid outbreak since the beginning of the pandemic.
March 9 – Bloomberg (Alice Huang): “Spreads on Chinese commodity firms’ dollar bonds rose sharply Wednesday as state-owned enterprises are considering possible investment in Russia’s energy and commodities sector. China Minmetals’ 3.75% perpetual note widened 57bps to 218bps…, set for the biggest increase since April…”The Shanghai Composite sank 4.0% this week, increasing y-t-d losses to 9.1%. The Hong Kong China Financials Index dropped 4.2%. Providing a hint of the myriad risks buried in the $55 TN Chinese banking system, a unit of China Construction Bank missed a margin call Monday in nickel-related trading.
March 11 – Financial Times (Neil Hume, Helen Thomas and Philip Stafford): “Beijing is exploring a plan to rescue the billionaire owner of Tsingshan Holding Group from billions of dollars of potential losses after a backfiring bet brought global nickel trading to a halt. China’s leading stainless steel producer is at the centre of a surge in nickel prices, after its wager that the price would fall collided with a rally in the metal sparked by the war in Ukraine, forcing it to buy contracts linked to the metal in huge volumes.” New China Credit data was out Friday. Following gangbuster January lending, February is typically a seasonally slow month for Chinese Credit. Still, last month’s lending was remarkably weak. At just over half of expectations, Aggregate Financing (China’s key Credit metric) increased $188 billion, down from January’s booming $974 billion and 31% below February 2021. At $195 billion, growth in Bank Loans was about 20% below forecasts and 9% behind a year ago.
Lending weakness was across the board. And while corporate and government bond issuance slowed markedly from January, it was the contraction in Household borrowings that must have set off alarm bells in Beijing. Household (chiefly mortgages) Loans fell $53 billion, down from January’s $132 billion expansion and the first contraction since pandemic February 2020. At $138 billion, three-month Household loan growth was down 55% from the year ago period. One-year growth dropped to 10.8%, the weakest in data back to 2007.
With so many major developments, it would have been reasonable to let the Fed’s Q4 2021 Z.1 report slip. But such an important quarter needed to be documented. With Q1 2022 a historic Bubble inflection point, it’s worth delving into Credit and Flow of Funds data at the Pinnacle of Bubble Excess. To be sure, Powerful Inflationary Dynamics Permeate virtually all aspects of Q4 data – the Fed, Treasury and Agency Debt, Mortgage Credit, Banking system Assets, Deposits, the Broker Dealers, the Securities markets, the Household Balance Sheet, and Rest of World.
Non-Financial Debt (NFD) expanded at an 8.24% annualized pace during Q4. Outside of the two massive pandemic stimulus quarters (Q1 and Q2 2020), it was the strongest pace of Credit growth since Q3 2008. Household Mortgages expanded at 8.0%, the strongest rate since Q2 2007. The Credit system is firing on all cylinders, consistent with a highly inflationary backdrop. Consumer Credit grew at a 6.9% rate, and Business borrowings expanded at a 6.7% pace.
For 2021, NFD expanded 6.17%. Excluding 2020’s booming 12.34%, it was the strongest annual Credit growth since 2007’s 8.17%. Last year’s 7.57% expansion in Household Mortgages was the biggest percentage gain since 2006’s 11.19%.
On a seasonally-adjusted and annualized basis (SAAR), NFD surged during Q4 a blistering $5.253 TN – with Treasury debt expanding SAAR $2.663 TN, Total Household borrowings SAAR $1.402 TN, Business Borrowings SAAR $1.216 TN and Foreign borrowings SAAR $509 billion. For 2021, NFD expanded $3.783 TN, second only to 2020’s $6.733 TN. Prior to 2020, the record for annual NFD growth was 2007’s $2.534 TN. For further perspective, NFD averaged $1.847 TN annually during the decade 2010 to 2019.
Federal Reserve Assets inflated an additional $273 billion during Q4 to a record $8.887 TN. Fed Assets expanded $1.231 TN for the year, with stunning growth of $4.877 TN over the past 10 quarters (122%). The Fed’s Treasury holdings ended the year up $778 billion to a record $6.032 TN. Treasury holdings have increased $3.666 TN, or 155%, since Q3 2019. Agency Securities holdings jumped $512 billion last year to a record $2.676 TN, having expanded $1.145 TN since Q3 2019.
Treasury borrowings expanded SAAR $2.663 TN during Q4. Outstanding Treasury Securities expanded nominal $1.035 TN during Q4 to a record $25.285 TN. It’s worth adding that Q4 federal government expenditures (SAAR $5.959 TN) were 24% higher than pre-pandemic Q4 2019. For 2021, Treasury Securities rose $1.684 TN, with 10 quarter growth of an unprecedented $7.470 TN, or 41.9%. Since 2007, Treasuries Securities have inflated $19.234 TN, or 318%. Treasury Securities ended the year at 122% of GDP, up from 55% to close 2007.
Agency Securities expanded $130 billion during the quarter to a record $10.666 TN, with one- and two-year growth of $579 billion and $1.237 TN. Combined Treasury and Agency Securities expanded $2.263 TN last year – and an outrageous $8.873 TN over 10 quarters - to 150% of GDP.
Household Mortgages expanded SAAR $900 billion during Q4, compared to the $226 billion annual average over the decade 2010 to 2019. Total Mortgage borrowings expanded a nominal $378 billion during Q4, the strongest quarter since Q3 2006. Total Mortgages surged $1.203 TN (strongest since 2006), or 7.2%, to a record $17.980 TN. Home Mortgages rose $879 billion during 2021, the largest increase since 2006’s $1.082 TN. Commercial Mortgages gained $184 billion in 2021, the strongest since 2007’s $265 billion.
Total Debt Securities (TDS) expanded nominal $1.275 TN during Q4 to a record $56.188 TN (largest increase since Q2 2020). TDS jumped $3.078 TN y-o-y and $10.443 TN (22.8%) over 10 quarters. Total Debt Securities ended the year at 234% of GDP, up from 201% to end 2007 and 158% to close out 1999. Total Equities surpassed $80 TN ($80.184 TN) for the first time during Q4, expanding $4.710 TN for the quarter and $14.800 TN (22.6%) for the year.
Total Equities were up $29.416 TN, or 58%, over 10 quarters. Total Equities ended the year at a record 334% of GDP, higher than previous cycle peaks 188% (Q3 2007) and 210% (March 2000). Total (Debt & Equities) Securities expanded $17.879 TN last year to a record $136.372 TN, or 568% of GDP. This compares to previous cycle peaks 387% (Q3 ’07) and 368% (Q1 ’00). It’s worth adding that the total value of ETFs surged $610 billion (37% annualized) to a record $7.191 TN, with 2021 growth of $1.741 TN, or 32%. Equities ETFs inflated $529 billion (53% annualized) during the quarter to a record $4.522 TN, with one-year growth of $1.339 TN, or 42%.
The Household Balance Sheet exemplifies historic Systematic Monetary Inflation. Household Assets inflated another $5.684 TN during Q4 to a record $168.642 TN. Household Liabilities gained $387 billion (8.6% pace) to a record $18.353 TN. Household Net Worth (Assets less Liabilities) surged $5.297 TN during the quarter to a record $150.290 TN. Net Worth surpassed $100 TN for the first time in 2017. Household Net Worth inflated a record $18.946 TN in 2021, with three-year growth of $44.771 TN, or 42%. For comparison, Net Worth expanded on average $5.447 TN annually over the decade 2010 to 2019. Household Net Worth ended the year at a record 626% of GDP, compared to previous cycle peaks 491% (Q1 ’07) and 445% (Q1 ’00).
Bank (“Private Depository Institutions”) Assets jumped $478 billion (7.6% annualized) during Q4 to a record $25.606 TN. Bank Assets expanded $2.160 TN (9.2%) over the past year and $5.550 TN (27.7%) in two years – for the most rapid expansion of Bank Assets since the early seventies. Bank Loans expanded nominal $425 billion during Q4, second only to Q1 2020’s $561 billion. Bank Mortgage loans grew $108 billion during the quarter, the biggest gain since Q2 2016. Consumer Loans increased $95.7 billion, second only to Q1 2010’s anomalous $312 billion.
The Bank Asset “Reserves at the Fed” dropped $215 billion during the quarter to $3.644 TN, while Treasury holdings jumped $190 billion to a record $1.646 TN. Treasuries surged $443 billion, or 36.8%, during 2021 (two-year gain $767bn). Bank Agency/MBS holdings rose $56 billion during the quarter and $512 billion for the year – to a record $3.888 TN. Agency holdings inflated $1.253 TN over the past two years, or 47.6%.
On the Bank Liability side, Total (Checking and Savings) Deposits jumped $573 billion (11.2% annualized) during the quarter to a record $20.986 TN. Total Deposits were up $2.124 TN in four quarters and $5.453 TN, or 35.1%, over two years.
Broker/Dealer Assets expanded $112 billion during the quarter (10.2% annualized) to a record $4.504 TN. Assets were up $306 billion, or 7.3%, over four quarters and $560 billion, or 14.2%, in two years. The Broker/Dealer asset Loans rose $24.9 billion to a record $841 billion. Loans were up $179 billion, or 27%, over the past year, and $412 billion, or 95.8%, over two years. Miscellaneous Assets gained another $115 billion to $1.504 TN, with one-year growth of $383 billion, or 34.2%.
The Z.1 category “Federal Funds and Security Repurchase Agreements” jumped $689 billion (57% annualized) during Q4 to a record $5.833 TN. The Fed’s “repo” Liability rose $278 billion for the quarter to a record $2.183 TN, with one-year growth of $1.967 TN. Money Market Funds’ “Repo” Asset increased $231 billion during the quarter to a record $2.496 TN (one-year growth $1.427 TN).
In some of the more enigmatic data, Rest of World (ROW) holdings of U.S. Financial Assets surged a nominal $2.504 TN (23% annualized) during the quarter to a record $46.984 TN. ROW holdings were up $7.141 TN (17.9%) over four quarters and $12.062 TN (34.5%) over two years. The value of ROW Equities holdings inflated $1.000 TN during the quarter to a record $14.531 TN, with one-year growth of $3.053 TN (26.6%) and two-year growth of $5.436 TN (59.8%). Debt Securities holdings increased $161 billion during the quarter to a record $13.576 TN, with one-year expansion of $705 billion (5.5%) and two-year growth of $1.505 TN (12.5%). Amazingly, ROW Assets have almost tripled since the end of 2008. I’m already looking forward to the Q1 2022 Z.1 report.
For the Week:
The S&P500 dropped 2.9% (down 11.8% y-t-d), and the Dow fell 2.0% (down 9.3%). The Utilities declined 0.9% (down 3.1%). The Banks lost 2.3% (down 7.2%), and the Broker/Dealers sank 3.2% (down 9.8%). The Transports declined 1.0% (down 7.6%). The S&P 400 Midcaps fell 1.7% (down 9.5%), and the small cap Russell 2000 slipped 1.1% (down 11.8%). The Nasdaq100 sank 3.9% (down 18.5%). The Semiconductors dropped 3.5% (down 20.3%). The Biotechs fell 1.8% (down 12.9%). With bullion gaining $18, the HUI gold index rose 2.6% (up 20.8%).
Three-month Treasury bill rates ended the week at 0.35%. Two-year government yields jumped 27 bps to 1.75% (up 102bps y-t-d). Five-year T-note yields surged 31 bps to 1.95% (up 68bps). Ten-year Treasury yields rose 26 bps to 2.00% (up 48bps). Long bond yields jumped 20 bps to 2.36% (up 45bps). Benchmark Fannie Mae MBS yields surged 32 bps to 3.07% (up 101bps).
Greek 10-year yields rose 22 bps to 2.57% (up 125bps y-t-d). Ten-year Portuguese yields jumped 27 bps to 1.11% (up 64bps). Italian 10-year yields surged 31 bps to 1.85% (up 68bps). Spain's 10-year yields rose 27 bps to 1.24% (up 67bps). German bund yields surged 32 bps to 0.25% (up 43bps). French yields jumped 29 bps to 0.72% (up 53bps). The French to German 10-year bond spread narrowed three to 47 bps. U.K. 10-year gilt yields rose 28 bps to 1.49% (up 52bps). U.K.'s FTSE equities index rallied 2.4% (down 3.1% y-t-d).
Japan's Nikkei Equities Index dropped 3.2% (down 12.6% y-t-d). Japanese 10-year "JGB" yields increased two bps to 0.19% (up 11bps y-t-d). France's CAC40 rallied 3.3% (down 12.5%). The German DAX equities index recovered 4.1% (down 14.2%). Spain's IBEX 35 equities index surged 5.5% (down 6.6%). Italy's FTSE MIB index gained 2.6% (down 15.7%). EM equities were mixed. Brazil's Bovespa index dropped 2.4% (up 6.6%), while Mexico's Bolsa was little changed (unchanged). South Korea's Kospi index fell 1.9% (down 10.6%). India's Sensex equities index rose 2.2% (down 4.6%). China's Shanghai Exchange sank 4.0% (down 9.1%). Turkey's Borsa Istanbul National 100 index jumped 3.2% (up 10.6%). Russia's MICEX equities index did not trade (down 34.8%).
Investment-grade bond funds saw outflows of $5.359 billion, and junk bond funds posted negative flows of $1.6 billion (from Lipper).
Federal Reserve Credit last week increased $3.7bn to $8.870 TN. Over the past 130 weeks, Fed Credit expanded $5.144 TN, or 138%. Fed Credit inflated $6.059 Trillion, or 216%, over the past 487 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt last week dropped $20.3bn to $3.433 TN. "Custody holdings" were down $137bn, or 3.8%, y-o-y.
Total money market fund assets declined $30.5bn to $4.576 TN. Total money funds increased $183bn y-o-y, or 4.2%.
Total Commercial Paper rose $11.9bn to $1.039 TN. CP was down $72bn, or 6.5%, over the past year.
Freddie Mac 30-year fixed mortgage rates jumped nine bps to 3.85% (up 80bps y-o-y). Fifteen-year rates gained eight bps to 3.09% (up 71bps). Five-year hybrid ARM rates rose six bps to 2.97% (up 20bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up 26 bps to 4.35% (up 112bps).
Currency Watch:
For the week, the U.S. Dollar Index increased 0.5% to 99.12 (up 3.6% y-t-d). For the week on the upside, the South African rand increased 2.3%, the Swedish krona 1.0%, and the Mexican peso 0.2%. On the downside, the Japanese yen declined 2.1%, the Swiss franc 1.9%, the British pound 1.5%, the South Korean won 1.4%, the Australian dollar 1.0%, the New Zealand dollar 0.7%, the Norwegian krone 0.6%, the Brazilian real 0.2%, the Singapore dollar 0.2%, the euro 0.2% and the Canadian dollar 0.1%. The Chinese renminbi declined 0.31% versus the dollar (up 0.27% y-t-d).
Commodities Watch:
March 9 – New York Times (Clifford Krauss): “Before its forces invaded Ukraine, Russia provided one out of every 10 barrels of oil the world consumed. But as the United States and other customers shun Russian crude, the global oil market faces its greatest upheaval since the Middle East tumult of the 1970s. An energy price shock will probably last as long as the confrontation goes on, since there are few alternatives to quickly replace Russia’s exports of roughly five million barrels a day. Oil prices were already rising fast as the world economy emerged from Covid-19 shutdowns and producers stretched to meet growing demand. International oil companies had cut back investment over the last two years. Now traders are bidding up crude prices to levels not seen in years…”
March 7 – Bloomberg (Allison Nicole Smith): “Investors are flooding commodity exchange-traded funds with cash on signs that shortages for energy, metals and grains will spark hefty returns. Commodity ETFs were injected with more than $4.5 billion last week, an inflow that would normally be seen over the course of a month. In a rarity, the money going into the funds topped flows into equity and bond ETFs, which pulled in $3.8 billion and $2.3 billion, respectively. The sudden influx of cash comes as red-hot inflation hampers other assets.”
March 9 – Associated Press: “Ukraine’s government has banned the export of wheat, oats and other staples that are crucial for global food supplies as authorities try to ensure they can feed people during Russia’s intensifying war… The export ban is needed to prevent a ‘humanitarian crisis in Ukraine,’ stabilize the market and ‘meet the needs of the population in critical food products,’ Roman Leshchenko, Ukraine’s minister of agrarian and food policy, said…”
The Bloomberg Commodities Index declined 0.5% (up 27.5% y-t-d). Spot Gold gained 0.9% to $1,988 (up 8.7%). Silver added 0.7% to $25.87 (up 11.0%). WTI crude fell $6.35 to $109.33 (up 67%). Gasoline sank 6.5% (up 49%), and Natural Gas fell 5.8% (up 27%). Copper sank 6.3% (up 4%). Wheat slumped 8.5% (up 44%), while Corn gained 1.1% (up 42%). Bitcoin was little changed this week at $38,940 (down 16%).
Russia/Ukraine Watch:
March 8 – The Hill (Rebecca Beitsch and Ines Kagubare): “Intelligence experts… painted a picture of an increasingly determined Vladimir Putin set to ‘double down’ on his invasion of Ukraine despite being ill-prepared for the consequences to Russia’s economy and with little prospect for long-term success. ‘I think Putin is angry and frustrated right now. He’s likely to double down and try to grind down the Ukrainian military with no regard for civilian casualties,’ CIA Director William Burns told lawmakers… ‘But the challenge that he faces, and this is the biggest question that's hung over our analysis of his planning for months now … is he has no sustainable political end game in the face of what is going to continue to be fierce resistance from Ukrainians.’”
March 9 – Reuters (Natalia Zinets): “Ukrainian's president accused Russia of carrying out genocide after officials said Russian aircraft bombed a children's hospital on Wednesday, burying patients in rubble despite a ceasefire deal for people to flee the besieged city of Mariupol. The attack, which authorities said injured women in labour and left children in the wreckage, is the latest grim incident of the 14-day invasion, the biggest assault on a European state since 1945.”
March 8 – Wall Street Journal (Matthew Luxmoore, Drew Hinshaw and Nancy A. Youssef): “In the space of two weeks, Russia’s invasion of Ukraine has set off one of the largest and fastest arms transfers in history. By road and rail, the Czech Republic sent 10,000 rocket-propelled grenades to Ukraine’s defenders last week alone. In Poland, the provincial airport of Rzeszow located about 60 miles from the Ukrainian border has been so crowded with military cargo jets that on Saturday some flights were briefly diverted until airfield space became available. On the country’s highways, police vehicles are escorting military transport trucks to the border, with other convoys slipping into Ukraine via snow-covered back roads through the mountains. The race to deliver arms to Ukraine is emerging as a supply operation with few historical parallels.”
March 10 – Wall Street Journal (James Marson): “Dancer Oleksiy Potyomkin was supposed to be leaping across the stage of the Kyiv Opera this month as the prince in the ballet ‘Lileya,’ a Ukrainian classic. Instead, he grabbed a gun and a medical kit and joined the resistance battling Russia’s invading army. Tens of thousands of Ukrainian civilians have taken up arms or otherwise sought to support a nationwide resistance movement against Moscow’s offensive, which Kyiv says has already left thousands of Ukrainian noncombatants dead. The broad mobilization includes people from all walks of life, including prominent figures from a playwright to a lawmaker, a rock singer and TV host, who have rallied to defend their country’s independence, as the Russian military has moved to encircle and pummel Ukrainian cities.”
March 8 – Financial Times (Mehul Srivastava, Madhumita Murgia, and Hannah Murphy): “Months before the Russian invasion, a team of Americans fanned out across Ukraine looking for a very specific kind of threat. Some were soldiers, with the US Army’s Cyber Command. Others were civilian contractors and some employees of American companies that help defend critical infrastructure from the kind of cyber attacks that Russian agencies had inflicted upon Ukraine for years. The US had been helping Ukraine bolster its cyber defences for years, ever since an infamous 2015 attack on its power grid left part of Kyiv without electricity for hours. But this surge of US personnel in October and November was different: it was in preparation of impending war.”
March 6 – Wall Street Journal (Gordon Lubold, Nancy A. Youssef and Alan Cullison): “Moscow is recruiting Syrians skilled in urban combat to fight in Ukraine as Russia’s invasion is poised to expand deeper into cities, according to U.S. officials. An American assessment indicates that Russia, which has been operating inside Syria since 2015, has in recent days been recruiting fighters from there, hoping their expertise in urban combat can help take Kyiv and deal a devastating blow to the Ukraine government, according to four American officials. The move points to a potential escalation of fighting in Ukraine, experts said.”
Economic War Watch:
March 10 – Bloomberg: “Russia is prepared to pay its foreign creditors on condition that a freeze on much of its $643 billion cash pile is lifted, according to Finance Minister Anton Siluanov. Speaking at a government meeting attended by President Vladimir Putin, Siluanov reiterated Russia’s decision to service its dollar and euro-denominated bonds in rubles. Bondholders would be able to get their payments in hard currency only if a block on the central bank’s reserves held overseas is removed... ‘We will repay our external obligations in rubles, but we will carry out the conversion as our gold and foreign exchange reserves are unfrozen,” Siluanov said...”
March 10 – Reuters (Elizabeth Piper): “British foreign minister Liz Truss will call on the West… to get tougher with Russian President Vladimir Putin for shattering ‘the architecture of global security’ over Ukraine and to tighten ‘the vice’ of sanctions. On the second day of a trip to the United States, Truss will tell an audience at the Atlantic Council think tank that after Russia's invasion of Ukraine, the West must never again ‘allow such aggression to grow unchecked’.”
March 10 – Bloomberg: “Russia has enough buyers for its oil and gas even as Western nations and their allies impose sanctions in response to the invasion of Ukraine, according to a top Kremlin official. ‘We will not persuade anyone to buy our oil and gas,’ Russian Foreign Minister Sergei Lavrov said… following a meeting with his Ukrainian counterpart Dmytro Kuleba. ‘If they want to replace it with something, they are welcome, we will have supply markets, we already have them.’”
March 8 – Bloomberg: “Russia issued an order saying it would restrict trade in some goods and raw materials in response to sanctions, and said details would follow as to which products would be affected. President Vladimir Putin signed the order to ban or restrict goods but said those items still need to be defined by the cabinet, according to the document posted Tuesday. The Kremlin instructed the government to prepare a list of countries that the restrictions will apply to in two days.”
March 10 – Bloomberg: “Russia’s government moved closer to seizing and even nationalizing foreign-owned companies that are leaving the market over the invasion of Ukraine while planning measures to coax others into staying. In the first explicit response to the exodus of foreign businesses from Ikea to McDonald’s Corp., the Economy Ministry has outlined new policies to take temporary control of departing companies where foreign ownership exceeds 25%. Under the proposals, a Moscow court would consider requests from board members and others to bring in external managers. The court could then freeze shares of foreign-owned companies as part of an effort to preserve property and employees.”
March 5 – Reuters: “The Kremlin said… the West was behaving like a bandit by cutting economic relations over the conflict in Ukraine but that Russia was far too big to be isolated as the world was much larger than just the United States and Europe. Kremlin spokesman Dmitry Peskov told reporters that the West was engaged in ‘economic banditry’ against Russia and that Moscow would respond.”
March 9 – Reuters: “The Kremlin said… that Russia's economy was experiencing a shock and that measures were being taken to soften the impact of what it described as an ‘absolutely unprecedented’ economic war being waged against Moscow. The West has imposed sweeping sanctions against Russia over its invasion of Ukraine. ‘Our economy is experiencing a shock impact now and there are negative consequences, they will be minimised,’ Kremlin spokesman Dmitry Peskov told reporters…”
March 9 – Bloomberg: “Russia is headed for one of its biggest inflation spikes this century after waves of sanctions over the invasion of Ukraine touched off the collapse of the ruble and disrupted trade. In the first full week since the military offensive began late in February, prices for new domestic cars soared over 17% and the cost of television sets jumped 15%. Some medicines and vegetables became 5% to 7% more expensive in the seven days ending March 4.”
March 9 – Reuters (Tim Hepher, Engen Tham and Carolyn Cohn): “Global leasing companies staring at an imminent sanctions deadline to repossess more than 400 jets worth almost $10 billion from Russian airlines have received mostly radio silence as experts warn of legal wrangling that could last a decade. Western bans imposed after Russia's invasion of Ukraine give most leasing firms until March 28 to sever ties with Russian airlines - sparking a game of cat-and-mouse from Asia to Africa as lenders frantically try to seize aircraft.”
U.S./Russia Watch:
March 8 – Reuters: “Sending foreign weapons to Ukraine will lead to a ‘global collapse,’ Interfax news agency cited the Russian foreign ministry as saying… Another Russian agency, TASS, quoted foreign ministry spokeswoman Maria Zakharova as saying that the West sending mercenaries and military equipment to Ukraine would cause a catastrophic development of the situation there.”
March 7 – CNN (Oren Liebermann): “Chairman of the Joint Chiefs of Staff Gen. Mark Milley went last week to an undisclosed airfield near the Ukrainian border that has become a hub for shipping weapons, a senior Defense Department official said, seeing firsthand the multinational effort to get weapons into Ukraine… While at the airfield, Milley met with troops and personnel and examined the shipment activity... The site has become a beehive of activity in recent days, going from a handful of flights each day to as many as 17, the field's maximum capacity. The airport's location remains a secret to protect the shipments of weapons, including anti-armor missiles, into Ukraine. The Russian military has not targeted these shipments once they enter Ukraine…, but there is some concern Russia could begin targeting the deliveries as its assault advances. The US and other NATO members have so far sent Ukraine 17,000 anti-tank missiles and 2,000 stinger anti-aircraft missiles, a senior US official told CNN.”
March 6 – Financial Times (Demetri Sevastopulo and Akila Quinio): “Vladimir Putin sparked menacing echoes of the Cuban Missile Crisis last weekend by putting his nuclear forces on high alert, triggering concern about a very dangerous escalation in the Ukraine conflict. The Russian president placed his nuclear arsenal on ‘special combat duty regime’, suggesting a rise in the alert level, in response to sanctions imposed over the invasion. Days before, he warned that interference would spark consequences ‘never before experienced in your history’. Putin’s order was vague, particularly since the terminology did not match anything in Russian nuclear doctrine. But it raised the spectre of Russia firing short-range nuclear missiles at Ukraine and using the threat of his vast nuclear arsenal to warn the US and western allies not to intervene.”
March 10 – Reuters (Guy Faulconbridge): “Russian Foreign Minister Sergei Lavrov said… he did not believe the conflict in Ukraine would spiral into a nuclear war but cautioned the United States and Europe that Moscow never again wanted to be dependent on the West… ‘Of course it gives us cause for concern when the West, like Freud, keeps on returning and returning to this topic,’ Lavrov said after talks… with his Ukrainian counterpart Dmytro Kuleba.”
March 7 – Bloomberg (Simon Kennedy): “A Goldman Sachs… analyst warned an escalation of Russia’s conflict with Ukraine could spark ‘malicious cyber activity’ with the potential to inflict significant economic and social costs. In a wrap of research on the topic, economist Ronnie Walker said cyberattacks have been said to cause about $1 trillion damage to the world economy each year and that two-thirds of them in recent years were attributed to Russia. While the U.S. is less vulnerable than many because it invests more in security and has stricter regulatory requirements, it does have a high degree of dependence on digital technology and studies have tried to calculate a cost of such attacks.”
March 9 – USA Today (Arathy Somasekhar): “U.S. officials are highly concerned the war in Ukraine could impact American cyber networks as the war enters its third week and Russian President Vladimir Putin grows more isolated. The nation’s main federal cybersecurity agency told USA TODAY Tuesday it has been encouraging U.S. organizations to up their security. ‘While there are not any specific, credible, cyber threats to the U.S., we encourage all organizations – regardless of size – to take steps now to improve their cybersecurity and safeguard their critical assets,’ the Cybersecurity & Infrastructure Security Agency said…”
March 9 – Reuters: “The United States… denied renewed Russian accusations that Washington was operating biowarfare labs in Ukraine, calling the claims ‘laughable’ and suggesting Moscow may be laying the groundwork to use a chemical or biological weapon. Late on Tuesday, Russia repeated its accusation of several years that the United States is working with Ukrainian laboratories to develop biological weapons. Such assertions in Russian media increased in the run-up to Moscow's military move into Ukraine and were made as recently as Wednesday by foreign ministry spokesperson Maria Zakharova.”
March 10 – Bloomberg: “Washington criticized China and Russia for promoting a conspiracy theory that the U.S. military runs biolabs in Ukraine, escalating a dispute over attempts at misleading the public over the war in Europe. ‘We took note of Russia’s false claims about alleged U.S. biological weapons labs and chemical weapons development in Ukraine,’ White House Press Secretary Jen Psaki said… ‘We’ve also seen Chinese officials echo these conspiracy theories.’ She described the allegations as ‘preposterous’ and the ‘kind of disinformation operation we’ve seen repeatedly from the Russians over the years.’ Psaki also raised concern that Russia may use chemical weapons in Ukraine. Chinese Foreign Ministry spokesman Zhao Lijian hit back at the White House’s stance… ‘It is wishful thinking to dispel concerns with a few words and irresponsible to call such misgivings of the world disinformation,’ he said.”
China/Russia Watch:
March 9 – Reuters (Yew Lun Tian): “Moves by U.S.-led NATO have pushed tension between Russia and Ukraine to a ‘breaking point’, Chinese foreign ministry spokesman Zhao Lijian said… At a daily news briefing, he urged the United States to take China's concerns seriously and avoid undermining its rights or interests in handling the Ukraine issue and ties with Russia.”
March 7 – Reuters (Ryan Woo): “China's friendship with Russia is ‘rock solid’ and the prospects for cooperation are very broad, Chinese Foreign Minister Wang Yi said… Cooperation between the two countries brings benefits and well-being to the two peoples, he told his annual news conference on the sidelines of China's annual meeting of parliament.”
March 7 – Reuters (Ryan Woo): “China's Red Cross will provide humanitarian aid to Ukraine ‘as soon as possible’, Foreign Minister Wang Yi said…, as he praised his country's friendship with Russia as ‘rock solid’. China has refused to condemn Russia's attack on Ukraine or call it an invasion while asking Western countries to respect Russia's ‘legitimate security concerns.’ Wang said the causes of the ‘Ukraine situation’ were ‘complex’ and had not happened overnight, noting, using a traditional Chinese expression, that ‘three feet of ice does not form in a single day’.”
March 6 – Reuters (Josh Horwitz and Brenda Goh): “Chinese firms are staying put in Russia for the moment despite a growing exodus of Western companies - albeit bracing for growing uncertainty - taking a cue from Beijing's stance of refraining from criticizing Moscow over its invasion of Ukraine. Even as Apple, Nike, Netflix, fashion chain H&M and many other Western companies have cut or paused business in Russia amid a tide of sanctions and international criticism of President Vladimir Putin's actions, Chinese firms so far have stayed largely silent about their operations in Russia.”
March 6 – Wall Street Journal (Patricia Kowsmann and Alexander Osipovich): “Russian banks that have been cut off from global payments networks are turning to China’s state-owned UnionPay system as the country tries to sidestep boycotts by Western businesses… Visa Inc. and Mastercard Inc. said they are suspending their Russian operations, making it difficult for Russians to buy goods from abroad. The moves by the two companies go beyond sanctions issued against many Russian banks. Sberbank, Russia’s largest bank by assets, Alfa Bank and Tinkoff Bank said… they were working on the possibility of issuing cards powered by China’s UnionPay. Another Russian lender, Gazprombank, said customers can do cross-border transactions by getting cards that use UnionPay or Japan’s JCB system.”
March 8 – Bloomberg: “China is considering buying or increasing stakes in Russian energy and commodities companies, such as gas giant Gazprom PJSC and aluminum producer United Co. Rusal International PJSC, according to people familiar... Beijing is in talks with its state-owned firms, including China National Petroleum Corp., China Petrochemical Corp., Aluminum Corp. of China and China Minmetals Corp., on any opportunities for potential investments in Russian companies or assets, the people said. Any deal would be to bolster China’s imports as it intensifies its focus on energy and food security -- not as a show of support for Russia’s invasion in Ukraine -- the people said.”
Europe/Russia Watch:
March 7 – Bloomberg: “Russia threatened to cut natural gas supplies to Europe via the Nord Stream 1 pipeline as part of its response to sanctions imposed over the invasion of Ukraine, a move that could heighten the turmoil in energy markets and drive consumer prices even higher. Russia has the right to take actions that ‘mirror’ the penalties imposed on the Russian economy, Deputy Prime Minister Alexander Novak -- who’s also in charge of energy affairs – said…”
Market Instability Watch:
March 9 – Bloomberg (Jack Farchy and Mark Burton): “For nearly a century and a half -- with only a handful of interruptions -- the London Metal Exchange has been the place where global prices are set for industrial metals from aluminum to zinc. At 8:15 a.m. on Tuesday morning, that stopped. The LME suspended trading in nickel, used to make stainless steel and electric-vehicle batteries, after prices spiked as much as 250% in two sessions. More shocking for many in the market: the exchange later announced it would cancel all trades that took place in the hours before the halt. The LME was moving to restore order in a market gripped by a classic short squeeze, driven by a panicky move by the world’s largest nickel producer, Tsingshan Holding Group Co., and its brokers to close some of a large short position it had built up over months.”
March 8 – Reuters (Eric Onstad): “The London Metal Exchange (LME) was forced to halt nickel trading and cancel trades after prices doubled on Tuesday to more than $100,000 per tonne in a surge sources blamed on short covering by one of the world's top producers. The LME's shock move came as Western sanctions threatened supply from major producer Russia and marked the biggest crisis to hit the 145-year-old exchange in decades. In the 1990s a rogue Sumitomo trader tried to corner the copper market and tin trading was stopped for five years in the 1980s. ‘The current events are unprecedented,’ the LME said… ‘The suspension of the nickel market has created a number of issues for market participants which need to be addressed.’”
March 8 – Bloomberg (Alfred Cang and Jack Farchy): “A Chinese tycoon who built a massive short position in nickel futures is facing billions of dollars in mark-to-market losses after this week’s unprecedented price spike, according to people familiar with the matter. Xiang Guangda -- who controls the world’s largest nickel producer, Tsingshan Holding Group Co., and is known as ‘Big Shot’ in Chinese commodity circles -- has closed out part of his company’s short position and is considering whether to exit the wager altogether, the people said.”
March 9 – Reuters (Andrea Shalal): “Russia and Belarus are edging close to default given the massive sanctions imposed against their economies by the United States and its allies over the war in Ukraine, the World Bank's chief economist, Carmen Reinhart, told Reuters. The specter of Russia defaulting on $40 billion of external bonds - its first major such default since the years following the 1917 Bolshevik revolution - has loomed large over markets since a raft of sanctions and countermeasures by Moscow have largely cut the country out of global financial markets.”
March 8 – Bloomberg (Michael Gambale and Jack Pitcher): “At least five of the eight companies looking to issue new U.S. investment-grade debt opted to stand down Tuesday. Borrowers are taking a pass amid U.S. preparations to ban imports of Russian energy, higher Treasury rates and a 7 bps uptick in the average high-grade corporate bond spread.”
March 8 – Bloomberg (Elaine Chen): “The suspension of trading in the world’s largest Russia ETF has left the fate of options worth hundreds of millions of dollars hanging. Cboe Global Markets Inc. halted trading of shares and options in the VanEck Russia ETF (ticker RSX) after the market close Friday as the fallout of the Russian invasion of Ukraine made the fund’s underlying securities practically impossible to trade. At the time there were about 1 million options tied to the exchange-traded fund worth roughly $285 million… That was the highest level since 2014.”
Derivatives Watch:
March 9 – Bloomberg: “The Chinese nickel company at the center of a historic short squeeze has secured a package of loans from local and international banks to help it meet a wave of margin calls, according to people familiar with the matter. Tsingshan Holding Group Co., which faces billions of dollars in potential losses on short positions in nickel futures, won credit promises from banks including JPMorgan... and China Construction Bank Corp. in meetings that ran into the pre-dawn hours of Wednesday morning…”
March 7 – Bloomberg (Jack Farchy): “A unit of China Construction Bank Corp. was given additional time by the London Metal Exchange to pay hundreds of millions of dollars of margin calls it missed Monday amid an unprecedented spike in nickel prices, according to people familiar... The reprieve from the LME means that the unit, called CCBI Global Markets, is not formally in default, the people said…”
March 8 – Bloomberg: “China asked its biggest financial firms and other state-owned enterprises to report the extent of their exposure to derivatives contracts following wild swings in nickel and other commodities that embroiled one of the country’s largest banks. At least two Chinese banks held urgent internal meetings about their clients’ exposure on Tuesday… The State-owned Assets Supervision and Administration Commission asked major state entities to provide data on their energy and commodity-linked derivatives along with any potential losses they face, the people said.”
March 8 – Bloomberg (Archie Hunter, Jacqueline Poh and Jack Farchy): “Commodities trading houses are being forced to seek additional financing as Russia’s invasion of Ukraine sends prices soaring, stretching credit limits at the companies that buy and sell the world’s resources… Trading houses typically use short positions in derivatives to hedge against potential losses on long-term contracts or physical inventories of commodities. With prices soaring, brokers and exchanges require additional cash -- or ‘margin’ -- to cover part of the value of those positions. At the same time, the cost of shipping oil, metals and crops around the world is surging, further straining the traders’ finances. Banks across Europe and the U.S. are being asked to pitch credit packages to trading houses seeking new lines or to increase existing borrowing facilities…”
March 10 – Bloomberg (Laura Benitez): “If the swap market is to be believed, Russia is going to default on foreign debt, and insurance is going to pay out. Trading on credit-default swaps, used to insure against non-payment, has skyrocketed this week despite the myriad of questions over whether Russia’s plan to repay some foreign bondholders in rubles could ultimately be judged as a default. There are even concerns that international sanctions and existing bond terms could complicate any settlement of the $39.7 billion of outstanding contracts. And yet, the swaps suggest a record 71% chance of default within one year and 81% within five years…”
March 7 – Bloomberg (Will Wade): “Peabody Energy Corp. set up a $150 million credit line with Goldman Sachs Group Inc. after surging coal prices prompted the biggest U.S. supplier to post $534 million to satisfy margin requirements for derivative contracts.”
Inflation Watch:
March 9 – Wall Street Journal (Tom Fairless): “When the global economy tanked in March 2020, the rate of inflation looked like it was heading to zero. That made it a surprising moment for former U.K. central banker Charles Goodhart to predict that inflation would hit between 5% and 10% in 2021—and stay high. Mr. Goodhart reasoned that a seismic shift was under way in the world economy, one that fiscal stimulus and the post-pandemic recovery would only hasten. A long glut of inexpensive labor that had kept prices and wages down for decades, he said, was giving way to an era of worker shortages, and hence higher prices. ‘The coronavirus pandemic will mark the dividing line between the deflationary forces of the last 30 to 40 years and the resurgent inflation of the next two decades,’ said the 85-year-old economist... He predicted that inflation in advanced economies will settle at 3% to 4% around the end of 2022 and remain at that level for decades, compared with about 1.5% in the decade before the pandemic.”
March 8 – Bloomberg (David R Baker): “Many U.S. drivers, stung by record gasoline prices, say they’d pay even more if it would end Russia’s war in Ukraine. That doesn’t mean they’re happy about it… A Quinnipiac University poll released Monday found 71% of Americans would support banning Russian oil, even if it pushes prices higher.”
March 10 – Bloomberg (Katia Dmitrieva): “A measure of rents in the U.S. posted the largest monthly increase in three decades, underscoring an increasingly high cost of living that’s poised to contribute even more to inflation this year. The index for rent of primary residence increased 0.6% in February from the prior month, the most since 1987… It was part of an acceleration across the broader shelter category, which accounted for more than 40% of the monthly increase in an index of consumer prices excluding food and energy. Rents, which have been in rising in the U.S. for the past year, are reported with a lag in the CPI report. That means they’ll contribute even more to inflation going forward…”
March 7 – Bloomberg (Will Wade): “Concerns of a looming global shortage of coal are driving up prices in every U.S. region that has access to export markets… Coal from the Illinois Basin soared $17 a short ton to $92.50 last week, the highest in records going back to 2005…”
Biden Administration Watch:
March 9 – Reuters (Kanishka Singh): “Chinese companies that defy U.S. restrictions against exporting to Russia may be cut off from American equipment and software they need to make their products, U.S. Commerce Secretary Gina Raimondo told the New York Times. The U.S. could ‘essentially shut’ down Semiconductor Manufacturing International Corp or any Chinese companies defying U.S. sanctions by continuing to supply chips and other advanced technology to Russia, Raimondo said… Washington is threatening to add companies to a trade blacklist if they skirt new export curbs against Russia, as it ramps up efforts to keep a vast array of technology out of the country that invaded Ukraine last month. If the United States were to find that a company like SMIC was selling its chips to Russia, ‘We could essentially shut SMIC down because we prevent them from using our equipment and our software’…”
March 9 – Bloomberg (Jenny Leonard): “Commerce Secretary Gina Raimondo vowed to vigorously enforce export controls on Russia and said the U.S. would be on guard against Chinese semiconductor companies that might try to get around the sanctions. ‘It’s going to be hard. I’m not going to pretend it won’t be hard,’ she said… ‘We’ve never done anything like this. But we have a plan and we’re serious about it.’ Raimondo told the New York Times earlier this week that the U.S. has the ability to shut down Chinese companies like Semiconductor Manufacturing International Corporation if they don’t comply with U.S. sanctions, but on Wednesday said it was ‘probably’ a mistake to call out a specific company to showcase a hypothetical enforcement action.”
March 6 – Wall Street Journal (James T. Areddy): “Under international agreements, North Korea isn’t supposed to be able to export its coal. That its smugglers have been doing so right under China’s nose is one reason Beijing is in focus as sanctions bear down on Russia. Chinese companies have repeatedly dodged restrictions on trading with countries like North Korea, Iran and Venezuela, according to sanctions investigators from United Nations panels of experts, the U.S. Treasury Department’s Office of Foreign Assets Control and other monitors. A U.N. panel’s report six months ago, for example, documented how North Korea-connected vessels illegally made 41 coal transfers… Western actions to sever many of Russia’s ties to the global economy as punishment for its war on Ukraine could be less effective if China offers Moscow access to what some see as the bazaar of choice for rogue nations.”
Federal Reserve Watch:
March 9 – Bloomberg (Elizabeth Stanton): “The largest Federal Reserve bond-buying program is about to come to an end. With the U.S. central bank having bought close to $6 trillion of Treasuries and mortgage bonds in the past two years after the onset of the Covid pandemic rattled markets, this Wednesday’s $4.025 billion operation looks set to be its last in Treasuries, with mortgage operations running through the end of the week.”
U.S. Bubble Watch:
March 8 – Wall Street Journal (Harriet Torry and Anthony DeBarros): “The U.S. trade deficit hit a fresh record in January…, as imports of vehicles and energy supplies increased while exports fell. The foreign-trade gap in goods and services expanded 9.4% from the prior month to $89.7 billion in January… Imports increased 1.2% in January, led by shipments of foreign-made vehicles, industrial supplies including crude oil and natural gas, food and capital goods like telecommunications equipment. Exports, meanwhile, fell 1.7%.”
March 9 – Reuters (Lucia Mutikani): “U.S. job openings fell in January, but remained near record highs as worker shortages persisted, pointing to a tight labor market that will continue to generate strong wage gains and contribute to keeping inflation high. Job openings… dropped 185,000 to 11.263 million on the last day of January, the Labor Department said… in its monthly Job Openings and Labor Turnover Survey, or JOLTS report.”
March 9 – Reuters (Arathy Somasekhar): “U.S. shale producers are unlikely to replace banned Russian oil imports due to a shortage of oilfield materials, equipment and labor and a dwindling backlog of wells waiting to be completed, energy executives and analysts said… U.S. President Joe Biden imposed an immediate ban on Tuesday on Russian oil imports in retaliation for its invasion of Ukraine, putting a spotlight on shale producers' ability to boost output to make up for the loss of about 200,000 barrels per day of Russia crude typically imported by domestic refiners.”
March 9 – Wall Street Journal (Nicole Friedman): “The past decade’s booming residential real-estate market has enriched almost every U.S. homeowner, but the gains have largely benefited the wealthiest… From 2010 to 2020, about 71% of the increase in housing wealth was gained by high-income households, according to… the National Association of Realtors. Overall, the total value of owner-occupied homes in the U.S. rose $8.2 trillion over the decade to $24.1 trillion, NAR said. Those wealth gains have continued in the past two years, as housing prices have surged because of robust demand and limited supply.”
Fixed-Income Bubble Watch:
March 9 – Bloomberg (Paula Seligson and Jeannine Amodeo): “U.S. leveraged loans, one of the hottest markets just a few weeks ago, have hit a major snag amid Russia’s invasion of Ukraine. Loans were trading at highs not seen since 2007 in January, thanks to the fact that their interest rates float – an alluring quality as the Federal Reserve prepares to boost rates. But they have now sunk to where they were in January 2021… The rapid reversal came as investors fled riskier assets, including loans and stocks, as oil spiked after Russia’s attack. The retreat can also be attributed to a broader drop in demand for the debt. Most of the buying base for leveraged loans comes from investment entities -- called collateralized loan obligations -- that package the assets into bonds. CLO sales have slowed amid the market volatility. Just two deals have priced this week, bringing issuance for the year to $22.2 billion, or about 21.5% lower than the same period a year ago…”
Economic Dislocation Watch:
March 8 – Bloomberg (Megan Durisin, Elizabeth Elkin and Pratik Parija): “Russia’s invasion of Ukraine means the food inflation that’s been plaguing global consumers is now tipping into a full-blown crisis, potentially outstripping even the pandemic’s blow and pushing millions more into hunger. Together, Russia and Ukraine account for a whopping portion of the world’s agricultural supplies, exporting so much wheat, corn, sunflower oil and other foods that it adds up to more than a tenth of all calories traded globally. Now, shipments from both countries have virtually dried up.”
March 8 – Bloomberg (Taylan Bilgic, Megan Durisin, Salma El Wardany and Eko Listiyorini): “The shockwaves in global crop markets from Russia’s invasion of Ukraine are now spreading to store shelves. Worries about surging sunflower oil prices triggered heavy buying over the weekend in Turkey, as footage of citizens trying to grab tins of cheaper oil at one store went viral… The war has already driven wheat prices 70% higher in Chicago this year and is threatening to upend global food trade. Russia and Ukraine are vital suppliers of grains, vegetable oil and fertilizers, which means that supply disruptions will be felt all over the world.”
March 7 – Financial Times (Oleg Ustenko): “The brutal Russian invasion of Ukraine is destroying a country, displacing millions of people and ruining lives. Vladimir Putin has already come close to causing a major nuclear disaster and appears to have plans for more. In addition, Russian violence is creating a global food security crisis. Ukraine is the world’s fifth-largest exporter of wheat, but farmers cannot now start what is called their spring sowing campaign. The regular window for starting field work is the first 10 days of March, and planting needs to be fully completed in the last week of April. We have highly productive soil, but also a climate that sets the rules. There is already no way that Ukrainians will be able to sow this year based on a normal schedule.”
March 9 – Reuters (Nigel Hunt): “A global food crisis sparked by Russia's invasion of Ukraine escalated… as Indonesia tightened curbs on palm oil exports, adding to a growing list of key producing countries seeking to keep vital food supplies within their borders. The conflict in Ukraine is threatening global grain production, the supply of edible oils and fertiliser exports, sending basic commodity prices rocketing and mirroring the crisis in energy markets.”
March 9 – Bloomberg (Stephen Treloar and Samuel Gebre): “European fertilizer makers, including Yara International ASA and Borealis AG, are cutting output because of surging natural gas prices, adding to the growing risks for global food inflation. Russia’s invasion of Ukraine has roiled commodities markets and propelled natural gas -- the feedstock of nitrogen fertilizers -- to record levels. That’s forcing producers to curb ammonia output, pushing up farm input costs and adding to the risks of a worldwide food shock.”
March 9 – Bloomberg (Clara Hernanz Lizarraga, Eddie Spence and Wilfried Eckl-Dorna): “Steelmakers across Europe are cutting back their operations as power prices surge to record levels in response to Russia’s invasion of Ukraine. Producers of the metal from Spain to Germany are beginning to slow down or entirely stop their output as the higher costs make production unsustainable, even with steel trading near record levels. Russia’s invasion of Ukraine has exacerbated already eyewatering power prices, affecting companies including Acerinox SA, Salzgitter AG and Liberty Steel. ‘The situation is untenable,’ said Andres Barcelo, director of Spanish industry group UNESID…”
March 7 – New York Times (Jack Ewing): “The auto assembly lines going quiet in Germany, Britain and Austria are more than just another example of how fragile supply chains have become. The shutdowns may foreshadow a fundamental reordering of the global economy that Russia’s invasion of Ukraine will accelerate. The conflict has underlined the risks of doing business in authoritarian countries — not just Russia but also China — raising questions about the growing dependence of the automobile industry on the Chinese market. China’s support for Russia has further strained relations between Beijing and the United States and Europe, which were already at loggerheads over trade.”
China Watch:
March 8 – Wall Street Journal (Jing Yang, Rebecca Feng and Joe Wallace): “Chinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after Russia’s war in Ukraine set off an unprecedented rise in the price of a key metal used in stainless steel and electric-vehicle batteries. The paper loss stood at $8 billion on Monday, before violent moves in nickel prices led the London Metal Exchange to suspend trading in the metal on Tuesday, one of the people said. Late Tuesday, the exchange said it anticipates trading won’t resume before Friday.”
March 9 – Bloomberg: “One of Chinese developers’ remaining funding channels is drying up, further weakening their abilities to repay debt amid an industrywide cash squeeze. Domestic issuance of asset-backed securities by real estate firms was almost halved the first two months of this year to 47.5 billion yuan ($7.5bn), the slowest annual start since 2018… The weakness in ABS sales shows that lenders and investors are shunning Chinese developers well beyond mainstream fundraising venues likes loans and bonds, after a crackdown on excessive debt and slumping homes sales helped trigger a record wave of defaults. It also comes as at least two real estate firms have encountered difficulties honoring ABS payments on time.”
March 11 – Financial Times (Edward White, Chan Ho-him and Tom Mitchell): “Mainland China is struggling to contain its biggest coronavirus outbreak since the pandemic erupted in Wuhan two years ago, as the Omicron variant tests President Xi Jinping’s zero-tolerance strategy and puts Shanghai at risk of being locked down. Changchun, the capital of north-eastern Jilin province with 9mn people and an important manufacturing base, was ordered into lockdown on Friday after 23 new cases were reported… Health authorities reported that daily case numbers have tripled in the past week, adding up to more than 1,100 cases across 17 regions…”
March 7 – Bloomberg: “Foreign investors reduced their holdings of Chinese government bonds by the most ever last month as Russia’s invasion of Ukraine roiled fixed-income markets worldwide. Overseas investors sold a net 35 billion yuan ($5.5bn) of Chinese government bonds in February, marking the largest monthly cut on record and the first reduction since March 2021…”
March 8 – Wall Street Journal (Jacky Wong): “Food security and self-sufficiency have long been high on the agenda of Chinese policy makers. Russia’s invasion of Ukraine gives Beijing more reasons to focus on the issue. Weaning itself off imported foodstuffs would mean more investment into the biotechnology industry and more widespread use of genetically modified food. Over the weekend, Chinese President Xi Jinping reiterated the importance of being self-sufficient in food… ‘The rice bowls of the Chinese people have to be filled mainly with Chinese grain,’ he said.”
Central Banker Watch:
March 10 – Financial Times (Martin Arnold): “The balance of power at the European Central Bank has shifted decisively in favour of hawkish officials determined to tackle the risk of inflation spiralling upwards, despite fears that the war in Ukraine could drag Europe into recession. Several ECB governing council members argued at Thursday’s meeting that it should wait before speeding up the withdrawal of its bond-buying stimulus due to uncertainty over the economic fallout from Russia’s invasion of Ukraine. But they were outnumbered by more hawkish voices. ‘The argument about inflation dominated and prevailed over anything else, including the war, the uncertainty and the fears about growth,’ said one person involved in the meeting.”
March 10 – Financial Times (Martin Arnold and Tommy Stubbington): “The European Central Bank has scaled back its bond-buying stimulus plan in response to inflation being driven up by the war in Ukraine, while giving itself more flexibility on the timing of a potential interest rate rise this year. ‘The Russian invasion of Ukraine is a watershed for Europe,’ the ECB said…, adding that it would ‘take whatever action is needed . . . to pursue price stability and to safeguard financial stability’. Analysts interpreted the move to speed up the ECB’s exit from buying more bonds as a signal that it could raise interest rates in the fourth quarter in an effort to contain soaring inflation — which would be the first such move for more than a decade.”
March 10 – Bloomberg (Carolynn Look and Jana Randow): “The European Central Bank unexpectedly accelerated its wind-down of monetary stimulus, signaling it’s more concerned about record inflation than weaker economic growth as Russia’s invasion of Ukraine threatens to propel prices even higher. Calling the war a ‘watershed’ moment for Europe, ECB officials pledged to slow bond buying from the start of May, and said they could halt the program as soon as the third quarter. They tried to temper that by making a subsequent interest-rate hike less automatic.”
Global Bubble Watch:
March 8 – CNBC (John Rosevear): “The price of nickel is surging as investors take stock of the new global reality: Russia, a key supplier of the metal, is now facing extensive sanctions following its invasion of Ukraine. Nickel is a critical ingredient in the lithium-ion battery cells used in most electric vehicles sold in — and planned for — the U.S. market. Its abrupt price surge has analysts and investors raising hard questions about automakers’ ambitious electric-vehicle programs. Morgan Stanley auto analyst Adam Jonas has been among the loudest voices raising concerns. In a note published Monday, he said: ‘As of this writing, nickel is up 67.2% just today, representing around a $1,000 increase in the input cost of an average EV in the U.S.’”
Europe Watch:
March 8 – Bloomberg (Jorge Valero and Nikos Chrysoloras): “The European Union is discussing a plan to jointly issue bonds on a potentially massive scale to finance energy and defense spending as the bloc copes with the fallout from Russia’s invasion of Ukraine. The proposal may be presented after the EU’s leaders hold an informal summit in Versailles, France, that starts Thursday… Officials are still working out the details on how the debt sales would work and how much money they intend to raise, depending on the guidance they receive from leaders in this week’s meeting.”
EM Bubble Watch:
March 7 – CNBC (Weizhen Tan): “Economist Stephen Roach warned effects from any default on Russia’s sovereign debt as a result of the Ukraine crisis would spill over to emerging markets, including China. ‘If Russia does default on its debt ... there will be broad spillover effects to sovereign debt in emerging markets around the world and China will not be unscathed from that,’ he told CNBC… ‘But I’m talking really of broader risks — guilt by association… And the sooner China breaks with Russia, the better — and we’ll have to wait and see and watch that very closely’…”
Covid Watch:
March 7 – Bloomberg (Jason Gale): “Even a mild case of Covid-19 can damage the brain and addle thinking, scientists found in a study that highlights the illness’s alarming impact on mental function. Researchers identified Covid-associated brain damage months after infection, including in the region linked to smell, and shrinkage in size equivalent to as much as a decade of normal aging. The changes were linked to cognitive decline in the study, which was published Monday in the journal Nature. The findings represent striking evidence of the virus’s impact on the central nervous system.”
March 8 – Reuters (Sayantani Ghosh): “COVID-19 can cause the brain to shrink, reduce grey matter in the regions that control emotion and memory, and damage areas that control the sense of smell, an Oxford University study has found. The scientists said that the effects were even seen in people who had not been hospitalised with COVID, and whether the impact could be partially reversed or if they would persist in the long term needed further investigation. ‘There is strong evidence for brain-related abnormalities in COVID-19,’ the researchers said in their study… Even in mild cases, participants in the research showed "a worsening of executive function" responsible for focus and organising, and on an average brain sizes shrank between 0.2% and 2%.”
March 8 – Reuters (Manas Mishra and Amruta Khandekar): “The BA.2 sub-variant of Omicron was estimated to be 11.6% of the coronavirus variants circulating in the United States as of March 5, the U.S. Centers for Disease Control and Prevention (CDC) said… Scientists are tracking a rise in cases caused by BA.2, the dominant variant in South Africa, which is spreading rapidly in parts of Asia and Europe. The World Health Organization said last month that the BA.2 variant appears to be more transmissible than the original BA.1 sub-variant…”
March 8 – Reuters: “Hong Kong reported more than 43,000 new coronavirus infections on Tuesday, a day after the launch of an online self reporting platform which lets residents register their own rapid antigen tests results.”
Social, Political, Environmental, Cybersecurity Instability Watch:
March 9 – Reuters (Renju Jose): “Australia declared a national emergency on Wednesday in response to devastating floods along its east coast, and designated catastrophe zones in towns swept away by swollen rivers. ‘Australia is becoming a harder country to live in because of these natural disasters,’ Prime Minister Scott Morrison said… after touring the worst-hit Northern Rivers area of New South Wales.”
Leveraged Speculation Watch:
March 7 – Bloomberg (Joanna Ossinger and Lu Wang): “As searing cross-asset turbulence threatens to end an epic bull run in equities, fast-money asset managers are reducing risk and getting out. ‘De-risking’ is the buzzword du jour on Wall Street, where hedge funds and their ilk are cutting positions, selling stocks and covering shorts. So-called degrossing activity in U.S. single stocks has climbed to the highest in a year, according to prime-broker data from Goldman Sachs…”
March 8 – Financial Times (Laurence Fletcher and Akila Quinio): “Several hedge funds spawned by Julian Robertson’s investment firm Tiger Management have sustained steep losses in recent months, after big falls for US tech stocks in which many of them held stakes. A group of so-called ‘Tiger Cubs’ including Chase Coleman’s $90bn-in-assets Tiger Global, Philippe Laffont’s Coatue Management and Glen Kacher’s Light Street Capital have backed a similar cohort of companies including Peloton Interactive, Zoom and Block…”
March 9 – Bloomberg (Nishant Kumar): “One hedge fund team at BlackRock Inc. saw Vladimir Putin’s invasion of Ukraine as a chance to buy more of the country’s stocks. That decision has backfired. BlackRock’s Emerging Frontiers Fund plunged over 10% in February, suffering the worst trading loss since it started more than a decade ago…”
Geopolitical Watch:
March 8 – Financial Times (Demetri Sevastopulo): “US intelligence chiefs… said they were monitoring how China was interpreting the war in Ukraine and said the swift western reaction would probably influence Beijing’s calculus over its goal of securing control of Taiwan. Avril Haines, the director of national intelligence, said China had noted the sanctions the US and its allies have imposed on Russia and understood the implications for how Washington might respond to an attack on Taiwan. ‘It is likely to reinforce China’s perspective on the seriousness with which we would approach an infringement on Taiwan and in the unity that they’ve seen between Europe and the US,’ Haines told the House Intelligence Committee…”
March 8 – Reuters (David Brunnstrom and Michael Martina): “China appears to have been unsettled by the difficulties Russia has faced since its invasion of Ukraine, but Chinese leader Xi Jinping's determination with regard to Taiwan should not be underestimated, the CIA's director said… William Burns, appearing at the annual House of Representatives Intelligence Committee hearing on worldwide threats, was asked whether he thought there might be room for a more ‘productive’ U.S. conversation with China over Taiwan… He said he did not. ‘I would just say analytically, I would not underestimate President Xi and the Chinese leadership's determination with regard to Taiwan… I do think ... that they have been surprised and unsettled to some extent by what they've seen in Ukraine over the last 12 days, everything from the strength of the Western reaction to the way in which Ukrainians have fiercely resisted’…”
March 8 – Financial Times (Kathrin Hille): “As Russia’s military might struggles in the face of Ukrainian resistance, China’s People’s Liberation Army is watching events on the ground with particularly close attention. For the PLA, the Russian operations — which Beijing refuses to call an invasion — are live lessons in the kind of warfare Chinese troops have not experienced in almost half a century. Beijing fears that, not having been in real combat since the 1979 border war with Vietnam, its military is suffering from ‘peace disease’, a lack of battlefield experience and fighting spirit. For decades, Chinese military scholars and analysts have therefore been studying conflicts around the world looking for ‘Chinese lessons from other people’s wars’, as a landmark book published a decade ago called it.”
March 7 – The Hill (Monique Beals): “China is cautioning against the U.S. supporting Taiwan and trying to build a Pacific version of NATO as the crisis in Ukraine draws renewed attention to the status of the Asian island. China's Foreign Minister Wang Yi claimed… the ‘real goal’ of the United States' plans in the Indo-Pacific was to develop Asia’s response to NATO, according to Bloomberg. ‘The perverse actions run counter to the common aspiration of the region for peace, development, cooperation and win-win outcomes,’ Wang said. ‘They are doomed to fail.’ China has previously accused the U.S. of attempting to suppress its growth via bloc coalitions, though the new remarks come after Russian President Vladimir Putin recently made similar accusations ahead of his invasion of Ukraine.”
March 5 – Washington Post (Eva Dou and Pei Lin Wu): “China is committed to ‘resolving the Taiwan question in the new era,’ it said in its annual government report…, using sharper wording than in previous such reports amid debate among foreign-policy experts over whether Beijing would attempt a takeover of the self-ruled island similar to Russia’s invasion of Ukraine. Beijing’s annual work report traditionally includes a couple of paragraphs declaring that the government will continue working toward the unification of Taiwan. This is the first year since President Xi Jinping came to power a decade ago that this section of the annual report includes a time frame — ‘in the new era’ — although it’s unclear how long a period this means. The stronger wording is in line with Beijing’s signals of impatience on Taiwan over the past few years…”
March 9 – Reuters (Yimou Lee): “No matter who wins in any future war between Taiwan and China, it will be a ‘miserable victory’, Taiwan Defence Minister Chiu Kuo-cheng said… Chiu said both sides would pay a heavy price in the event of conflict between China and Taiwan, which Beijing has vowed to reclaim, by force if necessary. ‘If there’s a war, to be frank, everyone will be miserable, even for the victors… One really needs to think this through. Everyone should avoid wars.’”
March 10 – Financial Times (James Politi): “The US has warned of a ‘serious escalation’ in North Korea’s military capabilities, after concluding that two recent missile tests involved ‘a relatively new’ system that could send warheads greater distances than previous launches.”
March 9 – Reuters (John Irish and Francois Murphy): “Parties trying to revive the Iran nuclear deal scrambled on Wednesday to resolve last-minute Russian demands that threaten to scupper negotiations, diplomats said, with the United States appearing unwilling to engage with Russia on the matter. Western powers… warned Russia against wrecking an almost completed deal on bringing the United States and Iran back into compliance with the 2015 accord. Iran's top negotiator returned to Vienna on Wednesday from consultations in Tehran.”
