Credit Bubble Bulletin : April 2025

Please join Doug Noland and David McAlvany this coming Thursday, April 17th, at 4:00 pm Eastern/2:00 pm Mountain Time for the McAlvany Wealth Management Tactical Short Q1 recap conference call, “Decades of Inflationism Home to Roost.” Click here to register.

Deleveraging gained powerful momentum early in the week, with global debt markets at the cusp of “seizing up.” 90-day Tariff Pause.

April 9 – Bloomberg (Hadriana Lowenkron and Daniel Flatley): “Treasury Secretary Scott Bessent played down a selloff in US Treasuries, saying that there was nothing systemic at play, and also served warning against China not to attempt to devalue its exchange rate in retaliation for American tariff hikes. ‘There’s one of these deleveraging convulsions that’s going on right now in the markets,’ Bessent said on Fox Business, adding that he’d witnessed those very often in his decades-long hedge-fund career. ‘It’s in the fixed-income market. There are some very large leverage players who are experiencing losses — that are having to deleverage’… ‘I believe that there is nothing systemic about this — I think that it is an uncomfortable but normal deleveraging that’s going on in the bond market,’ Bessent said.”

“Bond Market Turbulence Lifts 30-Year Yield Most Since March 2020.” “US government debt sells off as hedge funds cut down on risk.” “Is China dumping U.S. Treasuries?” “Bond Analysts Debate If China Had Role in Treasuries Swings.” “Bond Markets Retreat as US Treasuries Lead Yield Jump Worldwide.” “No Emerging Market Is Spared From Trade War Losses on Dollar Debt.” “Asian Stocks Tumble Most Since 2008 on Global Recession Worries.”

There was nothing “normal” about this week’s deleveraging - nothing if not systemic. At week’s end, an optimist might think this was just another bout of instability soon to be forgotten. There was the October 2022 Liz Truss deleveraging fiasco. March 2023 saw the bank run eruption and mini crisis. The more germane deleveraging erupted with the unwind of yen “carry trade” leverage back on August 5th, 2024.

August deleveraging was thwarted by Bank of Japan comments on August 6th, soon followed by a dovish pivot by Chair Powell at Jackson Hole. As markets recovered, the narrative immediately shifted to, with yen “carry trade” leverage unwound with minimal impact, the coast was clear to get back to leveraging and speculating.

I was skeptical of the whole unwind narrative. There was likely a significant unwind of currency and swaps positioning. But there was no way the massive leverage in higher yielding debt instruments (funded with cheap yen borrowings) could have been unwound over a few days or even weeks. Such deleveraging would have been systemic and deeply impactful to global market liquidity. I actually believe that unwind is ongoing. It’s worth noting that local currency Brazilian 10-year yields increased 350 bps between August and year-end, to 15%. Yields were up 100 bps in Mexico, 200 bps in Colombia, and 300 bps in Turkey.

A Friday WSJ (Jon Sindreu) article captured today’s deleveraging fears: “The basis trade, said UBS strategist Michael Cloherty, has ‘become the scary monster under the bed that gets blamed for everything.'” There are all varieties of leveraged speculation in myriad instruments across fixed income in the U.S. and globally. Leveraged speculation has proliferated for decades, and it’s reasonable to think in terms of tens of Trillions of leverage globally.

There was stress almost across the board this week, including “carry trades” and “basis trades” and especially the “swaps” derivatives marketplace. Barring global markets seizing up, deleveraging will be an ongoing challenge over the coming weeks and months. This week was merely a notably rocky start to the process, and I doubt much progress has been made in unwinding the massive “basis trade” in Treasuries. There are a few dominant “basis trade” operators that won’t be able to come out of their positions without Federal Reserve assistance.

From Bloomberg Intelligence’s Brian Meehan: “There’s a Basis-Trade Blowup, Just Not the One People Expect.” “Fears of a massive unwinding of long positions in the cash Treasury/Treasury futures basis trade appear overblown as the relative performance of cash vs. futures doesn’t indicate large liquidations. Also, open interest in Treasury futures hasn’t signaled steep declines witnessed in previous blowups.”

Ten-year Treasury yields spiked 50 bps this week, the largest weekly jump since the week of August 16, 2001 – a bond shellacking Bloomberg at the time called “the biggest weekly loss in at least 24 years.” That was also the week of an Alan Greenspan quote of historic note: “If I answered that in a way which you think you understand what I said, I made a mistake. Remember, the purpose of monetary policy is to address the structure of financial markets - that’s what we do.” I appreciate that Chair Powell never succumbs to such blather. But everyone sure loved it when the “Maestro” was at the top of his game. I do digress, but the structure of financial markets, having evolved so momentously starting with the Greenspan era, has never been as fragile.

When the Treasury market is the foundation and Treasuries are crumbling, U.S. and global market structures have serious structural fragility. Benchmark MBS yields surged 56 bps this week to 5.91%, the largest jump since the week of March 13, 2020 (Fed ratcheting up pandemic crisis lending facilities). From Tuesday’s low to Friday’s high, MBS yields spiked 65 bps.

April 11 – Bloomberg: “The Fannie Mae 30-year current-coupon spread to the 5/10-year blend widened 6 bps to +160 as the U.S. Treasury 10-year yield rose 11 bps to 4.29% and volatility rose. The spread was the highest in more than 13 months. Volatility was the highest in about 18 months.”

“Mortgage rates slingshot higher as tariff uncertainty roils markets.” “Brutal Week Sees Junk Debt Refinancing Costs Double in 2025.” “Cracks Are Forming in CLO Market as ETFs on Record Selling Spree.” “Investors lose $25bn in leveraged ETFs in sector’s biggest meltdown.” “‘The World Is Different Now’: Market Convulsions Hit Wall Street.”

Junk bond yields were up 96 bps in seven sessions to 8.58%, trading this week to the high since October 2023. Leveraged loan prices traded to lows since July 2023. “Private Credit” has serious unfolding issues, with ramifications for “subprime” lending throughout.

April 11 – Bloomberg (Rachel Graf): “As the US leveraged-loan market had no pricings or launches this week amid the ongoing tariff turmoil, the sector was among those from which investors fled to seek safer ground. US leveraged loan funds had a record $6.5 billion pulled from them in the week through April 9.”

Muni (AAA) yields were up 89 bps w-t-d at Wednesday’s close, before ending the week 66 bps higher at 3.39%.

April 8 – Bloomberg (Aashna Shah and Shruti Date Singh): “A wave of tariff-induced selling pressure hit the municipal bond market on Monday, leading to the worst-performing day in more than three decades. A benchmark index of municipal bonds dropped 2.85% on Monday, the biggest daily decline since at least 1994… The historic rout caused several deals to be postponed and wiped out total gains for this year… ‘Monday’s session signaled a major risk-off move in the market,’ Kimberly Olsan, senior fixed-income portfolio manager for NewSquare Capital LLC, wrote…”

April 9 – Bloomberg (Amanda Albright): “Municipal-bond yields surged another 20 bps Wednesday morning as the state and local debt market sees a continued steep selloff. The rout drove the 10-year AAA benchmark to 3.7%, the highest since at least 2011… Patrick Haskell, head of municipal bonds at BlackRock… said the US state and local debt market hit ‘panic levels’ Monday and Tuesday. Investors were ‘searching for liquidity,’ he said.”

When America sneezes, the world catches a cold. What’s the prognosis when the U.S. has a malignant tumor?

Already fragile, EM bonds suffered a further spike in yields. Dollar-denominated EM bonds were under notable selling pressure – indicative of intense deleveraging. Ten-year yields surged 57 bps in Colombia, 49 bps in Turkey, 48 bps in Philippines and Mexico, 46 bps in Indonesia, 38 bps in Chile, and 24 bps in Brazil. With the yen gaining 2.4% this week (vs. $), there was intense pressure on levered yen “carry trades” – likely including dollar-denominated EM bonds.

Local currency EM bonds suffered the dreaded double-whammy – hefty bond and currency losses. Versus the yen, the Indonesian rupiah fell 3.7%, the Peruvian sol 3.6%, Indian rupee 3.2%, Brazilian real 2.7%, Philippine peso 2.6%, South African rand 2.5%, Chinese renminbi 2.5%, Argentine peso 2.4%, and Turkish lira 2.1%.

Monday’s market bloodbath was notable. “Emerging Stocks Sink Most Since 2008 as Tariff Turmoil Deepens.” “Stocks in Hong Kong plunged 13.2% for their worst day since 1997” (AP). “MSCI’s main emerging equity index slid 7.9%, its biggest drop since the 2008 global financial crisis” (Bloomberg). Major index losses included Taiwan’s Taiex 9.7%, Japan’s Nikkei 7.8%, South Korea’s Kospi 5.6%, China’s CSI 300 7.0%, Philippines PSEi 4.3%, Australia’s S&P/ASX 200 4.2%, Malaysia’s KLCI 4.2%, and India’s Nifty 50 4.0%.

Germany’s DAX recovered from a 10% plunge to end Monday’s session 4.2% lower. Also recovering from steep losses, France’s CAC40 closed the day down 2.3%.

The dollar Index sank 2.8%, trading Friday to a two-year low. Levered “carry trades” in U.S. debt instruments financed in low yielding currencies (i.e., yen, Swiss franc, euro) had a rotten week. Algorithmic models would have had essentially zero probability of 10-year Treasury yields spiking 50 bps - as the dollar sank almost 3%.

It’s simply hard to believe how messed up things were early in the week. Stocks enjoyed a historic one-day rally and big up week. Can we now just put “Liberation Day” on the south lawn behind us? The tariff placard, the calculations, the propaganda? Can we erase from memory global markets in meltdown mode?

Left for dead, the “Trump put” made a dramatic comeback. When markets again approach the precipice, everyone – or at least the hedge funds - will wait anxiously for THE SIGNAL: “THIS IS A GREAT TIME TO BUY!!! DJT”

April 7 – Financial Times (Costas Mourselas and Antoine Gara): “Shares in billionaire Bill Ackman’s main investment vehicle have fallen 15% this year as Donald Trump’s trade war hits the portfolio of one of his most ardent Wall Street backers. The drop in Pershing Square Holdings… comes as the financier has turned sour on some of the US president’s policies in a major public reversal. The trust’s share price fell more than 3% on Monday. ‘If… on April ninth we launch economic nuclear war on every country in the world, business investment will grind to a halt, consumers will close their wallets and pocket books, and we will severely damage our reputation with the rest of the world that will take years and potentially decades to rehabilitate,’ he said on X on Sunday.”

What a difference two days can make…

April 9 – The Hill (Tara Suter): “Billionaire hedge fund investor Bill Ackman on Wednesday praised President Trump’s decision to implement a 90-day pause on reciprocal tariffs against foreign trading partners, with the exception of China. ‘This was brilliantly executed by @realDonaldTrump,’ Ackman wrote on the social platform X. ‘Textbook, Art of the Deal.’”

The hedge fund community had quickly landed in dire straits. Ackman’s “Art of the Deal” compliment was like an individual who just landed an incredible deal praising the other side’s savvy negotiating tactics. The great negotiator was forced to show his hand – to expose his point of vulnerability. China, witnessing the weakness of its adversary, was quietly triumphal. With steely resolve: “Got him just where we want him.”

April 10 – Wall Street Journal (Bertrand Benoit and Kim Mackrael): “Relief spread around the world on Thursday after President Trump suspended enforcement of some of his global tariffs, but the U-turn raised the question of whether big concessions on trade need to be made to mollify an American leader who had been humbled by the market… ‘Everyone will likely conclude that [Trump’s] credibility as a negotiator has diminished,’ said Moritz Schularick, head of the Kiel Institute for the World Economy, a think tank. ‘Next time, people will believe him even less and will consider at what point he might buckle again. It certainly hasn’t become easier for the U.S. to negotiate.’”

April 8 – CNBC (Jeff Cox): “Treasury Secretary Scott Bessent said Tuesday the U.S. holds a substantial advantage over China as the two nations exchange threats in a burgeoning trade war. ‘I think it was a big mistake, this Chinese escalation, because they’re playing with a pair of twos,’ Bessent said… ‘What do we lose by the Chinese raising tariffs on us? We export one-fifth to them of what they export to us, so that is a losing hand for them.’”

If Xi Jinping is playing with a “pair of twos,” what hand might President think he’s playing with?

April 8 – Reuters (Laurie Chen, Kevin Yao and David Kirton): “Beijing, feeling boxed into a corner by the United States’ intensifying tariff assault on China and any country that buys or assembles Chinese goods, is bracing for an economic war of attrition…. ‘Whoever surrenders first becomes the victim,’ said a Chinese policy adviser… ‘It’s a matter of who can hold out longer.’”

“Markets Plummet as Tariff-War Woes Fuel Exodus From US Assets.” “US Treasuries sell-off deepens as ‘safe haven’ status challenged.” “Treasuries Selloff Ramps Up as Investors Spurn US Long-End Bonds.” “Monday’s Jump in 30-Year Treasury Yields Suggests Doubts Over Safety of U.S. Assets.” “U.S. Bond Sell-Off Is Another Worrisome Echo of the Liz Truss Fiasco.”

I can’t imagine an objective of greater priority for Xi Jinping and China’s communist party than to see the downfall of so-called U.S. “exorbitant privilege.” This competitive advantage has provided incredible benefits to its global superpower rival for decades - compliments of the world’s safe haven Treasury market (and U.S. financial markets more generally) coupled with the globe’s dependable reserve currency. Now, Donald Trump has unwittingly exposed U.S. Bubble fragilities, vulnerability combined with reckless policymaking, which places U.S. markets, the American economy, and the dollar at great peril.

China has company in wanting to see Trump’s America taken down several notches: Russia, North Korea, Iran and, unfortunately, much of the “Global South.” Even (former) allies likely today recognize the leverage that would be gained from the U.S. suffering some comeuppance.

April 11 – Bloomberg (Masaki Kondo): “The decline of the US’s credibility as a safe haven for financial assets is going to cause issues in the market long-term, according to Westpac… Wednesday’s ‘price action for fixed income markets, specifically Treasuries, has no historical precedent,’ Martin Whetton, head of financial market strategy at Westpac, wrote… ‘It is not so much the range — wide and choppy, but the nature of the violent unwind and fall in liquidity, or actually the absence of the liquidity that is concerning.’ ‘The age of US exceptionalism — at least financially — has come to an end.’ Creditors’ willingness to finance US deficits has decreased. It’s ‘startling and a sharp warning’ that money didn’t scramble to secure dollar funding via the basis markets to buy Treasuries and the dollar for safety.”

I’ve viewed “US exceptionalism” as a key element of peak Bubble delusion. A bulletproof Treasury market and resilient dollar have afforded the U.S. phenomenal advantages. We’ve operated virtually without constraint – debt growth, fiscal deficits, consumption, current account deficits, asset inflation and Bubbles, deindustrialization, a services-based economy, and unlimited liquidity to pursue whatever technology advancement or financial whim to galvanize highly speculative financial markets.

And when Bubbles inevitably falter, the Fed has enjoyed open-ended capacity to reflate – from Bernanke’s Trillion to Powell’s $5 TN – a backstop fundamental to U.S. market exceptionalism. Truth be told, “US exceptionalism” was financed by endless liquidity, much of it originating from leveraged speculation backstopped by the Federal Reserve. It inflated into history’s greatest Bubble, with things going completely off the rails post-Covid.

I hear and read some seasoned market players confidently asserting that the U.S. has a dominant position vis-à-vis China. The U.S. economy and financial system are “hands down” stronger and more resilient. But this view ignores U.S. Bubble fragilities – financial, economic, and social.

April 8 – Bloomberg: “China pledged to retaliate against Donald Trump’s latest tariff threat and mobilized state organs to send a message of resilience, raising the risk of a prolonged trade war between the world’s two largest economies. ‘The US threat to escalate tariffs on China is a mistake on top of a mistake,’ the Chinese Ministry of Commerce said… ‘If the US insists on its own way, China will fight to the end.’”

The U.S. and China both have a tremendous amount to lose. We can only pray cooler heads prevail. But Beijing today has a lot to gain. A unique opportunity has landed in Xi Jinping’s lap. A global financial crisis would present challenges, but it would clearly be blamed directly on Donald Trump. The Chinese population would rally around Xi and the communist party, blame deflected from their own formidable policy blunders and mismanagement.

A Trump global crisis would also afford China the opportunity to expand its circle and global influence. One rival superpower stacking up friends and allies – with the other floundering and humbled. Beijing might also calculate that the U.S. in disarray would be less compelled to exert influence in Asia - and less likely to come to Taiwan’s defense. A world with an impaired America would be a playground for China and Russia. A world without U.S. “exorbitant privilege” would be a dream come true. Just imagine the elation when Xi and Putin huddle together.

If U.S./China trade war analysis lacks sufficient challenge, give current market analysis a whirl. April option expiration is next Friday, so I’ll take a cowardly approach and state conclusively that “anything could happen.” Bonds, fixed income, and currencies will remain the big story. The world is in the initial phase of a wrenching deleveraging that I expect to last months and likely years.

We can think in terms of the first round having quickly escalated to the brink of markets “seizing up," only to be pulled away from the precipice by 90-Day Tariff Pause. Somewhat of a recovery is possible, fueled by short squeezes and the unwind of hedges. But markets have been severely impaired. No putting the toothpaste back in the tube. Confidence has been badly shaken. The extreme degree of uncertainty (i.e., Trump, US/China trade war, economic, inflation risks...) ensures an environment inhospitable to leverage.

The leveraged speculating community has been fractured. The game works well when everyone has conviction to stay in the game. The game turns problematic when interests diverge – each billionaire for himself – dog eat dog. With deleveraging having gained powerful momentum, liquidity will be an ongoing issue. Like the August yen “carry trade” unwind, there’s been a mad rush to put on hedges and bring down leverage. But actual deleveraging of portfolios and strategies will take time - and ensures clouds hang over markets.

Furthermore, in the markets the past couple weeks there has been a distinct look of algorithmic models being blown to smithereens. An eruption of global deleveraging – and yet Treasury yields spike 50 bps and the dollar sinks 2.8%. The virtually impossible is suddenly commonplace, a nightmare dynamic for the crowded population of over-confident quant traders. Moreover, the newfound high risk Treasury dynamic must be causing tons of grief in lots of levered strategies that hold Treasuries to hedge portfolios of risk assets.

Spiking Treasury yields is a major market, financial and economic issue – at home and abroad. Does Beijing do a cold, strategic calculation - and go for the jugular? “Fight to the end” doesn’t sound like a bluff.

April 10 – Bloomberg (Ruth Carson and Masaki Kondo): “After a week of wild swings in the US bond market, China’s holdings of Treasuries are increasingly under scrutiny from analysts around the world. Some have gone as far as suggesting — without hard evidence — that sales by Beijing may have helped fuel the biggest surge in 30-year yields since the pandemic and subsequent volatility. Others debate whether China might turn to dumping US debt in the future as a response to the steepest American tariffs in a century. ‘China may be selling Treasuries in retaliation,’ wrote Ataru Okumura, a senior interest-rate strategist at SMBC Nikko Securities in Tokyo… Should this be the case, China has an incentive to show ‘it won’t hesitate to cause turmoil in the global financial market in order to improve its negotiating power against the US.’”

April 10 – Bloomberg (Lionel Laurent): “The bond market spoke; Donald Trump blinked. The lettuce theory of Liz Truss holds true: No leader, not even one who has shrugged off assassination attempts and a fraud trial, can remain steadfast in the face of a policy-induced meltdown that punishes voters it aims to protect. The question is: What now? What’s clear from markets is that the 90-day reprieve from worst-case tariffs on ‘any country, except for China’ is by no means a back-to-square-one moment. The dollar’s haven status has been hurt…The US remains a place where policy uncertainty is high, where tariffs can jump by double digits in days and where social-media influencers wield power over generals. This uncertainty is what deters investment and hurts economic confidence, rather than just tariffs.”

April 11 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Minneapolis President Neel Kashkari said he’s not seeing stresses in the Treasury market that would merit an intervention by the US central bank. ‘I’m not seeing big dislocations yet, I’m seeing some stresses but markets seem to be adjusting OK so far,’ Kashkari said Friday… Kashkari said the Fed had the tools to respond if needed, but only in severe circumstances. ‘The Fed or Treasury stepping in should be done reluctantly, should be done when it’s only truly needed,’ he said.”

President Trump’s 90-Day Tariff Pause capitulation must have been quite the topic of conversation in the Marriner S. Eccles Building. I’m sticking with the assumption that the Fed will be late in responding to deleveraging and marketplace illiquidity. They now have the added incentive to wait out market stress in anticipation of additional Trump capitulation. The ambiguous Fed liquidity backstop is one more major reason why the leveraged speculating community must rein in risk.

April 8 – Bloomberg (Annie Massa and Katherine Burton): “‘My bad.’ It was nearly 9 p.m. and Bill Ackman, public face of the billionaire class that embraced Donald Trump, was tweeting his way into the eye of the financial storm. World markets were reeling because Trump, to the smart money’s apparent surprise, was following through on his oft-repeated threats to impose punishing tariffs. Only months ago, Ackman celebrated Trump’s victory, predicting ‘the most pro-growth, pro-business, pro-American’ administration he’d seen in his adult life. Now, on a Sunday night — after nearly $6 trillion had been wiped out in an epic two-day market rout, with more pain to come — Ackman was launching into mea culpa mode. ‘I don’t think this was foreseeable,’ the hedge-fund mogul posted on X. ‘I assumed economic rationality would be paramount.’ Ackman, like so many on Wall Street, assumed wrong.”

Confidence has been badly shaken. Trust in the administration is irreparably damaged. The levered players have a lot of work to do to have a chance for survival. This is certainly no normal deleveraging. It is instead the initial phase of the bursting of history’s greatest Bubble. The first round got scary in a hurry. With the system impaired, the next round risks all hell breaking loose.

“Hedge funds hit with steep margin calls.” “Hedge Funds Log Historic One-Day Stock Selloff in Market Rout.” “Investors Fear Another Big Blowup of Basis Trade as Treasuries Lose Haven Status.”

From the FT (Kate Duguid, Arjun Neil Alim, Harriet Agnew and Costas Mourselas): “Hedge funds have trillions tied up in [Treasury ‘basis trade’] kind of strategy,’ he said. “As things spiral, they’re being forced to sell anything they can — even good assets — just to stay afloat… if the Federal Reserve doesn’t step in soon, this could turn into a full-blown crisis. It’s that serious.’ One hedge fund manager said: ‘Those huge hedge funds with trillions of dollars of Treasuries relative value trades will blow up today if the Fed doesn’t bail them out.’”

“Wall Street’s euphoria sends US stocks to historic gains after Trump pauses most of his tariffs.”

For Posterity:

April 7 – Wall Street Journal (Gerard Baker): “When I worked in Tokyo in the 1990s, a Japanese colleague told me a story about her father’s defining experience with Americans. In the days after Japan surrendered at the end of World War II, he was a young boy living in a small town. As American troops moved to occupy the country, the mood was one of panicked terror. The Japanese had been told by their leaders that the victorious Americans would murder, rape and pillage just as their own troops had treated their defeated enemies—though of course the Japanese people didn’t know that. Eventually American trucks rolled through the town and he and his family cowered indoors, awaiting the inevitable savagery. They watched as GIs jumped down from their vehicles and began placing heavy boxes on the street. At first they assumed the boxes contained some terrible weapon… but when the troops were gone and the boxes remained, some of the more curious and braver kids ventured out and began opening them. Inside were layers and layers of chocolate bars, candy, and other treats the near-starving Japanese had not seen in years. The memory lived with him his whole life, and the story moved me greatly, as I have traveled across the world and become a proud American myself.”

For the Week:

The S&P500 rallied 5.7% (down 8.8% y-t-d), and the Dow jumped 5.0% (down 5.5%). The Utilities gained 1.9% (up 3.3%). The Banks recovered 4.1% (down 14.8%), and the Broker/Dealers rallied 7.8% (down 4.5%). The Transports increased 1.9% (down 15.6%). The S&P 400 Midcaps rose 2.8% (down 12.8%), and the small cap Russell 2000 advanced 1.8% (down 16.6%). The Nasdaq100 rallied 7.4% (down 11.1%). The Semiconductors surged 10.9% (down 19.9%). The Biotechs slipped 0.7% (down 8.2%). With bullion jumping $199, the HUI gold index surged 19.8% (up 41.6%).

Three-month Treasury bill rates ended the week at 4.2075%. Two-year government yields surged 31 bps to 3.96% (down 28bps y-t-d). Five-year T-note yields rose 45 bps to 4.16% (down 22bps). Ten-year Treasury yields surged 50 bps to 4.49% (down 8bps). Long bond yields jumped 46 bps to 4.87% (up 9bps). Benchmark Fannie Mae MBS yields spiked 56 bps to 5.91% (up 7bps).

Italian 10-year yields increased four bps to 3.81% (up 29bps y-t-d). Greek 10-year yields gained eight bps to 3.52% (up 31bps). Spain's 10-year yields added two bps to 3.30% (up 24 bps). German bund yields slipped a basis point to 2.57% (up 20bps). French yields increased two bps to 3.35% (up 16bps). The French to German 10-year bond spread widened three to 78 bps. U.K. 10-year gilt yields surged 31 bps to 4.75% (up 19bps). U.K.'s FTSE equities index declined 1.1% (down 2.6% y-t-d).

Japan's Nikkei 225 Equities Index % (down 1% y-t-d). Japanese 10-year "JGB" yields jumped 11 bps to 1.32% (up 22bps y-t-d). France's CAC40 dropped 2.3% (down 3.7%). The German DAX equities index declined 1.3% (up 2.3%). Spain's IBEX 35 equities index dipped 1.1% (up 6.0%). Italy's FTSE MIB index fell 1.8% (down 0.5%). EM equities were mostly lower. Brazil's Bovespa index added 0.3% (up 6.2%), while Mexico's Bolsa index was little changed (up 4.0%). South Korea's Kospi fell 1.3% (up 1.4%). India's Sensex equities index slipped 0.3% (down 4.3%). China's Shanghai Exchange Index slumped 3.1% (down 3.4%). Turkey's Borsa Istanbul National 100 index was little changed (down 4.6%).

Federal Reserve Credit declined $8.5 billion last week to $6.679 TN. Fed Credit was down $2.222 TN from the June 22, 2022, peak. Over the past 291 weeks, Fed Credit expanded $2.952 TN, or 79%. Fed Credit inflated $3.868 TN, or 138%, over the past 648 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt increased $1.0 billion last week to $3.294 TN. "Custody holdings" were down $64.9 billion y-o-y, or 2.1%.

Total money market fund assets dropped $25.4 billion to $7.006 TN. Money funds were up $872 billion over 37 weeks (20% annualized) and $894 billion y-o-y (14.6%).

Total Commercial Paper fell $12.9 billion to $1.382 TN. CP has expanded $294 billion y-t-d and $52 billion, or 3.9%, y-o-y.

Freddie Mac 30-year fixed mortgage rates slipped two bps this week to 6.62% (down 26bps y-o-y). Fifteen-year rates were unchanged at 5.82% (down 34bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up five bps to 6.83% (down 67bps).

Currency Watch:

April 8 – Bloomberg (Vassilis Karamanis): “Currency traders are positioning for turbulence in currency markets to get even worse as an escalating trade war shakes up the global economic order. The dollar and its peers have been whipsawed by some of the sharpest price swings since the 2008 financial crisis… Options volumes surged to a record last week and uncertainty around the trade war has now pushed expectations for volatility in the next month to a two-year high. ‘Volatility in FX has been completely insane,’ Brent Donnelly, president of Spectra FX Solutions LLC., wrote... ‘We saw one of our biggest weeks ever on the trading side as volumes are gigantic and everyone is doing all kinds of stuff.’”

April 9 – Reuters (Rae Wee and Jiaxing Li): “China's yuan ended at its weakest level in more than 17 years on Wednesday after its offshore counterpart fell to a record low overnight, as an escalating Sino-U.S. trade war rattled currency markets. The onshore yuan finished the domestic trading session at 7.3498 per dollar, its weakest close since December 2007.”

For the week, the U.S. Dollar Index dropped 2.8% to 100.102 (down 7.7% y-t-d). For the week on the upside, the Swiss franc increased 5.7%, the Australian dollar 4.1%, the New Zealand dollar 4.1%, the euro 3.6%, the South Korean won 2.9%, the Canadian dollar 2.5%, the Japanese yen 2.4%, the Swedish krona 2.3%, the Singapore dollar 2.1%, the British pound 1.6%, the Norwegian krone 0.9%, and the Mexican peso 0.6%. On the downside, the Brazilian real declined 0.4%, and the South African rand slipped 0.2%. The Chinese (onshore) renminbi declined 0.14% versus the dollar (up 0.10% y-t-d).

Commodities Watch:

April 6 – Associated Press (Yihui Xie): “China’s central bank added gold to its reserves for a fifth straight month in March, deepening its bet on the precious metal as a haven asset amid rising global trade and geopolitical turmoil. Gold held by the People’s Bank of China rose by 0.09 million troy ounces last month… The central bank’s recent run of buying started in November, after a six-month hiatus that followed an 18-month buying spree.”

April 8 – Bloomberg: “Chinese investors funneled a record amount of cash into gold-backed exchange-traded funds last week, drawn by the safety of the asset as combative trade war rhetoric from the world’s biggest economies shakes global markets. Inflows to four major onshore gold ETFs, including Huaan Yifu Gold ETF, hit a record of 7.6 billion yuan ($1bn) last week…”

The Bloomberg Commodities Index rallied 1.8% (up 2.8% y-t-d). Spot Gold surged 6.6% to a record $3,238 (up 23.4%). Silver rallied 9.2% to $32.3065 (up 11.8%). WTI crude slipped 49 cents, or 0.8%, to $61.50 (down 14%). Gasoline fell 2.7% (down 1%), and Natural Gas sank 8.1% to $3.527 (down 2%). Copper rallied 2.7% (up 12%). Wheat jumped 5.1% (up 1%), and Corn surged 6.5% (up 7%). Bitcoin was little changed at $83,400 (down 11%).

Market Instability Watch:

April 7 – Financial Times (Kate Duguid, George Steer, Harriet Clarfelt, Joshua Franklin and Ortenca Aliaj): “US government debt sold off sharply on Monday as hedge funds cut back on risk in their strategies and investors continued shifting into cash during a third day of acute tumult on Wall Street… Market participants said the declines in the $29tn Treasury market on Monday reflected several factors, including hedge funds cutting down on leverage — or borrowing used to magnify trades — and a broader dash for cash as investors sheltered from swings in the wider market. Gennadiy Goldberg at TD Securities said the move reflected ‘an ‘everything, everywhere all at once’-type trade’. He added: ‘Multisector funds are trying to deleverage, which leads to a ‘sell everything’ trade’… ‘Hedge funds have been liquidating US Treasury basis trades furiously,’ said one hedge fund manager.”

April 6 – Financial Times (Harriet Agnew): “Hedge funds have been hit with the biggest margin calls since Covid shut down huge parts of the global economy in 2020, after Donald Trump’s tariffs triggered a rout in global financial markets. Wall Street banks have asked their hedge fund clients to stump up more money as security for their loans because the value of their holdings had tumbled. Several big banks have issued the largest margin calls to their clients since the beginning of the pandemic in early 2020. The margin calls underscore the intense turbulence in global markets at the end of last week.”

April 9 – New York Times (Mark Landler): “The parallels between President Trump and Liz Truss, Britain’s shortest-serving prime minister, are growing starker. Ms. Truss triggered market turmoil in 2022 after she proposed sweeping tax cuts that she proposed to pay for with massive government borrowing. Ms. Truss was ultimately doomed by fears of a credit crisis after yields on British government bonds spiked. Now, yields on U.S. Treasuries are beginning to rise. On Wednesday, in the hours after Mr. Trump’s latest tariffs went into effect, including levies of more than 100 percent on China, the yield on the 10-year U.S. Treasury rose to as high as 4.5%, up from around 3.9% a few days ago. The yield on a 30-year bond briefly traded above 5%.”

April 9 – CNBC (Ari Levy): “Every bear market has days like this. The Nasdaq soared 12% on Wednesday, the second-best day on record for the tech-heavy index and its sharpest rally since January 2001, which was the middle of the dot-com crash. During the financial crisis in October 2008, the Nasdaq enjoyed two of its best five days ever. The other two came as the tech bubble was bursting. The index’s sixth-best day since its beginning in 1971 came on March 13, 2020, as the Covid pandemic was hitting the U.S. Of the 25 best days for the Nasdaq, including Wednesday, 22 took place during the dot-com collapse, the 2008-09 financial crisis or the early days of Covid. One occurred on Oct. 21, 1987, two days after Black Monday.”

April 8 – Bloomberg (Edward Bolingbroke and Michael Mackenzie): “The upheaval from President Donald Trump’s tariffs is accelerating the collapse of a popular hedge-fund bet that Treasuries would perform better than interest-rate swaps… ‘The most violent move in the last six weeks has been that swap-spread trade coming to a violent conclusion,’ said Ed Al-Hussainy, a rates strategist at Columbia Threadneedle. ‘This tells us that banks are now looking to raise and looking to preserve cash.’”

April 11 – Financial Times (Will Schmitt): “Investors fled US funds that hold riskier bonds and loans at a historic pace over the past week as fears that President Donald Trump’s tariffs will deal a heavy blow to the economy ricocheted across asset markets. Investors yanked $9.6bn from US high-yield bond funds and $6.5bn from leveraged loan funds in the week to Wednesday, according to… LSEG Lipper. Both figures represent record outflows…”

April 11 – Reuters (Gaurav Dogra and Patturaja Murugaboopathy): “Investors pulled out of U.S. bond funds heavily in the week ending April 9 in a broad selloff triggered by fears of a recession and concerns that the escalating U.S.-China trade war could fuel inflation. Investors withdrew a net $15.64 billion from U.S. bond funds during the week, the largest amount for a week since December 21, 2022, data from LSEG Lipper showed.”

April 10 – Bloomberg (Kevin Kingsbury): “Despite Wednesday’s sharp reversal in risk-asset prices, it may take some more time for the two-week pause in US leveraged-loan launch activity to end as volatility continues. Loans was one area where prices didn’t rebound by day’s end, with secondary market levels dropping further Wednesday…”

April 10 – Bloomberg (Caleb Mutua, Isabelle Lee and Aaron Weinman): “US leveraged-loan funds had their biggest-ever weekly outflow as investors dump corporate debt across the board on concern that the tariff-spurred market turmoil will hit the economy. An estimated $6.5 billion was pulled from the funds in the week ended Wednesday, according to… LSEG Lipper, as prices on the risky debt hit their lowest since mid-2023. The previous record outflow of $3.6 billion was set in December 2018.”

April 8 – Bloomberg (Katie Greifeld and Carmen Arroyo): “Signs of worry are emerging in the market for collateralized loan obligations as tariff-fueled volatility sweeps across asset classes. The $20 billion Janus Henderson AAA CLO ETF, which invests in the highest-rated type of bonds known as collateralized loan obligations, saw nearly $600 million of withdrawals on Monday, the biggest single-day outflow since the fund’s inception in 2020… The selling pressure is forcing CLO exchange-traded funds to liquidate some of their holdings to help meet redemptions.”

April 6 – Bloomberg (Ameya Karve, Finbarr Flynn, and Kari Soo Lindberg): “Credit-default swaps in Asia blew out the most since the worsening of the Covid-19 pandemic in 2020… The cost to insure investment-grade debt of Asian issuers outside Japan widened by 26.5 bps on Monday, according to traders, deeper than the 22 bps in earlier trading. If that level holds, it would mark the biggest single-day jump since March 2020…”

Central Bank Watch:

April 9 – Bloomberg (Alice Gledhill and Jennifer Surane): “The Bank of England said hedge funds have faced ‘significant’ margin calls from their prime brokers as they navigated extreme market volatility in the aftermath of US President Donald Trump’s tariff announcements and warned that the risk of ‘further sharp corrections’ remains high. While the central bank’s Financial Policy Committee found that so far those firms had been able to meet margin calls, it warned that the overall global risk environment has deteriorated, according to minutes from meetings it held on April 4 and April 8… ‘Uncertainty has intensified,’ the committee said. ‘The probability of adverse events, and the potential severity of their impact, has risen.’”

April 11 – Bloomberg (Alessandra Migliaccio and William Horobin): “‘The European Central Bank is monitoring, and is always ready to use the instruments that it has available and has come up in the past with the adequate instruments and tools that were necessary in order to procure price stability and of course financial stability because one doesn’t go without the other,’ she said in Warsaw.”

April 8 – Bloomberg (Philip Aldrick): “The Bank of England has told commercial lenders to keep an eye on liquidity issues and disclose any potential funding problems following the market rout caused by US President Donald Trump’s tariffs. The central bank stepped up its monitoring after banks and other institutions struggled to access funds during the 2008 financial crisis, as well as the ‘dash-for-cash’ episode at the start of the pandemic and the £65 billion LDI rescue triggered by former UK Prime Minister Liz Truss.”

Leveraged Speculation Watch:

April 8 – Financial Times (Costas Mourselas and Amelia Pollard): “Computer-driven hedge fund Renaissance Technologies was wrongfooted after Donald Trump’s ‘liberation day’ tariff announcement last week sent shockwaves across global financial markets. The Renaissance Institutional Equities Fund, one of the group’s flagship strategies offered to external investors, was down about 8% for April as of Friday last week… The losses reduce the fund’s 2025 gains to 4.4%.”

April 8 – Bloomberg (Edward Bolingbroke and Michael Mackenzie): “The upheaval from President Donald Trump’s tariffs is accelerating the collapse of a popular hedge-fund bet that Treasuries would perform better than interest-rate swaps. The trade had been losing momentum since February… Signs of such a policy shift would have boosted Treasuries relative to rate swaps, which are derivative contracts through which two sides agree to exchange interest payments. But the unraveling picked up abruptly in recent days as the intensifying trade war darkened the outlook for Corporate America, leading banks to sell Treasury holdings to raise cash to meet clients’ liquidity needs, traders say.”

April 7 – Bloomberg (Harry Brumpton): “Bill Ackman said the US is ‘heading for a self-induced, economic nuclear winter.’ Boaz Weinstein predicted the ‘avalanche has really just started.’ And Jamie Dimon warned it ‘may be disastrous in the long run.’ One by one, many of the biggest names across Wall Street — some of whom supported President Donald Trump during his election bid last year, and others who merely hoped for looser regulation and economic growth under his administration — are speaking out against his decision to unleash expansive tariffs worldwide, plunging global markets into chaos.”

April 8 – Bloomberg (Dasha Afanasieva): “Billionaire Ken Griffin said President Donald Trump’s latest tariffs amount to a hefty tax on families and are a ‘huge policy mistake’ by the administration. It isn’t right to tell a middle-class or economically challenged family making $50,000 a year “it’s going to cost you 20%, 30%, 40% more for your groceries, for your toaster, for a new vacuum cleaner, for a new car,’ Griffin said. ‘Even if the dream of jobs coming back to America plays out, that’s a 20-year dream. It’s not 20 weeks. It’s not two years. It’s decades.’

April 9 – Bloomberg (Justina Lee): “Just as bonds sell off while stocks get whipsawed, a slew of supposedly diversifying investment strategies are also failing to live up to their defensive billing. Trend followers — a breed of quantitative fund who tout ‘crisis alpha,’ or outperformance at times of market stress — have extended their worst losses in two years. A strategy that goes long steady stocks and short volatile ones is down on the week. Hedge funds… also appear to be struggling. In short, the protective approaches often relied on by institutional investors have been faltering just when they’re needed most.”

April 8 – Yahoo Finance (Steve Johnson): “Investors lost $25.7bn in leveraged exchange traded funds late last week, in the biggest ever meltdown for risky funds that have drawn huge inflows in recent years from retail traders seeking quick returns. The high-octane funds, which magnify the daily returns of individual stocks or indices by up to five times, lost almost a quarter of their value on Thursday and Friday… This eclipsed the previous worst losses on record, two separate days during the March 2020 Covid-19 crash when leveraged ETFs lost $9.1bn and $5.6bn respectively, and the ‘Volmageddon’ of 2018 when an extreme surge in volatility led to large losses for short volatility ETFs.”

Trump Administration Watch:

April 6 – Politico (Jake Traylor): “Hours ahead of what some are predicting could be a historic market sell-off Monday morning over U.S. tariffs, President Donald Trump likened his policies — and the reaction — to medicine. ‘I don’t want anything to go down, but sometimes you have to take medicine to fix something… What’s going to happen to the markets, I can’t tell you. But our country is much stronger’… Amid fallout from Trump’s tariff plan this weekend, the president participated in a Florida golf tournament, posting a video of his swing to Truth Social. On Saturday, Trump urged Americans to “HANG TOUGH” in a Truth Social post despite the downturn in the markets. ‘HANG TOUGH, it won’t be easy, but the end result will be historic,’ he posted.”

April 6 – Financial Times (James Politi): “Donald Trump’s top economic officials vowed to press ahead with bruising tariffs on imports from around the world, rejecting fears of a looming recession as investors braced for new turmoil in financial markets… Scott Bessent, the US treasury secretary, and Howard Lutnick, the commerce secretary, defended Trump’s ultra-protectionist trade policies as a necessary overhaul of global commerce and dismissed last week’s brutal sell-off in equity prices. They also suggested additional levies on imports from a wide range of countries… would not be delayed. These are on top of a 10% ‘baseline’ tariff implemented on Saturday that has hit most imported goods. ‘He announced it, and he wasn’t kidding. The tariffs are coming, of course they are,’ Lutnick told CBS on Sunday, adding that there was ‘no postponing’ the levies. ‘The president needs to reset global trade.’”

April 6 – Bloomberg (Shawn Donnan): “US Treasury Secretary Scott Bessent on Sunday struck a defiant tone in the face of global financial markets selling off sharply in response to new US tariffs... ‘I see no reason that we have to price in a recession,’ Bessent told NBC’s Meet the Press… Bessent — along with Commerce Secretary Howard Lutnick and White House trade czar Peter Navarro in separate comments — gave no indication that President Donald Trump was willing to back down on the sweeping new tariffs he introduced last week.”

April 6 - @realDonaldTrump: "We have massive Financial Deficits with China, the European Union, and many others. The only way this problem can be cured is with TARIFFS, which are now bringing Tens of Billions of Dollars into the U.S.A. They are already in effect, and a beautiful thing to behold. The Surplus with these Countries has grown during the 'Presidency' of Sleepy Joe Biden. We are going to reverse it, and reverse it QUICKLY. Some day people will realize that Tariffs, for the United States of America, are a very beautiful thing!”

April 7 – Financial Times (Kana Inagaki, Harry Dempsey, David Keohane and Adrienne Klasa): “Companies have pledged to invest at least $1.9tn in the US since the start of Donald Trump’s presidency but the spending bonanza could be threatened by a spiralling tariff war. Investment pledges from overseas and US companies have reached $1.9tn… The latest commitments include $100bn each from SoftBank, which made the commitment in December, and chip manufacturer TSMC, $20bn from French shipping group CMA CGM, a $500bn pledge by Apple and $5bn from carmaker Stellantis. However, many of the promises are from businesses with global supply chains that are vulnerable to the sweeping tariffs Trump has announced against trading partners including China, India and the EU.”
April 10 – Citywire (John Schaffer): “Although Donald Trump categorically denied that the sharp sell-off in US Treasuries on Wednesday prompted a pause in his aggressive tariffs later in the day, the spike in the cost of US government debt will surely have been a more pressing concern for the White House than crashing equity markets. When asked whether the decision to lower tariffs on most nations, with the exception of China, to 10% was due to the bond market turmoil, Trump said: ‘No, I was watching the bond market. The bond market is very tricky.’ ‘The bond market is beautiful now,’ he added.”

April 11 – Axios (Ben Berkowitz): “President Trump’s whiplash tariffs may have inadvertently achieved his goal of reordering the global economy by inspiring investors to sell U.S. assets and move their money elsewhere. For decades, the world has invested in America. Now, a global moment of clarity threatens to redirect trillions of dollars of capital inflows and diminish the U.S. in the international economic order. The U.S. receives nearly $2 trillion each year in foreign capital inflows… -- things like investments in businesses and bank lending, but also foreign investors buying U.S. stocks and bonds. America's share of global capital flows has nearly doubled from where it was just before the pandemic, to 41%... Then came the tariffs. The U.S. dollar — which should strengthen in a tariff environment, all other things being equal — weakened steadily. ‘This suggests foreigners have been and are continuing to sell U.S. stocks and sending their money elsewhere,’ write Howard Ward and John Belton, co-chief investment officers of value at Gabelli Funds.”

April 7 – Bloomberg (Rebecca Choong Wilkins, Alastair Gale and Ruchi Bhatia): “With panic spreading in markets across the globe, world leaders raced over the weekend to make offers to US President Donald Trump to lower tariffs across the board. The problem, however, is that it’s unclear what exactly Trump would find acceptable — or if he even wants to make deals at all. Trump set a high bar on Sunday night, telling reporters that any agreements would need to eliminate bilateral trade deficits. ‘To me, a deficit is a loss,’ Trump told reporters... ‘We’re going to have surpluses or, at worst, we’re going to be breaking even.’”

April 10 – Independent (Gustaf Kilander): “As President Donald Trump’s back-and-forth on trade policies creates chaos in the financial markets, some fund managers are questioning the rationality of his decisions. ‘In the last few days, we have had many conversations with macro fund managers,’ Tom Lee, the head of research at the financial analysis firm FSInsights, wrote… ‘And their concern is that the White House is not acting rationally, but rather on ideology. And some even fear that this may not even be ideology… A few have quietly wondered if the President might be insane.’”

April 6 – Wall Street Journal (Roshan Fernandez): “President Trump has targeted universities and colleges, going after their federal funding in an effort to eradicate what he considers extreme leftist ideology on college campuses. He has threatened to pull funding from schools that don’t comply—and followed through in some instances. The Trump administration has been scrutinizing universities over their handling of alleged antisemitism on campus and their response to pro-Palestinian protests. In response, universities have taken steps to mitigate Trump’s spending cuts, including hiring freezes and rejecting previously accepted graduate students.”

April 10 – Bloomberg (Sri Taylor, Hadriana Lowenkron and Laura Nahmias): “President Donald Trump said that he plans to withhold all federal funding to sanctuary cities, a move that would pressure finances from New York to San Francisco. ‘No more Sanctuary Cities! They protect the Criminals, not the Victims,’ the president said… ‘They are disgracing our Country, and are being mocked all over the World.’ Trump — who has promised to execute the largest mass deportation of undocumented migrants in US history — said he was ‘working on papers to withhold all Federal Funding for any City or State that allows these Death Traps to exist!!!’”

April 7 – Axios (Jim VandeHei and Mike Allen): “With markets nosediving across the globe, President Trump played golf, raised money for MAGA and dug in deep on his tariff plans, after warning Americans to buckle up. ‘THIS IS AN ECONOMIC REVOLUTION, AND WE WILL WIN,’ he said on Truth Social on Saturday.”

April 8 – Axios (Ben Berkowitz): “Elon Musk escalated his war of words with Trump trade adviser Peter Navarro on Tuesday, calling him ‘truly a moron’ and ‘dumber than a sack of bricks’ over comments about Musk's businesses. The gloves are off, and Musk — who has already challenged Trump's trade policy publicly — is now getting increasingly personal with the architect of that policy, too. White House press secretary Karoline Leavitt, asked for comment on the Musk-Navarro spat at the daily press briefing, replied with a smile: ‘Boys will be boys, and we will let their public sparring continue.’”

Constitution Watch:

April 8 – CNBC (Dan Mangan): “A federal judge ruled… that the White House cannot bar Associated Press reporters and photographers from the Oval Office, Air Force One and other tightly controlled spaces where a handful of other media outlets are admitted to cover President Donald Trump. District Court Judge Trevor McFadden said the White House’s blocking of AP journalists from those secure spaces after the wire service refused to wholeheartedly adopt his renaming of the Gulf of Mexico is ‘contrary to the First Amendment’ of the U.S. Constitution.”

Trade War Watch:

April 8 – Bloomberg: “Beijing lashed out at US Vice President JD Vance for comments he made about ‘Chinese peasants,’ adding a personal dimension to the tensions between the world’s biggest economies just as a global trade war unfolds. ‘It is surprising and sad to hear such ignorant and disrespectful remarks from the vice president,’ Foreign Ministry spokesman Lin Jian said… The remarks by the diplomat were a rare instance of China directly rebuking a top US leader. Last week Vance complained about the China-US economic relationship in an interview with Fox News, saying it amounted to ‘incurring a huge amount of debt to buy things that other countries make for us.’ Then he added: ‘To make it a little more crystal clear, we borrow money from Chinese peasants to buy the things those Chinese peasants manufacture. That is not recipe for economic prosperity.’”

April 8 – Politico (Elena Giordano): “China… branded U.S. Vice President JD Vance ignorant and disrespectful after he claimed that America was borrowing money from ‘Chinese peasants.’ Beijing ‘has made its position perfectly clear on its trade relations with the U.S.,’ Foreign Ministry spokesperson Lin Jian said… ‘To hear words that lack knowledge and respect like those uttered by this vice president is both surprising and kind of lamentable,’ he added."

April 9 – Bloomberg: “President Donald Trump has ramped up US tariffs on China by a record 104%, betting he can force Xi Jinping to the table even as Beijing vows to ‘fight until the end.’ The question now is which leader folds first. Hours before the steepest US tariffs in a century took effect…, Trump claimed he was ‘waiting’ for China’s call as he set up talks with a range of countries. ‘They want to make a deal,’ the US leader said. ‘They just don’t know how to because they’re proud people. China will now pay a big number to our Treasury.’”

April 11 – Associated Press: “China announced… it will raise tariffs on U.S. goods from 84% to 125% — the latest salvo in an escalating trade war… While U.S. President Donald Trump paused import taxes this week for other countries, he raised tariffs on China and they now total 145%. China has denounced the policy as ‘economic bullying’ and promised countermeasures… Washington’s repeated raising of tariffs ‘will become a joke in the history of the world economy,’ a Chinese Finance Ministry spokesman said… ‘However, if the U.S. insists on continuing to substantially infringe on China’s interests, China will resolutely counter and fight to the end.’”

April 7 – Associated Press (Huizhong Wu): “China on Monday accused the U.S. of unilateralism, protectionism and economic bullying with tariffs, while calling on representatives of American companies, including Tesla, to ‘take concrete actions’ to resolve the issue. Putting ‘America First’ over international rules harms the stability of global production and the supply chain and seriously impacts the world’s economic recovery, Ministry of Foreign Affairs spokesperson Lin Jian told reporters… The People’s Daily, the Communist Party’s official mouthpiece, had strong words. ‘The sky won’t fall,’ it declared, even if the U.S. tariffs have an impact. ‘Faced with the indiscriminate punches of U.S. taxes, we know what we are doing and we have tools at our disposal,’ it added.”

April 9 – Wall Street Journal: “China’s top leaders are looking to foster closer ties with neighboring Asian countries, signaling that Beijing may try to wield regional collaboration in its trade fight with the U.S. President Xi Jinping and other top Communist Party members met Tuesday and Wednesday to discuss deepening security and trade ties with the rest of the region… Officials at the meeting said they aim to generate economic integration with neighboring nations and strengthen cooperation on industrial and supply chains.”

April 8 – Politico (Koen Verhelst): “The European Union… reached out to Beijing for help in tracking a wave of Chinese imports that is expected to pour toward the EU after U.S. Donald Trump ramped up tariffs on China. China has pledged to ‘fight to the end’ against Washington… The challenge for the EU — as in the trade war of Trump’s first term — is that goods boxed out of the U.S. will quickly flow toward new markets in the EU, opening the up the risks of an even deeper global trade war.”

April 10 – Financial Times (Roula Khalaf, Henry Foy and Andy Bounds): “The EU is prepared to deploy its most powerful trade measures and may impose levies on US digital companies if negotiations with Donald Trump fail to end his tariff war against Europe. European Commission president Ursula von der Leyen told the Financial Times that the EU would seek a ‘completely balanced’ agreement with Washington during Trump’s 90-day pause in applying additional tariffs. But the Commission president warned she was ready to dramatically expand the transatlantic trade war to services if those talks failed, potentially including a tax on digital advertising revenues that would hit tech groups such as Meta, Google and Facebook. ‘We are developing retaliatory measures,’ von der Leyen said…”

April 11 – Wall Street Journal (Paul Hannon): “The members of the eurozone will stand together in support of retaliation against the U.S. if talks to resolve the trade conflict are unsuccessful, Ireland’s finance minister said… Paschal Donohoe was speaking to reporters as head of the Eurogroup of finance ministers, after a meeting in Warsaw. ‘I am absolutely certain we will work together,’ Donohoe said. Members of the eurozone have different levels of reliance on trade with the U.S., and varying degrees of vulnerability should the dispute move beyond the trade in goods.”

April 7 – Bloomberg (Jesse Pound): “White House trade advisor Peter Navarro said Monday that an offer by Vietnam to eliminate tariffs on U.S. imports would not be enough for the administration to lift its new levies announced last week. ‘Let’s take Vietnam. When they come to us and say ‘we’ll go to zero tariffs,’ that means nothing to us because it’s the nontariff cheating that matters,’ Navarro said… The examples of nontariff ‘cheating’ cited by Navarro included Chinese products being routed through Vietnam, intellectual property theft and a value-added tax.”

April 7 – New York Times (Ana Swanson): “Peter Navarro, a senior White House trade adviser, on Monday defended the sweeping tariffs President Trump has imposed on foreign nations and indicated that other countries’ offers to drop their own tariffs on American products would be insufficient to convince the president to retreat. Mr. Navarro, who has been the architect of many of President Trump’s trade plans, said… the United States was facing a national emergency based on chronic trade deficits, and the only fix would be foreign countries removing trade barriers that had hindered the flow of American goods. The European Union offered Monday to drop its tariffs on American cars and industrial goods to zero if the United States did the same. But Mr. Navarro criticized the bloc for its value-added taxes and restrictions on American meat exports, as well as systematically higher tariffs. ‘You steal from the American people every which way is possible,’ Mr. Navarro said. ‘So, don’t just say we’re going to lower our tariffs.’”

April 6 – Bloomberg (Ram Anand): “Malaysia will lead efforts to coordinate a regional response in Southeast Asia toward US President Donald Trump’s tariffs, the country’s Prime Minister Anwar Ibrahim said. ‘Malaysia, as Asean chair, will lead efforts to present a united regional front, maintain open and resilient supply chains, and ensure Asean’s collective voice is heard clearly and firmly on the international stage,’ Anwar said…”

April 7 – Bloomberg (Dorothy Ma): “The global default rate could rise to 8% over the next year from less than 5% today if high-yield bond spread continue to widen, as they have since Donald Trump’s tariffs announcement last week, according to a Moody’s… analyst. ‘A negative shock could keep the global speculative-grade default rate high,” according to Sharon Ou, Vice President and Senior Credit Officer at Moody’s… Industries with complex supply chains, like technology companies and automakers in Europe, Japan and Korea, are most exposed…”

April 8 – Financial Times (Owen Walker): “Singapore fears tariffs imposed by US President Donald Trump will trigger a global trade war that will be particularly damaging for trade-dependent small nations, the city-state’s foreign minister has said. Vivian Balakrishnan told the Financial Times… the city-state’s role as an international financial and commercial hub made it highly vulnerable. ‘Our greatest fear is that this set of announcements has shaken the foundational pillars of the world trading system right down to the core,’ said Balakrishnan. ‘If that collapses and everything becomes an infinite series of bilaterals, it’s going to be very hostile for small nations. And especially small nations [that], like ours, are explicitly sensitive to global trade,’ he said. ‘It is a global trade war that we are really afraid of.’”

April 8 – Reuters (Nandita Bose, Ryan Patrick Jones and Ben Blanchard): “President Donald Trump… said he told the Taiwan Semiconductor Manufacturing Company, which has pledged to build new factories in the United States, it would pay a tax of up to 100% if it did not build its plants in the country.”

April 9 – Reuters (Nandita Bose): “President Donald Trump on Tuesday said the U.S. will soon announce a ‘major’ tariff on pharmaceutical imports. Speaking to an event at the National Republican Congressional Committee, Trump said the tariff will incentivize drug companies to move their operations to the U.S.”

April 10 – Bloomberg (Derek Wallbank and Maya Averbuch): “President Donald Trump threatened fresh tariffs and possibly sanctions on Mexico, escalating a dispute about water at the US southern border. ‘My Agriculture Secretary, Brooke Rollins, is standing up for Texas Farmers, and we will keep escalating consequences, including TARIFFS and, maybe even SANCTIONS, until Mexico honors the Treaty, and GIVES TEXAS THE WATER THEY ARE OWED!’ Trump wrote in a Truth Social post…”

April 9 – Axios (Andrew Solender): “At least a dozen House Republicans are considering signing onto Rep. Don Bacon's (R-Neb.) bill to restrict the White House's ability to impose tariffs unilaterally… It's a significant break with President Trump, who has threatened to veto the bill should it pass Congress. Bacon told Axios that two Republicans — Reps. Jeff Hurd (R-Colo.) and Dan Newhouse (R-Wash.) — and two Democrats have signed on to the bill as co-sponsors. He added: ‘I have 10 others who want to do it but they want to talk to the trade representative first.’ The details: The bill would cause any tariffs a president institutes to expire after 60 days unless Congress votes to pass a resolution of approval.”

April 7 – Financial Times (Alex Rogers in Washington and James Fontanella-Khan): “Ken Langone, the co-founder of Home Depot and longtime Republican donor, has lambasted Donald Trump’s wide-ranging tariffs for being set too high and implemented too quickly. Langone told the Financial Times the US president was being ‘poorly advised’, the 46% tariff on Vietnam was ‘bullshit’ and the additional 34% tariff on China was ‘too aggressive, too soon’ and did not give ‘serious negotiations a chance to work’. ‘Forty-six per cent on Vietnam? Come on!’ said Langone. ‘You might as well tell them, ‘Don’t even bother calling’.’ Langone is one of a growing number of billionaire financiers openly criticising the president’s decision to increase tariffs on imports to heights not seen since the 1930s as they grow increasingly alarmed at the resulting market meltdown.”

Budget Watch:

April 10 – Associated Press (Fatima Hussein): “The U.S. budget deficit has grown to more than $1.3 trillion in the first half of the 2025 fiscal year — the second highest six-month deficit on record… The new Treasury Department data shows a deficit of $1.307 trillion for October through March, the first six months of the fiscal year 2025. And spending is $139 billion more in the first three months of 2025 compared to the same period last year, with borrowing over that period $41 billion higher.”

April 8 – Bloomberg (Jarrell Dillard): “President Donald Trump’s tariff increases will cause a slump in US trade volumes that’s likely to limit the scope of the extra revenue the federal government can expect to reel in, new projections show. All of the tariffs Trump has imposed, along with those he has threatened, since January would generate around $300 billion in annual revenue on average, according to… Bloomberg Economics. That’s at the low end of the range, with Treasury Secretary Scott Bessent having floated a figure of up to $600 billion.”

April 8 – Reuters (Trevor Hunnicutt): “U.S. President Donald Trump said… the United States is taking in $2 billion per day from tariffs… The Treasury Department's daily statement of deposits into and withdrawals from its general account, the federal government's main operating account, shows ‘Customs and Certain Excise Taxes’ deposits have on average totaled around $200 million a day so far this month.”

April 7 – Bloomberg (Roxana Tiron): “President Donald Trump said his administration had approved a defense budget in the ‘vicinity’ of $1 trillion. ‘We are very cost conscious but the military is something that we have to build and we have to be strong because you have a lot of bad forces out there now,’ Trump said… Trump added his administration will approve a budget that will be ‘the biggest one we’ve ever done for the military.’ Defense Secretary Pete Hegseth followed up with a post on social media platform X: ‘COMING SOON: the first TRILLION dollar @DeptofDefense budget. President @realDonaldTrump is rebuilding our military — and FAST.’”

April 10 – Wall Street Journal (Richard Rubin and Olivia Beavers): “House Republicans narrowly approved the blueprint for President Trump’s ‘one big, beautiful bill’ following a late push by party leaders that won over some holdouts who had worried that the plan doesn’t force deep-enough spending cuts. The 216-214 vote on Thursday marks a major step forward for Trump’s legislative agenda… The House’s adoption of the measure unlocks a procedural fast track for a bill later this year that would extend expiring tax cuts, lower taxes even further and increase spending for border security and national defense.”

April 7 – Bloomberg (Erik Wasson): “Republicans are splintering over a proposal to create a new 40% tax bracket for those earning $1 million or more as a way to offset a raft of new tax cuts Congress is looking to pass later this year. House Freedom Caucus Chairman Andy Harris says he is open to the creation of a new 40% tax bracket for those earning $1 million or more… Harris said… he views the millionaires’ tax rate as a ‘reasonable way to pay for’ President Donald Trump’s campaign pledge to eliminate levies on tipped wages.”

New World Order Watch:

April 9 – Financial Times (Kate Duguid, Arjun Neil Alim, Harriet Agnew and Costas Mourselas): “Treasuries sold off on Wednesday as President Donald Trump’s tariffs took effect, deepening investor concern about the ‘safe haven’ status of US sovereign debt. The 10-year US Treasury yield jumped to 4.51% before falling back to 4.45%... The move dragged government borrowing costs around the world higher, with yields in the UK and Japan climbing sharply. The moves offer a new challenge to the Trump administration, which had previously cited lowering Treasury yields as a policy aim, and could mark a loss of investor confidence in the world’s largest sovereign debt market. ‘The sell-off may be signalling a regime shift whereby US Treasuries are no longer the global fixed-income safe haven,’ said Ben Wiltshire, a rates strategist at Citi.”

Canada Friend and Ally Watch:

April 7 – Wall Street Journal (Paul Vieira and Vipal Monga): “Canada’s economy was already stumbling a few months ago. Now, it is on the brink of recession because of President Trump’s tariffs. Canada’s economy is starting to shed jobs after months of tariff-fueled anxiety, while the outlook among businesses and consumers has become increasingly dour… ‘The tariff shock is hitting hard,’ said Robert Embree, an economist with Rosenberg Research. Canada is teetering on the brink of a recession, he said.”

April 7 – Bloomberg (Mathieu Dion and Thomas Seal): “The US is poised to more than double duties on Canadian softwood lumber to 34.45%, putting more pressure on US materials costs even before President Donald Trump places any new tariffs on the sector. The US currently levies countervailing and anti-dumping duties totaling 14.4%...”

April 5 – Bloomberg (Randy Thanthong-Knight): “The Canadian government issued a new warning for travelers entering the US, saying they should ‘expect scrutiny’ at the border and that their phones and other electronic devices may be searched. The updated travel advisory follows US President Donald Trump’s move to tighten border and immigration policy, which had already prompted similar travel advisories from countries including the UK, Germany and France.”

Ukraine War Watch:

April 5 – Financial Times (Raphael Minder): “Donald Trump risks making a ‘historical mistake’ if his negotiations to end the war in Ukraine result in the US recognising Russia’s claims to Crimea and other occupied territory, says the Polish government’s adviser on Ukraine. Paweł Kowal, who advises Prime Minister Donald Tusk… and heads the Polish parliament’s foreign affairs committee, said in an interview that a ‘red line’ would be crossed for Poland and the rest of central Europe if expanded Russian borders were legally recognised as a result of the invasion of a neighbouring country.”

April 9 – Financial Times (Christopher Miller): “Volodymyr Zelenskyy has accused Beijing of doing nothing to stop Russia enlisting Chinese nationals to fight in Ukraine, saying 155 such recruits have already been deployed to the battlefield and many more may soon follow. The Ukrainian president’s comments raise questions about Beijing’s claims of neutrality… Zelenskyy said Ukrainian intelligence had identified 155 Chinese nationals who had signed contracts with Russia’s armed forces to fight in Ukraine. The president said he believed ‘the real number is much higher’.”

Middle East Watch:

April 9 – Reuters (Phil Stewart): “U.S. Defense Secretary Pete Hegseth said it was up to Iran to decide whether the recent U.S. movement of B-2 bombers was a message to Tehran, as he voiced hope that U.S.-Iran negotiations over Tehran's nuclear program could be resolved peacefully. As many as six B-2 bombers relocated in March to a U.S.-British military base on the Indian Ocean island of Diego Garcia…, amid a U.S. bombing campaign in Yemen and mounting tensions with Iran… Asked if the B-2s were meant to send a message to Iran, Hegseth said: ‘We’ll let them decide.’”

Global Credit and Financial Bubble Watch:

April 9 – Bloomberg (James Hirai, Naomi Tajitsu, and Alice Atkins): “Britain’s long-term borrowing costs shot to a 27-year high, piling pressure on Downing Street about the precarious state of UK finances as concern builds about stress in the financial system reaching a breaking point. Yields on 30-year gilts surged past 5.5%, marking an increase of half a percentage point from early February. The bonds, which were at the center of the 2022 crisis caused by Liz Truss’s mini-budget, have once again come under strain as Chancellor Rachel Reeves faces few options to help the economy if a recession hits. ‘The UK is a weak link, and gilts are getting bullied,’ said Neil Mehta, a portfolio manager at RBC BlueBay Asset Management.”

April 9 – Bloomberg (Abhinav Ramnarayan and Ronan Martin): “A damaging few sessions for junk bonds on the back of US President Donald Trump’s tariff shock means that refinancing costs have doubled this year, sparking concerns the market could become inaccessible to some borrowers. In the worst week for high-yield bonds since the collapse of Credit Suisse — with two days still to go — the average yield on a European index of junk-rated borrowers has surged to 6.58% and a similar US index hit 8.67%.”

Bubble and Mania Watch:

April 9 – Bloomberg (Paul J. Davies): “When it’s finally completed seven years from now, Citadel LLC’s New York tower will be the second tallest building in the city, after the World Trade Center. It will also loom over the headquarters of JPMorgan… just a few hundred yards south along Park Avenue. That the world’s most valuable bank will be literally in the shadow of a key pillar of shadow banking is an overt and irresistible metaphor for how financial power has shifted over the last 15 years from traditional lenders toward enormous, less restrained repositories of money such as Citadel. Shadow banks do a lot of the work that commercial banks do without being hampered by strict government regulations. That means these operations — particularly hedge funds and private asset managers — can invest more aggressively, taking on greater risks and potentially earning greater rewards.”

April 8 – Bloomberg (Katie Roof, Kate Clark, and Yazhou Sun): “This was supposed to be the year that Silicon Valley’s yearslong backlog of billion-dollar startups were finally able to go public, delivering riches to venture capitalists. Instead, President Donald Trump’s promises of sweeping tariffs and the havoc in global markets have thrown those plans into limbo, threatening to plunge the VC and startup industry into crisis. Most major public listings planned for this year are on ice… A significant delay to initial public offerings could starve venture capitalists of cash at a critical moment. ‘A major source of anxiety is going to be around the exit markets and whether or not they are open,’ said Tomasz Tunguz, founder of Theory Ventures. ‘If we have another two years of no liquidity, it’s going to be really problematic for the asset class.’”

April 6 – Financial Times (Antoine Gara and Alexandra Heal): “Large institutional investors are studying options to shed stakes in illiquid private equity funds after the rout in global financial markets pummelled their portfolios, according to top private capital advisers. The calls by pensions and endowments seeking ways to exit their investments, probably at discounts to their stated value, are a bad sign for the $4tn buyout industry… The race to find liquidity signals that investors in private equity funds increasingly expect to receive few cash profits from their holdings this year and may face liquidity pressures that cause them to further retrench from making new investments.”

April 9 – Bloomberg (Chris Hughes): “What can private equity firms do in this volatile market? Seemingly nothing. Even with a tariff reprieve, barriers to buying and selling assets remain. But buyout barons have their work cut out just operating the portfolio companies they’re sitting on. As investment realizations get pushed back yet again, the risk of business damage at their stuck-on-ice holdings increases. The industry’s reversal of fortune has been stunning.”

April 8 – Financial Times (Craig Coben): “Dealmakers on Wall Street and in the City have plenty to worry about. After a sluggish first quarter, market conditions have suddenly taken a sharp turn for the worse. Stock prices are tumbling, economic jitters are spreading and many transactions are likely to be shelved. Investment bankers are no stranger to cycles… But if 2025 marks the third slow year out of the past four, then this is no ordinary downturn — it begins to look like something more existential. The year began with great expectations. Donald Trump returned to the White House, the economy was humming, and interest rates and inflation were gliding downward. Bank chiefs trumpeted a revival in mergers and IPOs. Wall Street was regaining its swagger. But bankers have since lost their mojo.”

De-globalization Watch:

April 10 – Axios (Eleanor Hawkins): “Anti-American sentiment abroad has been on the rise, with President Trump's unpredictable trade policies exacerbating the issue. Communication and marketing teams at multinational companies are grappling with how America's reputation might be impacting their own. Since Trump took office in January, the average net favorability of the U.S. has fallen by roughly 20 points worldwide…, according to a Morning Consult analysis. Canadian consumers are among the most likely to avoid American brands due to U.S. trade policies. In response, U.S. companies that operate internationally are preparing for backlash or boycotts as geopolitical tensions rise.”

April 5 – Bloomberg (Alessandra Migliaccio): “European Central Bank Executive Board member Isabel Schnabel suggested that US President Donald Trump’s tariff onslaught may signify that the era of free-flowing global commerce is over… The policymaker began her remarks with a quip about the implications of the White House’s actions. ‘Liberation day’ was not liberating, but seems to have marked the end of global free trade,’ she said.”

April 10 – Wall Street Journal (Benoît Morenne and Collin Eaton): “Free trade fueled the U.S.’s rise as an oil-and-gas hegemon. President Trump’s America First era is set to force a painful readjustment. Globalization has been a boon to U.S. oil-and-gas companies, which have been able to export their abundant surplus of fossil fuels. This in turn has blown the lid off domestic production, allowing America to lap Saudi Arabia and Russia as the world’s top producer of oil and gas—and narrow its trade deficit. Now, Trump’s levy offensive could put these gains at risk by hurting demand for U.S. products. It could also create an opening for America’s energy rivals to regain market share.”

Inflation Watch:

April 9 – Financial Times (Robert Wright): “US consumers are facing steep price increases on bicycles as US President Donald Trump’s tariffs take a heavy toll on an industry that is heavily dependent on Chinese manufacturing. Arnold Kamler, chair of family-owned Kent International, one of the biggest US bike manufacturers, warned prices across the industry would rise as much as 50% if Trump retained tariffs at current levels. US bike brands import about 90% of the roughly 12.5mn bikes they sell annually. The biggest share is manufactured in China, while Taiwan, Vietnam and Cambodia also produce a substantial amount of bikes.”

Federal Reserve Watch:

April 9 – Wall Street Journal (Nick Timiraos): “Federal Reserve Chair Jerome Powell is facing an increasingly dreadful task. Economists, business owners and investors are betting that the uncertainty created by the sudden rollout of President Trump’s large tariff hikes… will push the economy closer to a recession by weakening hiring and spending. That would call for cutting rates to cushion any downturn. At the same time, the magnitude of tariff increases is likely to lead prices to rise substantially for many imported goods, including materials used by domestic manufacturers. That could make central bankers nervous about inflation and argues for keeping rates where they are… ‘They are in a no-win situation,’ said Laurence Meyer, a former Fed governor.”

April 8 – Reuters (Ann Saphir): “Chicago Federal Reserve Bank President Austan Goolsbee said… U.S. President Donald Trump's announced tariffs are ‘way bigger’ than had been modeled, and it’s unclear how quickly or fully those higher costs will be passed on to consumers and to what degree businesses and consumers may react by hunkering down, slowing the economy. ‘We just lived through and learned what happens when inflation is raging out of control,’ Goolsbee said…, in which he called tariffs a ‘negative supply shock’ to which the Federal Reserve's response isn't necessarily clear. ‘The anxiety is this is just going to take us back to a thing we spent the last five years desperately trying to get away from,’ he said.”

April 7 – Bloomberg (Jesse Pound): “Federal Reserve Governor Adriana Kugler… said that some of the recent rise in goods and market-services inflation may be ‘anticipatory’ of the effect of the Trump administration's tariffs, adding that the Fed's focus should be on keeping inflation in check. ‘It should be a priority to make sure that inflation doesn't move up,’ Kugler said… She noted that short-term inflation expectations have risen but longer-term they remain well-anchored.”

April 10 – Reuters (Michael S. Derby): “Federal Reserve Bank of Boston President Susan Collins said Thursday that large trade tariffs now being pursued by the Trump administration will almost certainly drive inflation higher and depress growth, at least in the near term… ‘I see monetary policy as well positioned to address a wide range of potential economic outcomes in this highly uncertain environment,’ Collins said. ‘Maintaining the current monetary policy stance seems appropriate for the time being,’ she added.”

U.S. Economic Bubble Watch:

April 8 – Bloomberg (Chris Anstey): “Former Treasury Secretary Lawrence Summers warned that the US is now likely headed toward a recession, with potentially 2 million Americans put out of work, thanks to the tariff increases now in train. ‘It’s more likely than not that we’re going to have a recession — and in the context of a recession, we’ll see an extra 2 million people be unemployed,’ Summers said on Bloomberg Television’s Wall Street Week with David Westin. ‘We’ll see losses in household income’ of $5,000 per family or more, he said… Financial markets are ‘speaking with incredible clarity’ about the impact of the tariffs, Summers said — highlighting that stocks have been surging on any headlines suggesting relief, and plunging on news suggesting the levies will go ahead.”

April 8 – Reuters (Ann Saphir): “U.S. small-business confidence dropped for a third straight month in March, eroding most of the gains that followed President Donald Trump's election victory in November… The National Federation of Independent Business said on Tuesday its Small Business Optimism Index fell 3.3 points to 97.4, below the 51-year average and the biggest drop since June 2022. The slide mirrored declines in both consumer and business confidence in other recent surveys. ‘The implementation of new policy priorities has heightened the level of uncertainty among small business owners over the past few months,’ said NFIB Chief Economist Bill Dunkelberg. ‘Small business owners have scaled back expectations on sales growth as they better understand how these rearrangements might impact them.’”

April 8 – Axios (Emily Peck): “Consumer confidence dropped precipitously on Monday, as Americans absorbed news on stock market plunges and sky-high tariffs. The index, from Morning Consult, follows other data pointing to a growing negative vibe throughout the economy… Republicans are still broadly optimistic, per the data from Morning Consult. But among Democrats it’s ‘approaching lows observed during the pandemic.’”

April 10 – Associated Press (Matt Ott): “Slightly more Americans filed for unemployment benefits last week… Jobless claim filings inched up by 4,000 to 223,000 for the week ending April 5… That’s less than the 225,000 new applications analysts forecast… The total number of Americans receiving unemployment benefits for the week of March 29 fell by 43,000 to 1.85 million.”

April 7 – Bloomberg (Suzanne Woolley and Sonali Basak): “More Americans than average are turning to their retirement accounts for emergency cash in a trend that’s catching the attention of Empower… Hardship withdrawals from 401(k)s are running about 15% to 20% above the historical norm, Empower CEO Ed Murphy said…”

April 7 – Bloomberg (Vince Golle): “US consumer borrowing unexpectedly declined in February for the first time in three months, reflecting a sharp pullback in credit-card balances and a decrease in motor vehicle and other non-revolving loans. Total credit fell nearly $810 million after a revised $8.9 billion gain in January…”

April 9 – Financial Times (Jamie Smyth and Myles McCormick): “US shale oil producers are facing their gravest threat in years, as a sudden crude price sell-off triggered by Donald Trump’s trade war has pushed parts of the sector to the brink of failure, executives have warned. US oil prices have fallen 16% since Trump’s ‘liberation day’ tariff announcement last week, leaving them below the level many producers in Texas say they need to break even — and sparking fears the industry could be forced to idle rigs.”

China Watch:

April 8 – Bloomberg (Foster Wong and Jacob Gu): “Chinese Premier Li Qiang said his country has ample policy tools to ‘fully offset’ any negative external shocks, and reiterated his optimism about the growth of the world’s second-largest economy in 2025, despite the latest tariff threat from US President Donald Trump. During a call with European Commission President Ursula Von der Leyen…, Li said China’s macroeconomic policies this year have fully taken account of various uncertainties… Beijing is strongly confident about maintaining the country’s healthy and sustainable economic growth, added Li — China’s No. 2 official…”

April 7 – Bloomberg: “China’s central bank said it will provide support to a sovereign fund when needed as it firmly supports its decision to buy more stocks. The People’s Bank of China will step up funding aid via a re-lending program to Central Huijin Investment Ltd. when it’s necessary, in order to safeguard the stability of capital markets, it said…”

April 9 – Reuters (Qiaoyi Li and Ryan Woo): “China’s consumer prices fell for the second straight month in March while factory-gate deflation worsened, as an escalating U.S. trade war heightened worries about mounting piles of unsold exports that could drive domestic prices even lower… The consumer price index (CPI) dropped 0.1% last month from a year earlier…”

Europe Watch:

April 9 – Financial Times (Olaf Storbeck): “The European Central Bank faces an economic environment in which ‘some of the worst-case scenarios that we had identified are materialising’, according to José Luis Escrivá, governor of the Bank of Spain and a member of the ECB’s governing council… Escrivá warned that tariffs imposed by Donald Trump were triggering a ‘very significant negative shock on economic activity’. He suggested US policies could bring into question the dollar’s status as a reserve currency and haven. Escrivá said the precise fallout from the sweeping measures… was ‘still uncertain’, adding that monetary policymakers were ‘monitoring it closely’.”

April 8 – Politico (Balazs Koranyi and Francesco Canepa): “U.S. tariffs will be a massive drag on global growth and the European Central Bank will do its part to support Europe but the solution lies in more unity on the continent, ECB policymaker Joachim Nagel said… ‘Global growth prospects have deteriorated massively,’ Nagel said… ‘Monetary policy in Europe will do its part… We are already well on our way to achieving our inflation target this year.’”

April 6 – Financial Times (Anne-Sylvaine Chassany and Olaf Storbeck): “Germany’s chancellor-in-waiting Friedrich Merz has warned of the ‘dramatic’ impact of US tariffs on global markets and on Germany, in his first comments since US President Donald Trump unveiled sweeping levies against the EU. ‘The situation on the international equity and bond markets is dramatic and threatens to deteriorate further,’ he said... ‘It is therefore more urgent than ever for Germany to restore its international competitiveness as quickly as possible.’”

Social, Political, Environmental, Cybersecurity Instability Watch:

April 7 – Financial Times (Kenza Bryan and Jana Tauschinski): “Arctic sea ice hit a record low for the end of the region’s winter last month, in a stark sign of how climate change is opening up the North Pole to a geopolitical race for military and energy exploration… Military and commercial vessels, particularly from Russia, are stepping up activity in the region, some of which is expected to be ice-free during summer within a decade, said Rebecca Pincus, former director of the Wilson Center’s Polar Institute. US President Donald Trump’s desire to take control of Greenland has increased attention on the area’s critical minerals and importance for trade and military strategy.”

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Saturday, April 12, 2025

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Weekly Commentary: Normal Deleveraging and Trade Wars