Trading Tuesday afternoon to $117.63, WTI (July futures) almost touched $95 early in Wednesday’s session (“biggest drop since 2020”). The S&P500 gapped 2.7% higher at Wednesday’s open, with the Nasdaq100 and small cap Russell 2000 gapping 3.5%. The MAG7 Index surged 4.2%. Financial stocks were even stronger. The KBW Bank Index gapped up 4.4% and the Broker/Dealers 4.5%.
After trading at 28 during Tuesday’s session, the VIX (equities volatility) Index sank to 21 at Wednesday’s open. European stock market moves were even more dramatic. Germany’s DAX Index gapped 5.0% higher, with France’s CAC40 jumping 4.3%. Italy’s MIB and Spain’s IBEX indices gapped 4.2% and 4.1%. UK FTSE 100 Index opened 3.0% higher. European banks (STOXX 600) gapped up 6.0%, ending the week 6.5% higher. European (subordinated) Bank CDS sank from 125 to 108 bps.
European bond moves were just as dramatic. After trading to 4.00% in Tuesday trading, Italian 10-year yields opened Wednesday trading 39 bps lower at 3.61%. Greek yields sank from 3.93% all the way down to 3.59%. France’s 10-year yield was at 3.80% on Tuesday, only to sink to Wednesday’s 3.51% low. German yields dropped from 3.09% to 2.90%. UK gilt yields sank 26 bps to 4.68%.
Acute volatility across asset markets was a global phenomenon. Japan’s Nikkei spiked 4.8% at Wednesday’s open. For South Korea’s KOSPI Index, it was a 6.0% gap open. Taiwan’s TAIEX saw 4.0% - and 3.0% for Australia’s ASX200.
The iShares emerging equities ETF (EEM) gapped 6.4% higher at Wednesday’s open, before ending the session with a 5.5% gain – the biggest one-day advance since the President’s tariff pause (April 9, 2025). EM CDS sank 18 Wednesday (to 165bps), also the largest one-day decline since the “pause.” The 1.2% rise in the iShares EM bond ETF (EMB) was the largest post-“pause” gain. For the week, the Mexican peso gained 3.5%, the South African rand 3.4%, and the Brazilian real 3.0%.
Asian bond markets were unstable. Japan’s 10-year JGB yield traded to 2.43% on Tuesday, falling to 2.34% on Wednesday - only to close the week back at 2.43% (the high back to 1999). Australian yields were at 5.01% Tuesday, fell to 4.86%, and then ended the week at 4.97%.
Ten-year Treasury yields traded Tuesday at a high of 4.38%, then dropped 15 bps to a Tuesday low of 4.23% - with yields then rising to end the week at 4.32%. It was an even wilder ride for benchmark MBS. After trading to 5.40% Tuesday, yields were down to 5.16% at Wednesday’s lows – before ending the week at 5.26%.
This week saw important Bubble Dynamics at play. With war raging and a global energy crisis taking hold, hedging global market exposures has been a rational course of action. And with the President’s threats risking uncontrollable war escalation, there was every reason to hedge some exposure going into Trump’s Tuesday evening deadline. Preposterous madman threats of “bombing back to the stone age” and “a whole civilization will die” raised the possibility of absolute chaos.
Would a last-minute deal materialize, or might all hell break loose? Not only did the circumstance create extraordinary binary market risk, but this event would also transpire outside of U.S. market hours. Prices for enormous quantities of options and derivative hedges hung in the balance. More specifically, those that had written options and derivatives would not enjoy the luxury of liquid and continuous markets necessary to dynamically hedge potentially momentous market-moving developments.
Depending on the binary outcome, risk markets would gap either higher or lower. With risk premiums highly elevated going into Tuesday evening’s deadline, there was clear potential for a pricing collapse in bearish options and hedges in the event of a deal.
But a no deal “back to the stone ages” scenario had potential to unleash market chaos. Energy assets throughout the Gulf would have been vulnerable to Iranian attack and the Strait of Hormuz becoming a literal mine field. This risked disastrous dislocations in global energy prices and supplies. A major gap lower in global equities and bond prices risked financial market panic, as sellers of puts and bearish derivative hedges would rush to “delta hedge” (sell securities/derivatives) their rapidly ballooning exposures.
This is where Trump and Fed “puts” play a momentous yet surreptitious role throughout the markets and contemporary finance more generally. Such a major event, like Tuesday evening’s war deadline, poses acute market dislocation risk. With enormous amounts of market risk hedges overhanging the markets, a bad outcome would unleash massive sell programs, market discontinuity, panic, and unwieldy self-reinforcing liquidations. A market crash scenario is a rational fear.
It's important to recognize that the further a Bubble inflates, the greater the systemic risks associated with the proliferation of hedging strategies. A marketplace simply can’t hedge itself. Popular strategies of hedging with options and derivatives only transfer risk to players with little wherewithal to make good on hedges in the event of a major market drop. Instead, these derivatives operators rely on strategies where timely shorting/selling establishes positions that are to generate the required cash flows to pay on hedges they’ve previously sold/written.
The more market prices inflate, the greater the risk that popular hedging strategies at some point overwhelm marketplace liquidity. Throw in the potential for a run on Trillions of perceived liquid ETF shares (in the event of a market panic) – and a market crash scenario becomes a serious issue.
There is, however, virtually no concern for a crash today. The S&P500 and Nasdaq100 were little changed in Tuesday trading, ahead of the evening deadline and associated extraordinary binary market risk. Indeed, the S&P500 closed the week only about 2% below record highs. Markets can approach the edge of the cliff, yet confidence holds that President Trump knows precisely where and when retreat is necessary to avoid an accident.
Derivative players can comfortably sell risk “insurance,” confident that the problematic downside dislocation scenario is something policymakers will not allow to unfold. And knowing binary event odds are significantly skewed in favor of bullish outcomes, the hedge fund community and speculators will invariably focus on the likelihood of gap higher scenarios. As we witnessed again on Wednesday, the risk vs. reward calculus still strongly favors short squeezes and the forced unwind of hedges. Myriad hedging strategies do not these days function as models would predict.
As noted above, impacts from this extraordinary backdrop flow beyond distorted markets to “contemporary finance more generally.” High yield CDS prices collapsed 60 bps over the past nine sessions, sinking back down to 346 bps – incredibly 30 bps below the five-year average of 376 bps. Sellers of “insurance” win again at the expense of buyers.
Market perceptions of the sanctity of Trump/Fed “puts” significantly skew pricing for “insurance” against defaults in risky Credit. Presuming Washington controls the weather, enterprising derivative operators have been conditioned to sell “flood insurance”. Importantly, inexpensive and readily available “insurance” fosters high-risk lending and Credit Availability more generally. This powerful dynamic is instrumental in sustaining high-risk lending, despite festering “private Credit” issues and escalating systemic Credit vulnerability.
It's a fundamental tenet of Credit Bubble Analysis that Bubble Dynamics be recognized and mitigated as early as possible. As we’ve witnessed for years, protracted Bubbles reach a point where further inflation stokes an exponential rise in systemic risk. The danger of pricking Bubbles becomes too great a burden for policymakers to shoulder. Indeed, in the Bubble’s perilous “terminal phase,” every effort is made to indefinitely hold Bubble deflation at bay.
The aged “global government finance Bubble” has reached uncharted waters. Many will think this is a stretch (at a minimum). But I see inflationism as having left its mark at every turn. It might be too much to blame central bank monetization and contemporary unfettered “Wall Street finance” for all the world’s problems, though it’s a reasonable place to start. The world would certainly look so different today had the scourge of inflationism not prevailed over recent decades.
Acute market instability, including Wednesday’s gap opening, epitomizes well-entrenched monetary disorder. Moreover, the Trump/MAGA populist movement can be traced back to decades of inflation-induced economic and financial instability, wealth inequality, insecurity, distrust of national institutions, and social/political disorder. And if not for over-liquefied and over-tolerant speculative markets, I doubt Trump risks aggressive “liberation day” tariff regime implementation.
And I’ll go one step further. Tariffs have created unprecedented power in the hands of President Trump. He can, at a whim, threaten and punish. As easily, Trump can reward and enrich. Of course, such power is intoxicating and addictive. And how can such power not create an insatiable appetite for ever greater exploits? But it’s a different world – and Trump administration – if a normally-functioning bond market would revolt against perpetual deficits of 6 to 7% of GDP.
In today’s bizarro Bubble world, there’s endless “money” for guns and butter aplenty – and throw in an historic AI arms race for good measure. “Money” literally for anything and everything. Of course, President Trump yearns for an extra $500 billion to ensure ongoing military supremacy for his quest of greater intimidation, threats and historic conquests.
My point: I don’t see Trump initiating war against Iran if Washington faced traditional fiscal restraints. Deficits are already egregious – and this war and replenishment of our depleted munitions will be costly. Normal markets would be kicking the administration’s ass – and we can assume the President would behave accordingly. Instead, it’s halcyon days of a 4.32% 10-year yield and stocks near record highs - markets all too content to accommodate. The President is unhinged and feeling invincible – a combo that beckons for speculation around Trump “put” and unfailing TACO. He'll push things to the precipice - and then mount a hasty retreat. Buy the dip and squeeze the shorts!
While on my analytical tangents, I’ll offer another thought. Market Bubbles have inflated to the point of no return. Securities markets have come to dominate everything – here in the U.S., it’s the economy, society, politics, and even national security. When the Trump administration was negotiating tariffs with China, a faltering stock market would have provided the Chinese added leverage. We undoubtedly have the strongest military in history. But the badly outgunned Iranians gain major leverage if their asymmetric warfare puts U.S. stock and bond market Bubbles at risk.
I have no expectations that markets behave normally during war – trade or military. And with midterms less than seven months away, the administration will undoubtedly pull out all the pro-Bubble stops.
The Islamabad talks should be fascinating. Hopefully, as the President claims, the Iranians are more reasonable in private than they have been in public. The President is back to the old “no cards” banter his administration proclaimed prior to Chinese rare earth restrictions and fraught trade negotiations. It’s Unbelievable how much leverage the Iranians still possess coming into these talks.
President Trump is clearly eager for an exit. Renowned tough and patient negotiators, it’s difficult to believe Iran will easily relinquish control over the Strait of Hormuz. Trump said Friday evening the Strait would be “open fairly soon.” With global energy supplies running short, time is on Iran’s side. They are also well-aware of the ticking U.S. political clock.
I can’t help but think of President Trump’s asymmetric warfare use of tariffs. He shattered rules and norms, establishing a unique capacity to punish, reward and profit. It’s like when Bernanke started printing money, fatefully unleashing printing presses around the globe. We should expect others to advance their own “asymmetric warfare,” certainly including the Iranians.
Even if negotiations result in a commitment to open the Strait of Hormuz (seemingly a big “if”), Iran’s determination to control and profit from traffic flow is more than a fleeting interest. It’s a changed Gulf. And while it will take years for Iran to rebuild, the regime will surely start by swiftly replenishing their capacity to menace the Strait and Gulf energy assets. More than ever before, they are keenly aware of pressure points. Moreover, the regime surely views previous restraint as a disastrous strategy. President Trump wants to claim victory - like never seen before - and be done with it. It may prove anything but easy to walk away.
Meanwhile, Credit problems fester away…
April 9 – Bloomberg (Neil Callanan, Weihua Li and Jinshan Hong): “The software problem roiling private markets is about to face a big new test. A wall of debt maturities is looming for the industry just as artificial intelligence threatens to upend entire businesses in what’s been dubbed the SaaSpocalypse. More than $330 billion of high yield, leveraged loan and business development company-linked software and technology debt is coming due for repayment through 2028, a chunk of it tied to firms owned by private markets. As companies look to refinance in the coming months, they face numerous headwinds, from fears about AI devaluing or replacing their products to the risk of higher borrowing costs spurred by the war in the Middle East… ‘Software borrowers from private-credit funds are more highly leveraged and more dependent on future growth expectations than borrowers in other industries, making them more sensitive to adverse shocks,’ according to… MSCI Inc.”
April 10 – Wall Street Journal (Heather Gillers): “Most insurance companies got through the 2008-09 financial crisis all right. A ratings firm just warned that the industry might not get through the next one unscathed. A.M. Best published a report Friday that finds that the investment portfolios of insurers that sell annuities hold more risky debt than they did in 2007, the year before the worst downturn since the Great Depression. The ratings firm adds that annuity portfolios had a slightly smaller financial cushion in 2024… than they did in 2007. Annuity portfolios also held more investments that had been sold by companies with which they shared some affiliation... ‘We’re significantly worse off,’ said Erik Miller, A.M. Best senior director. ‘The chance of not being able to pay your claims is just higher.’ The study looked specifically at the reserves insurers set aside to make payments on annuities, the savings vehicles that promise guaranteed income in retirement.”
For the Week:
The S&P500 rallied 3.6% (down 0.4% y-t-d), and the Dow recovered 3.0% (down 0.3%). The Utilities increased 1.1% (up 10.0%). The Banks surged 5.6% (up 0.7%), and the Broker/Dealers jumped 4.6% (up 2.5%). The Transports rallied 6.6% (up 17.2%). The S&P 400 Midcaps rallied 3.4% (up 6.6%), and the small cap Russell 2000 rose 4.0% (up 6.0%). The Nasdaq100 rallied 4.5% (down 0.5%). The Semiconductors spiked 13.5% higher (up 25.5%). The Biotechs were about unchanged (down 1.9%). With bullion rising $73, the HUI gold index gained 4.6% (up 20.6%).
Three-month Treasury bill rates ended the week at 3.591%. Two-year government yields dipped four bps to 3.80% (up 32bps y-t-d). Five-year T-note yields declined four bps to 3.97% (up 22bps). Ten-year Treasury yields slipped two bps to 4.32% (up 15bps). Long bond yields were unchanged at 4.91% (up 7bps). Benchmark Fannie Mae MBS yields dropped seven bps to 5.27% (up 21bps).
Italian 10-year yields slipped a basis point to 3.84% (up 29bps y-t-d). Greek 10-year yields added one basis point to 3.80% (up 36bps). Spain's 10-year yields gained four bps to 3.52% (up 23bps). German bund yields jumped seven bps to 3.06% (up 20bps). French yields increased three bps to 3.71% (up 14bps). The French to German 10-year bond spread narrowed four to 65 bps. U.K. 10-year gilt yields were unchanged at 4.84% (up 36bps). U.K.’s FTSE equities index increased 1.6% (up 6.6% y-t-d).
Japan’s Nikkei 225 Equities Index surged 7.2% (up 13.1% y-t-d). Japan’s 10-year “JGB” yields gained five bps to 2.44% (up 37bps y-t-d). France’s CAC40 rose 3.7% (up 1.4%). The German DAX equities index rallied 2.7% (down 2.8%). Spain’s IBEX 35 equities index jumped 3.7% (up 5.2%). Italy’s FTSE MIB index recovered 4.3% (up 5.9%). EM equities were higher. Brazil’s Bovespa index rallied 4.9% (up 22.5%), and Mexico’s Bolsa index added 0.4% (up 8.8%). South Korea’s Kospi surged 9.0% (up 39.0%). India’s Sensex equities index jumped 5.8% (down 9.0%). China’s Shanghai Exchange Index rose 2.7% (up 0.4%). Turkey’s Borsa Istanbul National 100 index surged 8.8% (up 25.0%).
Federal Reserve Credit jumped $17.4 billion last week to $6.638 TN, with a 17-week expansion of $148 billion. Fed Credit was down $2.252 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.911 TN, or 78%. Fed Credit inflated $3.827 TN, or 136%, since November 7, 2012 (700 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped $15.3 billion last week to $2.997 TN - the low back to November 2010. “Custody holdings” were down $297 billion y-o-y, or 9.0%.
Total money market fund assets (MMFA) added $8.0 billion to $7.819 TN - with a 40-week surge of $796 billion, or 14.6% annualized. MMFA were up $813 billion, or 11.6%, y-o-y - having ballooned a historic $3.235 TN, or 70.6%, since October 26, 2022.
Total Commercial Paper recovered $28.1 billion to $1.362 TN. CP contracted $20 billion, or 1.4%, y-o-y.
Freddie Mac 30-year fixed mortgage rates dropped nine bps to 6.37% (down 25bps y-o-y). Fifteen-year rates dipped three bps to 5.74% (down 8bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down four bps to 6.57% (down 26bps).
Currency Watch:
April 9 – Bloomberg (Simon White): “The US’s war with Iran has put a potentially irreversible strain on the global trading system, with gold reserves having eclipsed central bank holdings of valuation-adjusted dollar assets for the first time in several decades… The dollar’s demise has been greatly exaggerated on many previous occasions. But it will not be a dramatic point-in-time event. Sterling’s fading as a reserve currency was punctuated by several milestones over an extended period — the end of World War I, coming off the Gold Standard, Bretton Woods and the Suez crisis.”
April 8 – Bloomberg (Chien-Hua Wan and Jacob Gu): “Taiwan’s foreign reserves saw their steepest monthly drop in nearly 15 years in March, as the central bank sold the greenback to stabilize the local currency against capital outflows spurred by the Iran war. Forex reserves dropped by $8.6 billion to $596.9 billion at the end of last month…”
For the week, the U.S. Dollar Index fell 1.5% to 98.65 (up 0.3% y-t-d). On the upside, the Mexican peso increased 3.5%, the South African rand 3.4%, the Brazilian real 3.0%, the New Zealand dollar 2.6%, the Norwegian krone 2.5%, the Swedish krona 2.5%, the Australian dollar 2.5%, the British pound 2.0%, the South Korean won 1.8%, the euro 1.8%, the Swiss franc 1.5%, the Singapore dollar 1.0%, the Canadian dollar 0.8%, and the Japanese yen 0.3%. China's (onshore) renminbi gained 0.77% versus the dollar (up 2.33% y-t-d).
Commodities Watch:
April 7 – Bloomberg (Yihui Xie): “China’s central bank bought the most gold in more than a year in March, demonstrating that a key pillar of support for the precious metal remains intact as prices come under pressure amid the Iran war. Bullion held by the People’s Bank of China rose by 160,000 troy ounces last month, or about 5 tons… The central bank, among the world’s largest buyers, has added to holdings for 17 months straight.”
The Bloomberg Commodities Index fell 3.7% (up 20.5% y-t-d). Spot Gold added 1.6% to $4,750 (up 10.0%). Silver jumped 3.9% to $75.8765 (up 5.9%). WTI Crude sank $14.97, or 13.4%, to $96.57 (up 68%). Gasoline lost 7.6% (up 77%), and Natural Gas fell another 5.4% to $2.648 (down 28%). Copper rallied 5.4% (up 4%). Wheat dropped 4.6% (up 13%), and Corn fell 2.5% (unchanged). Bitcoin jumped $6,030, or 9.0%, to $72,930 (down 16.8%).
Market Instability Watch:
April 8 – Bloomberg (Natalia Kniazhevich): “Hedge funds are rushing to close out bets against US stocks at a pace not seen since the market rebounded from the crash set off by the pandemic in March 2020. Goldman Sachs Group Inc.’s trading desk division reported that hedge fund managers sharply accelerated the covering of short positions tied to macro products — like major indexes and exchange-traded funds — late Tuesday, just after President Donald Trump announced a temporary ceasefire deal in his war against Iran. The bank said the volume of such unwinding is on track to reach the levels seen early in the pandemic. ‘This is the offramp the market has been waiting for,’ John Flood, Goldman’s head of Americas equities execution services and partner, wrote…, adding that investors he’s speaking with see a high likelihood the move marks ‘the beginning of the end’ of the conflict.”
April 8 – Bloomberg (Justina Lee): “A trade that went from niche to one of the biggest options strategies on Wall Street in recent years posted its worst monthly performance in more than a decade in March… The dispersion trade, which buys options on individual US stocks while selling those on the broader index, suffered a 4.9% loss last month, the steepest since 2011 in backtested data… Bank swaps tied to the approach fell 2.6%, according to Premialab… The losses lay bare the strategy’s vulnerability to such a major geopolitical event.”
April 9 – Bloomberg (Tom Rees): “Financial Stability Board Chair Andrew Bailey warned stresses may be emerging in private credit after the shock to markets from the Iran war. Bailey, who is also Bank of England governor, said… regulators needed to focus on the threat posed by private credit given its rapid rise and the febrile market responses to the conflict in the Middle East. ‘Private credit is a relatively opaque world and it’s not yet, of course, because of its relative newness, actually come under stress, and we may be seeing that now,’ Bailey said in a hearing in the European Parliament. Bailey has repeatedly warned of dangers from private credit after its boom since the financial crisis, when efforts to tighten regulation on banks drove corporate borrowers toward investment funds and other routes outside public markets.”
Leveraged Speculation Watch:
April 8 – Financial Times (Costas Mourselas and Amelia Pollard): “Hedge funds were blindsided by the onset of the US and Israeli war with Iran last month, suffering their biggest losses since the lockdowns in March 2020 shuttered the global economy at the start of the Covid-19 pandemic. The flagship hedge fund performance index of data provider HFR recorded a 3.1% fall last month, more than any month since a 9.1% drop six years ago… ‘I’ve been managing money for 40 years and I’ve never been less certain on how things are going to turn out,’ said one macro hedge fund manager. Major multi-manager hedge funds such as Ken Griffin’s Citadel, Izzy Englander’s Millennium Management and Dmitry Balyasny’s eponymous firm were down 1.9%, 1.2% and 4.3% in their flagship funds for March respectively… But the pain was most acute among macro hedge funds that trade assets such as bonds and currencies to make bets on economic trends.”
April 7 – Bloomberg (Liza Tetley and Nishant Kumar): “Macro hedge funds struggled in March as the war in the Middle East upended inflation expectations, leading to steep losses at many of the industry’s largest firms. Said Haidar’s Jupiter Fund lost about 12% in March, paring quarterly gains to 13.4%... The Brevan Howard Master Fund declined 6.6% for the worst monthly loss in its two-decade-plus history... Diego Megia’s Taula Capital Management lost 8.6%, bringing year-to-date losses to 7.6%, while Edouard de Langlade’s EDL Global Opportunities Master Fund was down 11% in March…”
April 6 – Bloomberg (Hema Parmar): “Some of the hedge fund industry’s most prolific stock-pickers incurred big losses in March as the US and Israeli war against Iran roiled markets. Tiger Global Management’s main hedge fund tumbled 7.3% last month, while Maverick Capital’s dropped 5% and Viking Global Investors’ lost 4.1%... Coatue Management declined 4.8% in March… Maverick’s other vehicle, the Long Enhanced fund — which uses leverage to turbocharge bullish bets — declined 8.1%.”
April 7 – Financial Times (Rachel Rees, Jonathan Vincent and Ray Douglas): “Hedge funds have amassed a record number of short positions against European stocks, in a bet that the region will be hard hit by the economic fallout from the Iran war.”
U.S. Credit Trouble Watch:
April 7 – Wall Street Journal (Heather Gillers): “Of the about $6 trillion in invested assets held by life and annuity companies, nearly $1 trillion is now in private-credit investments, according to A.M. Best, a credit-rating firm that rates insurers. About $419 billion of that debt carries a so-called private letter rating. In some ways, such a rating resembles what the ratings firms provide for publicly traded bonds: The firm issuing or packaging the debt pays a ratings company to assign a grade based on the likelihood the borrower will repay it… But unlike bond ratings, ‘private’ letter grades are available only to the debt’s issuer and investors.”
April 8 – Financial Times (Eric Platt): “Wealthy investors attempted to pull more than $20bn from private credit funds in the first quarter, underscoring the growing strain on an asset class that had boomed into a dominant force on Wall Street. The $20.8bn in redemption requests hit huge groups in the sector, including Apollo Global Management, Ares Management, Blackstone, Blue Owl and KKR… The funds tracked by the FT, which collectively manage investment portfolios worth about $300bn, have honoured just over half of the redemption requests they received. Many investors have been forced to wait until a redemption window opens up later this quarter to exit.”
April 7 – Reuters (Gursimran Kaur, Arasu Kannagi Basil and Natalia Bueno Rebolledo): “Moody’s… cut its outlook on a $36-billion Blue Owl non-traded fund to ‘negative’ from ‘stable’ on Tuesday, citing redemption requests that were significantly higher than at peers… The downgrade highlights the mounting strains in the $2 trillion private credit industry after a strong run… Moodys also said the change in the outlook on Blue Owl Credit Income Corp (OCIC) is due to the majority of the redemption requests coming from a very limited number of investors, revealing some concentration in the equity-holder base.”
April 9 – Reuters (Isla Binnie and Manya Saini): “Investors have asked to pull more than 15% of their assets from Carlyle’s flagship private credit interval fund…, in the latest rush away from funds that give broad access to the rarely-traded asset class. Scrutiny is intensifying on the multi-trillion-dollar private credit market, as investors question the health of loan portfolios and how the software companies that have borrowed from funds will manage disruption from artificial intelligence.”
April 9 – Wall Street Journal (Isaac Taylor): “Carlyle Group’s flagship private-credit interval fund is the latest to be hit with a wave of share-redemption requests, as investor fears about a potential private-credit meltdown continue. The Carlyle Tactical Private Credit Fund, or CTAC, received repurchase requests amounting to roughly 15.7% of shares outstanding, more than three times the 5% redemption limit… The fund, which had more than $7 billion in total assets, including leverage, as of late January, has an emphasis on direct lending, which accounts for 41% of the fund’s portfolio… A representative for Carlyle said the CTAC fund also was exposed to redemption requests from investors looking for liquidity after being unable to fully redeem shares from other private-credit funds.”
April 6 – Bloomberg (Nabila Ahmed): “A Barings LLC private credit fund capped redemptions after investors asked to pull out 11.3% of the shares in the first quarter. Barings Private Credit Corp. is paying out less than half of the requests, capping withdrawals at 5%... ‘We seek to balance near-term liquidity needs with prudent stewardship of capital for both exiting and remaining investors,’ the fund said…”
April 7 – Bloomberg (Rene Ismail): “A swelling wave of redemptions has driven Moody’s… to revise its outlook for private credit investment vehicles to negative, after holding the line at stable for over two years. The ongoing exodus from nontraded vehicles, which make up 60% of the sector’s assets, and elevated leverage in their publicly-traded counterparts are key drivers of the credit grader’s revision… The ‘disruptive force’ presented by artificial intelligence is expected to compound the group’s worries and put it ‘on defense’ in the coming year, Moody’s analysts wrote. An abrupt reversal in the first quarter spurred the first ever net outflow for the sector, Moody’s said.”
April 7 – Bloomberg (Amanda Albright and Erin Hudson): “The concerns building in the private-credit industry are starting to inflict pain in a rapidly growing segment of the US municipal debt market. The anxiety around private credit… has roiled select munis in a sector known as prepaid energy bonds. These securities allow municipal utilities to buy electricity or natural gas at a discount by locking in decades of supply upfront… Investors point to deals involving insurer Athene Annuity and Life Co., which is owned by Apollo Global Management Inc., one of the big asset managers whose shares have slid amid private-credit jitters. Some of these prepaid energy bonds have weakened more than benchmark munis…”
April 7 – Wall Street Journal (Peter Grant): “America’s battered office market is holding a fire sale, featuring some buildings marked down by more than 90%. In Chicago, real-estate developer Marc Calabria bought a 485,000-square-foot office building for $4 million. The building sold for $68.1 million a decade ago. Developer Asher Luzzatto paid a mere $5.3 million for the Denver Energy Center… The two-building complex sold for $176 million in 2013. Even the federal government’s landlord is getting in on the act. The General Services Administration last month sold a 940,000-square-foot building to a residential converter for $24 million, a tiny fraction of its value a few years ago. Landlords and their lenders held on to their office towers for years, hoping for a turnaround after Covid. Now, they are accepting enormous losses.”
April 9 – Reuters (Ross Kerber and Isla Binnie): “Several big North American pension systems are standing by their private credit holdings even as the sector faces choppy waters, a sign of both the industry’s potential resilience and its long reach into workers’ retirement plans. For instance, the California State Teachers’ Retirement System, or CalSTRS, has holdings in private credit funds including some run by Blue Owl Capital Inc, and it is the biggest investor in one of that firm's publicly traded business development companies (BDCs), Blue Owl Capital Corp, according to LSEG data.”
Iran War Watch:
April 4 – Axios (Barak Ravid): “U.S. special forces rescued the second crew member of the F-15 fighter jet that was shot down over Iran… The crew member, a weapons system officer, was wounded after ejecting from the aircraft on Friday but could still walk, and evaded capture in the mountains for more than a day… Both crew members were rescued in special forces operations inside Iran. One official said Saturday’s operation was conducted by a specialized commando unit with a high volume of air cover, that the U.S. forces unleashed a hail of heavy fire, and that all of the forces were now out of Iran.”
April 8 – Financial Times (Humza Jilani, Abigail Hauslohner and Demetri Sevastopulo): “The White House pushed the idea of a temporary ceasefire with Iran even as Donald Trump escalated threats against the Islamic republic and claimed it was ‘begging’ for a deal, according to people familiar... For weeks the Trump administration was leaning on Islamabad to convince the Iranians to agree a pause in fighting where it would reopen the Strait of Hormuz, the people said. Pakistan’s crucial role, as a Muslim-majority neighbour and intermediary, was to sell it to Tehran. The back-channel efforts led by Pakistan’s military strongman Asim Munir culminated on Tuesday night in the announcement by the US, Iran and Israel of a two-week ceasefire, hours after Trump had threatened to destroy Iran’s ‘whole civilisation’ if Iran didn’t meet his terms.”
April 8 – Associated Press (Kareem Chehayeb and Abby Sewell): “Israeli strikes hit busy commercial and residential areas in central Beirut without warning on Wednesday, hours after a ceasefire was announced in the U.S.-Israeli war with Iran. Lebanon said at least 182 people were killed and hundreds were wounded, making it the deadliest day in the latest Israel-Hezbollah war. U.S. President Donald Trump told PBS News Hour that Lebanon was not included in the deal because of the Lebanese militant Hezbollah group. When asked about Israel’s latest strikes, he said, ‘That’s a separate skirmish.’ Israel had said the agreement does not extend to its war with the Iran-backed Hezbollah, although Iran and mediator Pakistan said it does.”
April 8 – Bloomberg (Eltaf Najafizada): “The passage of oil tankers through the Strait of Hormuz was halted as a consequence of Israeli attacks on Lebanon, Iran’s semi-official Fars news agency reported. The report followed an overnight ceasefire between the US and Iran that Fars said had resulted in the transit of two oil tankers. The halt to tanker movements happened simultaneously with attacks on Lebanon, it reported.”
April 8 – Wall Street Journal (Yaroslav Trofimov): “The Iranian government hailed the cease-fire with the U.S. by posting images on social media of President Trump waving the white flag and collapsing on his knees in defeat. America’s allies and partners in the Middle East fear that Tehran may have a point—and that they will end up paying the price for a war in which the overwhelming military might of the U.S. and Israel failed to secure political gains. Subjected to thousands of Iranian missile and drone strikes since the war’s start, the Gulf states are grappling with how to survive next to an emboldened Iran that, as of now, retains control over the crucial Strait of Hormuz and seeks to become a regional hegemon.”
April 8 – Financial Times (Najmeh Bozorgmehr, Alice Hancock, Verity Ratcliffe and Rachel Millard): “Iran will demand that shipping companies pay tolls in cryptocurrency for oil tankers passing through the Strait of Hormuz, as it seeks to retain control over passage through the key waterway during the two-week ceasefire. Hamid Hosseini, a spokesperson for Iran’s Oil, Gas and Petrochemical Products Exporters’ Union, told the FT… Iran wanted to collect tolling fees from any tanker passing and to assess each ship. ‘Iran needs to monitor what goes in and out of the strait to ensure these two weeks aren’t used for transferring weapons,’ said Hosseini, whose industry association works closely with the state. ‘Everything can pass through, but the procedure will take time for each vessel, and Iran is not in a rush,’ he added.”
April 9 – Axios (Barak Ravid and Alex Fitzpatrick): “President Trump on Thursday demanded Iran stop charging tolls for tankers to cross the Strait of Hormuz, as Iran’s supreme leader promised the country would control the crucial waterway. The already shaky ceasefire between the two countries is getting more strained by the day, even as they prepare for peace talks in Islamabad on Saturday… ‘There are reports that Iran is charging fees to tankers going through the Hormuz Strait — They better not be and, if they are, they better stop now!’ Trump posted… That followed a… report that Iran is demanding the right to toll ships passing through the strait: $1 per barrel of oil aboard, paid in cryptocurrency. Trump later added… ‘Iran is doing a very poor job, dishonorable some would say, of allowing Oil to go through the Strait of Hormuz. That is not the agreement we have!’”
April 5 – Financial Times (Abigail Hauslohner, Steff Chávez, Demetri Sevastopulo, Jill R Shah and Simeon Kerr): “Donald Trump has threatened to bomb Iran’s power plants and bridges if it does not reopen the Strait of Hormuz... The US president gave Iran until 8pm eastern time on Tuesday to reopen the crucial shipping lane after earlier threatening to unleash ‘hell’ in an expletive-laden social media post. ‘Tuesday will be Power Plant Day, and Bridge Day, all wrapped up in one, in Iran,’ Trump wrote… ‘There will be nothing like it!!! Open the Fuckin’ Strait, you crazy bastards, or you’ll be living in Hell - JUST WATCH! Praise be to Allah’.”
April 8 – Wall Street Journal (David S. Cloud): “When Iran agreed to a two-week cease-fire only hours before President Trump had vowed to unleash punishing new attacks, it was in many ways a moment of triumph for the battered regime. Tehran emerged from 38 days of war against the U.S. and Israel having won not only its primary goal—its own survival—but also two potential strategic gains: control of the Strait of Hormuz and a newly established deterrence against large-scale attacks by its longtime adversaries. Despite huge military losses, Iran’s stranglehold on the vital waterway for 20% of the world’s oil exports won’t be broken anytime soon. Tehran’s asymmetric tactics were carefully planned to offset U.S. and Israeli military advantages, raising the pressure on Trump to halt the conflict.”
April 9 – Bloomberg (Grant Smith): “Oil tankers and other vessels seeking to transit the Strait of Hormuz must liaise with the Iranian military to ensure their safe passage, the country’s deputy foreign minister told ITV… ‘Each tanker and vessel should make necessary arrangements with Iranian authorities to securely pass,’ Saeed Khatibzadeh said. There are ‘technical restraints’ resulting from the conflict, such as mines, that require caution, he added.”
April 9 – Reuters (Enas Alashray, Yomna Ehab and Sheila Dang): “Attacks on Saudi energy facilities have cut the kingdom’s oil production capacity by around 600,000 barrels per day and throughput on its East-West Pipeline by about 700,000 bpd, Saudi state news agency SPA reported… The latest attacks, including previous strikes on some facilities, also disrupted operations at key oil, gas, refining, petrochemical and electricity sites in Riyadh, the Eastern Province and Yanbu Industrial City, SPA said.”
April 6 – Wall Street Journal (Rory Jones, Brian Spegele and Austin Ramzy): “In the first Trump administration, the U.S. launched a ‘maximum pressure’ campaign to cut Iranian oil from the global market and eliminate Tehran’s biggest source of revenue. Today, Iran sells billions of dollars’ worth of oil every month. For that, it can thank one country: China. Tehran’s Asian partner has dramatically increased the amount of Iranian oil it buys as sanctions have gotten tighter. It now takes nearly every drop Iran produces, compared with around 30% a decade ago. To make those purchases possible, Chinese buyers have worked closely with Iran to expand what U.S. officials and researchers say has become one of the world’s largest sanctions-evasion networks.”
April 7 – Associated Press (Qassim Abdul-Zahra): “American journalist Shelly Kittleson, who was kidnapped from a Baghdad streetcorner last week, was released Tuesday… The development came after the powerful Iran-backed Iraqi militia Kataib Hezbollah said… it had decided to free Kittleson, who was abducted on March 31. Its condition was that Kittleson must ‘leave the country immediately’ upon her release.”
Iran War Ramifications Watch:
April 8 – Bloomberg (Alex Wickham): “The ceasefire in Iran has reinforced views among both adversaries and the NATO alliance that President Donald Trump’s campaign against the Tehran regime marks a strategic setback, bolstering China and Russia while squandering American strengths, according to people familiar with the thinking across capitals in Europe and the Middle East. While Moscow and Beijing fear US military and intelligence superiority, they have seen it couldn’t force Iran’s capitulation... The tensions in the North Atlantic Treaty Organization, which culminated in Trump threatening to leave the alliance, have left lasting doubts over his commitment to its defense.”
April 8 – Axios (Ben Geman): “Untangling the largest disruption in oil market history won't happen quickly or easily — and that means continued high prices and scarcity in major importing countries. A big thing to watch following the U.S.-Iran ceasefire deal is whether it gives tanker owners enough certainty to begin resumption of large-scale traffic of oil, petroleum products and other commodities through the Strait of Hormuz. ‘Confidence-building measures in coming days are going to be key to restoring shipments,’ Joe Brusuelas, chief economist at… RSM US, said… He notes that insurance for the tankers will need to be reestablished, and that means figuring out the specific conditions Iran may impose, which remain murky right now.”
April 7 – Reuters (Alex Lawler): “European and Asian refiners are paying record high prices of near $150 a barrel for some crude oil grades, far exceeding prices for paper futures, highlighting the worsening supply crisis from the U.S.-Israel war with Iran. The Iran war has forced the shutdown of at least 12 million barrels per day - about 12% of world supply - from the Middle East due to Iran’s effective closure of the Strait of Hormuz.”
April 8 – Wall Street Journal (Collin Eaton): “The last South Korea-bound oil tanker to sail through the Strait of Hormuz dropped off its cargoes late last month. That is a grim omen for California, which relies on the Asian nation for jet fuel shipped 6,000 miles across the Pacific. The reverberations of the Iran war are poised to hit California harder than other states. That is because California imports roughly 75% of its crude oil, almost one-third of which comes from the Middle East. It also gets jet fuel and gasoline from countries whose refineries depend on the flow of oil from the Persian Gulf.”
April 7 – Reuters (Shariq Khan and Siddharth Cavale): “Fuel prices could keep rising for months even after the Strait of Hormuz reopens, the U.S. Energy Information Administration said…, deviating from President Donald Trump’s assurances that consumers will see immediate relief when the war with Iran ends… The agency said full restoration of oil flows through the Strait of Hormuz will take months even after the war ends, keeping prices elevated until flows resume fully and Middle Eastern producers return to normal output.”
April 6 – New York Times (Alexandra Stevenson and Murphy Zhao): “The energy shock caused by the war in the Middle East caught China, the world’s top buyer of oil, by surprise. But Beijing has been preparing for a crisis like this for years. China has stockpiled increasingly large amounts of oil. It has pursued renewable sources of energy like solar, wind and hydropower so aggressively that its demand for refined oil, diesel and gasoline is falling. And it has harnessed technology to reduce its reliance on the foreign-sourced raw materials that go into the massive output of its factories.”
April 6 – Reuters (Michael S. Derby): “Supply chain pressures heated up in March to levels last seen at the start of 2023, data released by the Federal Reserve Bank of New York said… In its latest Global Supply Chain Pressure Index, the bank said that the measure rose to 0.68, a modest rise from the 0.54 seen in February.”
April 6 – Associated Press (Ken Sweet): “JPMorgan… CEO Jamie Dimon warned in his annual shareholder letter that a ‘resilient’ U.S. economy could face renewed inflation pressures if the war in Iran disrupts global energy markets. Dimon described inflation as the potential ‘skunk at the party’ this year, cautioning that turmoil in oil and commodity markets could ripple through the economy, affecting everything from gasoline prices to manufacturing costs. He also warned that sustained inflation could force the Federal Reserve to keep interest rates higher for longer, posing risks to the broader economy and financial system.”
Trump Administration Watch:
April 9 – CNBC (Anniek Bao): “President Donald Trump said… U.S. military forces will remain deployed in and around Iran until Tehran fully complies with the ‘real agreement,’ warning that any breach would trigger a military response larger than anything seen before. ‘All US ships, aircraft, and military personnel...will remain in place in, and around, Iran, until such time as the REAL AGREEMENT reached is fully complied with,’ Trump wrote… ‘If for any reason it is not...the ‘Shootin’ Starts,′ bigger, and better, and stronger than anyone has ever seen before….’ ‘In the meantime our great Military is Loading Up and Resting, looking forward, actually, to its next Conquest,’ Trump added. He ended the post, which was published near midnight, with a declaration: ‘AMERICA IS BACK!’”
April 8 – Wall Street Journal (Lara Seligman, Alexander Ward and Michael R. Gordon): “President Trump’s declaration of ‘total victory’ in Iran left some close allies and several senior aides worried Wednesday that he is overstating what is a fragile cease-fire with Tehran, which remains capable of blocking ships in the Strait of Hormuz and attacking U.S. forces in the region. The president has been advised on the risks that could cause the cease-fire to crater and warned that Iran still retains dangerous military capabilities… More than half of Iran’s missile launchers have been destroyed, but a substantial number remain mostly buried deep underground, according to another U.S. official. The Islamic Revolutionary Guard Corps also retains dozens of small boats that can threaten ships in the Strait of Hormuz, the official said, even as strikes have sunk more than 90% of Iran’s regular Navy.”
April 8 – Axios (Barak Ravid): “Vice President Vance said Wednesday Israel has proposed to restrain itself when it comes to strikes in Lebanon as long as the negotiations between the U.S. and Iran are taking place. The Israeli military’s renewed attacks in Lebanon posed an immediate challenge to the stability of the ceasefire and led Iran to threaten to pull out of negotiations with the U.S. planned for Saturday. At least 254 people have been killed in Israel’s strikes… Stopping the Israeli strikes against Hezbollah… was one of Iran’s key demands for the ceasefire…. ‘The Iran–U.S. Ceasefire terms are clear and explicit: the U.S. must choose— ceasefire or continued war via Israel. It cannot have both. The world sees the massacres in Lebanon. The ball is in the U.S. court, and the world is watching whether it will act on its commitments,’ Foreign Minister Abbas Araghchi wrote…”
April 8 – Financial Times (Andrew England): “In the space of a drama-filled day, Donald Trump shifted from warning that Iran’s ‘whole civilisation will die tonight’ to announcing it was an ‘honour to have this Longterm problem close to a resolution’. Less than two hours before the US president’s deadline for the Islamic republic to reopen the Strait of Hormuz or face being bombed back to the ‘stone ages’, Trump agreed to a two-week ceasefire… It was conditioned on Tehran agreeing to the immediate reopening of the key waterway… Shortly afterwards, the Islamic regime announced it had accepted the ceasefire, and would allow safe passage through the strait ‘via coordination’ with Iran’s military — the very force holding the waterway hostage.”
April 8 – Wall Street Journal (Annie Linskey and Robbie Gramer): “The White House is considering a plan to punish some members of the NATO alliance that President Trump thinks were unhelpful to the U.S. and Israel during the Iran war, according to administration officials. The proposal would involve moving U.S. troops out of North Atlantic Treaty Organization member countries deemed unhelpful… and stationing them in countries that were more supportive… The plan, which has circulated and gained support among senior administration officials in recent weeks, is early in conception and one of several the White House is discussing to punish NATO. It underscores the growing rift between the Trump administration and European allies following the president’s decision to launch the war with Iran.”
April 7 – CNBC (Kevin Breuninger): “President Donald Trump… heaped praise on Hungarian Prime Minister Viktor Orbán after Vice President JD Vance called his boss from the stage of a political rally… in Budapest. ‘I love that Viktor, I’ll tell you, he’s a fantastic man, we’ve had a tremendous relationship,’ Trump said as Vance held his phone’s speaker up to a microphone on the stage. The efforts by Trump and Vance, who traveled to Hungary for the first time as a public official to boost Orbán’s candidacy, came as polls show the incumbent leader is set to lose his upcoming election. Orbán, a conservative nationalist whose closeness with Russian President Vladimir Putin throughout the war in Ukraine has made him an outlier among European leaders, has long been a favorite of Trump.”
April 9 – Reuters (Katharine Jackson): “White House economic adviser Kevin Hassett said… he was confident Kevin Warsh would start as Federal Reserve chairman in May and that he did not expect current Fed chairman Jerome Powell to remain on the board. ‘I’m highly confident that that will happen,’ Hassett told Fox…, adding that he believed a confirmation hearing for Warsh was on track to begin next week.”
Budget Watch:
April 7 – New York Times (Tony Romm and Annie Karni): “For decades, the U.S. government has helped poor Americans pay their home heating and cooling bills. It sends money to states, which then administer the aid, assisting nearly six million households nationally. With a roughly $4 billion budget, the bipartisan program known as LIHEAP is just a sliver of a sprawling federal balance sheet that ranges well into the trillions each year. Yet it counts among the vast set of federal aid that President Trump is trying to eliminate, as he scrounges for ways to cut costs at home and fund a larger, more expensive military. Mr. Trump has eyed a series of potentially unpopular and divisive domestic spending cuts for the next fiscal year, in a move that may test the political appetite and financial health of a cost-weary American public.”
New World Order Watch:
April 9 – Politico (Victor Jack, Nette Nostlinger and Eli Stokols): “U.S. President Donald Trump unloaded his frustration with NATO allies in a bad-tempered meeting with Secretary-General Mark Rutte… — and indicated he was considering reprisals for lack of support over the war in Iran. Rutte met Trump behind closed doors as part of a long-scheduled visit that quickly turned into a life-support mission after the U.S. president repeatedly threatened to quit the alliance… According to two European officials…, Trump used the White House meeting as a venting session for the president to air out his frustration about Europe’s refusal to participate in the Iran operation.”
April 6 – Wall Street Journal (Yaroslav Trofimov): “Crowning a year of disputes with the Trump administration over trade tariffs, support for Ukraine and the future of Greenland, the Iran war has placed America’s friends in Europe, Asia and the Middle East in front of an uneasy dilemma. Their most important ally is acting in ways that they see as erratic and that have already caused hardship and uncertainty. The war has sapped their economies and even bigger shocks loom if the Strait of Hormuz remains closed, deepening the worldwide energy crisis. Many—on both sides of the Atlantic—wonder if they are even allies anymore.”
April 8 – Politico (Nicholas Vinocur): “Donald Trump makes a mess. Europe gets called on to clean it up, or at least pay a hefty price to deal with it. That’s a pattern the EU fears is about to repeat itself in the Strait of Hormuz after the U.S. president announced a ceasefire agreement with Iran, five EU diplomats and officials said. European leaders had already promised to help clear the contested waterway once the fighting stopped. Not only could France, Germany and the U.K. now be on the hook to pay for an expensive operation escorting ships and clearing mines in the strait, but their commercial vessels may also have to pay large fees that didn’t exist before the war just for the privilege of passing through. Trump said on Wednesday he was considering a ‘joint venture’ with Iran and Oman to levy a toll.”
April 8 – Politico (Chris Lunday): “The U.S. under Donald Trump is seen as more of a threat than an ally, according to a new POLITICO European Pulse survey of six major EU countries. Since returning to power in January 2025, Trump has questioned Washington’s commitment to NATO, threatened to annex Greenland and Canada, hit allies with tariffs and launched a war with Iran that European countries refused to join. Only 12% of those polled in March in Poland, Spain, Belgium, France, Germany and Italy saw America as a close ally while 36% saw it as a threat. By contrast, China was seen as a threat by 29% of those polled across the six countries.”
U.S./Russia/China/Europe/Iran Watch:
April 8 – CNBC (Anniek Bao): “U.S. President Donald Trump appears to have set his eyes on Greenland again while venting frustration at NATO, as the diplomatic fallout from Iran war exposes rifts in Washington’s ties with the security alliance. In a… post…, Trump said that ‘NATO WASN’T THERE WHEN WE NEEDED THEM, AND THEY WON’T BE THERE IF WE NEED THEM AGAIN. REMEMBER GREENLAND, THAT BIG, POORLY RUN, PIECE OF ICE!!!’”
April 4 – Washington Post (Cate Cadell and Lyric Li): “As the war in Iran erupted five weeks ago, social media sleuths across Western and Chinese platforms flagged a wave of viral posts detailing equipment at U.S. bases, the movements of American carrier groups and granular breakdowns of how military aircraft were assembling for strikes on Tehran. The intelligence came from a fast growing new market: Chinese firms — some with links to the People’s Liberation Army — marrying artificial intelligence with open-source data to market information they claim can ‘expose’ the movements of U.S. forces.”
April 7 – Associated Press (Edith M. Lederer and Farnoush Amiri): “Russia and China… vetoed a U.N. Security Council resolution aimed at reopening the Strait of Hormuz that had been repeatedly watered down in hopes those two countries would abstain. The vote — 11-2, with two abstentions from Pakistan and Colombia — took place shortly after U.S. President Donald Trump issued an unprecedented threat that a ‘whole civilization will die tonight’ if Iran does not open the strategic waterway and make a deal.”
Taiwan Watch:
April 9 – Financial Times (John Thornhill): “Iran’s effective blockade of the Strait of Hormuz has highlighted the alarming impact of tightening a trading chokehold. Yet there is an even bigger potential pain point in the global economy: Taiwan’s control of more than 90% of the world’s leading-edge silicon chips, which run almost every western smartphone, data centre, AI model and smart weapons system. The rise of Taiwan’s chip industry is one of the most remarkable industrial stories of our century. But the island of 23mn people lies on a geostrategic… faultline, roughly 100 miles off the coast of China. Beijing has long trumpeted its ‘national rejuvenation’ mission to incorporate the island. It has also significantly boosted its military capabilities to help achieve that end. Any serious disruption to the global supply of the world’s most valuable semiconductors would surely bring the current AI investment boom in the US screeching to a halt.”
AI Bubble/Arms Race Watch:
April 6 – Wall Street Journal (Max Rust and Will Parker): “Maine looks poised to become the first state to freeze building of new data centers with legislation that could pass this spring, but community backlash against these properties is spreading across the country. Lawmakers in more than 10 states have proposed temporary bans on data-center construction this year. Dozens of county and city governments have already passed such measures.”
April 8 – Los Angeles Times (Queenie Wong): “The artificial intelligence boom has driven up San Francisco’s median home sales price to a record $2.15 million. Real estate brokerage firm Compass said that recent transactions showed that some parts of the tech capital have emerged from its doom loop on the back of the surge in AI investment and hiring. The March median home price, up 18% from last year, surpassed the April 2022 peak of $2 million, according to Compass. Median condo sale prices jumped to $1.36 million, up 27% from a year earlier, and slightly below the $1.37 million peak in April 2022. The new data show how the rise of AI is making it more expensive and competitive to live in San Francisco…”
Bubble Watch:
April 9 – Reuters (Kanchana Chakravarty): “Assets under management for U.S. exchange-traded funds could more than double to $25 trillion by the end of this decade, Citigroup said…, as investors seek the increasingly popular asset class for low-cost, diversified exposure across markets. As of March 2025, the U.S.-listed ETF industry’s total assets stood at about $10.4 trillion… The Wall Street brokerage had previously forecast the industry's AUM to hit $19 trillion by 2030 and $29 trillion by 2035.”
April 5 – Financial Times (Alexandra Heal): “The value of buyouts by private equity groups fell by more than a third in the first quarter of the year… Private equity groups agreed acquisitions worth $172bn in the three months to March, a 36% fall from the previous quarter, according to Dealogic. The figure was an 8% drop from the same period last year… Rising concerns about the effect of AI on software groups — one of the buyout industry’s most lucrative sectors in recent years — have also punctured hopes that private equity was turning a corner after a prolonged downturn.”
Crypto Bubble Watch:
April 6 – Bloomberg (Melos Ambaye): “Bitcoin accumulator Strategy Inc. registered a roughly $14.5 billion unrealized loss in the first quarter as the value of the Michael Saylor-led company’s cryptocurrency holdings fell. Bitcoin tumbled more than 20% in the three months… Strategy held more than $50 billion of cryptocurrency at quarter-end.”
Inflation Watch:
April 10 – CNBC (Jeff Cox): “Consumer prices spiked in March as the Iran war sent energy costs soaring and took the Federal Reserve further from its inflation target, according to a Bureau of Labor Statistics report... The consumer price index increased a seasonally adjusted 0.9% for the month, putting the annual inflation rate at 3.3%, pushed by a 10.9% surge in energy costs… The annual rate was the highest since April 2024 and up from 2.4% in February.”
April 9 – Associated Press (Christopher Rugaber): “A key measure of inflation stayed high in February, before the war in Iran spiked gas prices, a sign that everyday costs were elevated even before the conflict began. An inflation gauge monitored by the Federal Reserve rose 0.4% in February from January, up slightly from the previous month. Compared with a year ago, prices rose 2.8%... Excluding the volatile food and energy categories, core inflation also rose 0.4% in February from January, and it was 3% higher than a year earlier. The annual figure is slightly below January’s reading of 3.1%... ‘Consumer inflation was firming even prior to the outbreak of war in the Middle East, and it is primed to jump sharply higher in March,’ Kathy Bostjancic, chief economist at Nationwide, wrote…”
April 6 – Bloomberg (Mark Niquette and Vince Golle): “Skyrocketing fuel prices due to the Iran war are fanning the embers of transportation costs, which were already rising due to a shrinking pool of drivers in the US. Trucking operators saw diesel prices spike by almost 50% since the start of the US-Israel war against Iran at the end of February. Haulers have responded by raising the weekly per-mile fuel surcharge paid by shippers to its highest since 2022… Those surcharges come on top of a months-long increase in truck-equipment rates…”
April 6 – USA Today (Maddie McGay,): “If you think your budget has been tight lately, you might look at your insurance bill. A 45.8% increase in regulator-approved home insurance rates is one that's severely impacting housing affordability. A new report from LendingTree… found that home insurance rates have been rising nearly twice as fast as inflation in recent years… From 2020 to 2025, there was a 19.7 percentage point gap between this 45.8% home insurance rate increase nationwide and the 26.1% inflation rate. This means that home insurance rates rose about 1.8 times faster than inflation during this time…”
April 8 – Bloomberg (Rainier Harris and Charles Gorrivan): “Surging prices for plastic caused by disruptions from the Iran war have pushed one US toymaker to buy up more inventory than needed before the conflict boosts costs even higher. Factories in China, Vietnam and India have seen price hikes as high as 55% for materials such as low-density polyethylene, a widely used plastic…”
April 9 – Wall Street Journal (Nicole Friedman): “Americans are paying more than ever to homeowners associations, adding to the mounting costs that are driving many would-be buyers out of the housing market. The median monthly condo fee was $420 in 2025, up 29% from 2019, according to a Realtor.com... For single-family homeowners, median HOA fees rose 26% from 2019 to $63 last year. HOA and condo fees aren’t the biggest expense in many household budgets, but they are rising at the same time as near-record home prices and elevated mortgage rates have worsened home-buying affordability. Property-tax bills, home-insurance premiums and utility costs have also climbed in many parts of the country.”
April 9 – Wall Street Journal (Esther Fung): “The U.S. Postal Service said it plans to raise the price of a First-Class Mail Forever stamp about 5% to 82 cents starting July 12, up from 78 cents, as the agency tries to navigate a financial crisis.”
April 6 – Bloomberg (Laura Nahmias): “New York families need six-figure incomes to live without government assistance in all five boroughs of New York City, according to two new reports. One report, released by the Fund for the City of New York, measures the ‘self-sufficiency standard,’ or the income a working household needs to earn to meet its basic needs… The median annual income necessary for a four-person family with two school-age kids to afford to live in the city reached $133,000 in 2026…”
Federal Reserve Watch:
April 9 – New York Times (Colby Smith): “Early on in the war with Iran, Jerome H. Powell, the chair of the Federal Reserve, seemed vexed about the state of inflation after the central bank’s prolonged battle to try to tame it. Overall consumer price growth, based on the Fed’s preferred gauge, had in the past year made little progress toward its 2% target. Another closely watched metric, tracking inflation in services such as transportation and personal care, had also barely budged, sitting well above its 20-year average of 2.7%. ‘It’s frustrating,’ Mr. Powell told reporters… The Fed, which had been wrestling with elevated price pressures for five years, needed to see progress on a multitude of fronts to feel confident about its grip on inflation, he said. Mr. Powell warned that without that, additional interest rate cuts would be hard to justify.”
April 8 – Axios (Courtenay Brown): “Some Federal Reserve officials wanted to keep interest rate increases on the table, given the stubborn inflation that was set to be amplified by the Iran war, according to minutes from the central bank’s March 17-18 policy meeting… ‘Many participants judged that, in time, it would likely become appropriate to lower the target range for the federal funds rate if inflation were to decline in line with their expectations,’ the minutes show. But even a couple of those officials said they pushed out their projections for rate cuts ‘further into the future in light of recent readings on inflation,’ the minutes show. ‘Some’ officials cited a ‘strong case’ for the Fed to describe future interest rate decisions as ‘two-sided’ — acknowledging the possibility for both rate cuts and rate hikes…”
April 7 – Reuters (Michael S. Derby): “Federal Reserve Bank of New York President John Williams said… the Middle East war energy shock will drive up overall inflation over the course of this year, while reiterating monetary policy is in the right place to deal with what happens in the economy. The war impact ‘will directly go into headline inflation because energy prices are an important component of that,’ Williams said… ‘I expect headline inflation to actually be elevated, you know, in the middle of this year’ and come in at around 2.75% for the year, he added.”
April 6 – Associated Press (Christopher Rugaber): “A top Federal Reserve official said… an interest rate hike could be appropriate if inflation remains persistently above the central bank’s 2% target, the latest sign that some policymakers are moving away from a bias toward reducing borrowing costs. Beth Hammack, president of the Federal Reserve Bank of Cleveland, said… her general preference is for the Fed keep its benchmark interest rate unchanged ‘for quite some time’… ‘I can foresee scenarios where we would need to reduce rates… if the labor market deteriorates significantly… Or I could see where we might need to raise rates if inflation stays persistently above our target’.”
April 7 – Reuters (Ann Saphir): “Chicago Federal Reserve Bank President Austan Goolsbee said… he is worried that the Iran war will drive inflation higher even as it slows the U.S. economy, putting the Fed in an uncomfortable position where there is no obvious ‘cookbook’ for what to do. ‘The prices spiked from tariffs and they were supposed to go away, and this is now hitting before that went away… You’re just in a very uncomfortable situation and there's not an obvious cookbook of should we… heat things up or cool things down. It’s not obvious which way to do it,’ Goolsbee said.”
U.S. Economic Bubble Watch:
April 6 – Bloomberg (Julia Fanzeres): “The US service economy expanded in March at a slower pace as employment shrank by the most since 2023 and input prices accelerated sharply. The Institute for Supply Management’s gauge of prices paid for services and materials jumped to 70.7, the highest since October 2022… The 7.7-point increase from a month earlier was the largest in nearly 14 years, comparable to the change seen in the group’s manufacturing survey. The ISM services index fell 2.1 points to 54, dragged down by weaker employment and less growth in business activity.”
April 6 – Reuters (Lucia Mutikani): “U.S. services sector growth slowed in March, while prices paid by businesses for inputs increased by the most in more than 13 years, an early indication that the prolonged war with Iran was boosting inflation pressures… ‘Companies across many industries reported seeing higher gas and diesel pricing, and inventories of multiple goods increased to withstand supply chain disruptions or short-term oil price impacts,’ said ISM Services Business Survey Committee Chair Steve Miller. ‘Such construction products as lumber, copper and steel were noted as up in price’.”
April 9 – Associated Press (Matt Ott): “U.S. applications for unemployment benefits rose last week... The number of Americans applying for jobless aid for the week ending April 4 jumped by 16,000 to 219,000 from the previous week’s 203,000… The total number of Americans filing for unemployment benefits for the previous week ending March 28 fell by 38,000 to 1.79 million, the fewest in nearly two years.”
April 9 – Bloomberg (Julia Fanzeres): “Wage growth among higher-income US households is now outpacing lower-earning cohorts by the widest margin in over a decade, according to an analysis by the Bank of America Institute. While higher-income households’ after-tax wages and salaries climbed 5.6% in March from a year earlier…, middle-income earners saw their pay rise a more tepid 2%. Wages among low-income groups advanced just 1%. The gap is the widest since the data series began in 2015.”
April 7 – Financial Times (Emily Peck): “Confidence among American small-business owners fell for a second consecutive quarter, according to the U.S. Chamber of Commerce Small Business Index… The numbers signal a ‘growing unease’ over rising inflation and the Iran war… The survey took place from Feb. 25-March 11… The index is still higher than this time last year, after President Trump’s ‘Liberation Day’ tariffs crushed business confidence. Researchers surveyed 750 small-business owners and operators who run companies with 500 or fewer people. 53% of the small-business owners said inflation was their top challenge, up from 45% in the last three months of 2025. Only 37% said they expect to make new investments in the year ahead, down from 44% in Q4.”
April 9 – Associated Press (Paul Wiseman): “The American economy, slowed by last fall’s 43-day government shutdown, grew at a sluggish 0.5% annual pace from October through December… U.S. gross domestic product… decelerated in the fourth quarter after registering impressive growth of 4.4% from July through September and 3.8% from April through June. The latest number was marked down from the… previous estimate of 0.7% fourth-quarter growth.”
April 7 – Reuters (Lucia Mutikani): “New orders for key U.S.-manufactured capital goods increased more than expected in February while shipments of those products rose solidly, suggesting business spending on equipment was on firmer footing before the war with Iran… Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, rose 0.6% after a downwardly revised 0.4% drop in January…”
China Watch:
April 6 – Bloomberg: “China’s unrelenting housing downturn is forcing the country’s banks to confront a thorny issue: sinking real estate values are pushing millions of mortgages underwater, increasing the risk of losses for lenders and property owners. Behind the scenes, Chinese bankers and officials are getting creative to contain the fallout. Several state-owned banks have approached cash-strapped borrowers and offered them payment holidays on their mortgages for as long as two years… Some lenders are working with individual customers to find buyers for their homes, instead of calling defaults and foreclosing on the properties, the people said.”
Europe Watch:
April 5 – Financial Times (Henry Foy and Amy Kazmin): “EU officials are urging governments to avoid excessive support to offset surging energy prices, warning that the shock triggered by the Iran war could tip into a fiscal crisis. The European Commission is insisting in discussions with member states that proposed energy subsidies, tax cuts and price caps be limited in time and scope… Brussels is seeking to avoid a repeat of the 2022 energy crisis, which fuelled rampant inflation and ballooning deficits.”
Emerging Market Watch:
April 7 – Financial Times (Delphine Strauss): “Emerging markets have become much more vulnerable to global shocks such as the Iran war because of their increased reliance on ‘flighty’ sources of capital such as hedge funds in recent years, the IMF has warned. Purchases of emerging market stocks and bonds by foreign investors have increased eightfold since the 2008 global financial crisis, with cumulative inflows approaching $4tn in 2025, mostly in the form of debt, the fund said… Debt held by foreign investors now averages 15% of GDP in emerging markets, up from 9% in 2006, the IMF said. Four-fifths of this capital comes from non-bank sources such as hedge funds and investment funds, double the share seen two decades ago.”
Social, Political, Environmental, Cybersecurity Instability Watch:
April 9 – Wall Street Journal (Mike Cherney): “From the Baltic Sea to the Pacific Ocean, a global scramble is under way to protect submarine cables vulnerable to potential sabotage. Governments, militaries, cable owners and tech startups are taking action to bolster the defenses of the world’s underwater cable network, through which most international data traffic travels. In Northern Europe, the North Atlantic Treaty Organization is using ships and drones to ward off possible sabotage, after a Russia-linked vessel cut vital cables in 2024. On Thursday, the U.K. exposed what it called a secret, month-long operation by Russian submarines carrying out ‘nefarious activity’ over key underwater infrastructure. It warned Russian President Vladimir Putin that any damage would be met with ‘serious consequences.’ In Asia, Taiwan is increasing coast guard patrols and penalties for damaging cables, hoping to deter would-be saboteurs.”
April 9 – Bloomberg (Lauren Rosenthal): “An unusually hot, snowless winter has fueled a fast start to the spring fire season across large swaths of the western, central and southeastern US, disrupting businesses and upending daily life. Nearly 19,000 have ignited nationwide since Jan. 1, about 6,900 more than normal compared to the past decade. In recent weeks, flames have scorched nearly 1 million acres of cattle grazing land and prairie in the Great Plains and dampened tourism in parts of the Everglades… Air tankers, frequently deployed over the West, are already in high demand, weeks ahead of schedule.”
April 9 – Bloomberg (Lauren Rosenthal): “A planet-heating El Niño is favored to emerge by August, with rising odds of an unusually powerful event that threatens record-breaking temperatures during the Northern Hemisphere’s summer. In an outlook…, the US Climate Prediction Center said there’s a 25% chance for the El Niño to become ‘very strong’ — based on warming in a key stretch of the tropical Pacific — by February 2027. Even mild El Niño events can disrupt crops in Vietnam, Brazil and parts of Africa, while raising wildfire risks in Australia and suppressing hurricane activity in the Atlantic. The possibility of a strong event with sharper impacts on global weather patterns hinges on the development of wind anomalies across the equatorial Pacific in the coming months, forecasters said.”
The S&P500 rallied 3.6% (down 0.4% y-t-d), and the Dow recovered 3.0% (down 0.3%). The Utilities increased 1.1% (up 10.0%). The Banks surged 5.6% (up 0.7%), and the Broker/Dealers jumped 4.6% (up 2.5%). The Transports rallied 6.6% (up 17.2%). The S&P 400 Midcaps rallied 3.4% (up 6.6%), and the small cap Russell 2000 rose 4.0% (up 6.0%). The Nasdaq100 rallied 4.5% (down 0.5%). The Semiconductors spiked 13.5% higher (up 25.5%). The Biotechs were about unchanged (down 1.9%). With bullion rising $73, the HUI gold index gained 4.6% (up 20.6%).
Three-month Treasury bill rates ended the week at 3.591%. Two-year government yields dipped four bps to 3.80% (up 32bps y-t-d). Five-year T-note yields declined four bps to 3.97% (up 22bps). Ten-year Treasury yields slipped two bps to 4.32% (up 15bps). Long bond yields were unchanged at 4.91% (up 7bps). Benchmark Fannie Mae MBS yields dropped seven bps to 5.27% (up 21bps).
Italian 10-year yields slipped a basis point to 3.84% (up 29bps y-t-d). Greek 10-year yields added one basis point to 3.80% (up 36bps). Spain's 10-year yields gained four bps to 3.52% (up 23bps). German bund yields jumped seven bps to 3.06% (up 20bps). French yields increased three bps to 3.71% (up 14bps). The French to German 10-year bond spread narrowed four to 65 bps. U.K. 10-year gilt yields were unchanged at 4.84% (up 36bps). U.K.’s FTSE equities index increased 1.6% (up 6.6% y-t-d).
Japan’s Nikkei 225 Equities Index surged 7.2% (up 13.1% y-t-d). Japan’s 10-year “JGB” yields gained five bps to 2.44% (up 37bps y-t-d). France’s CAC40 rose 3.7% (up 1.4%). The German DAX equities index rallied 2.7% (down 2.8%). Spain’s IBEX 35 equities index jumped 3.7% (up 5.2%). Italy’s FTSE MIB index recovered 4.3% (up 5.9%). EM equities were higher. Brazil’s Bovespa index rallied 4.9% (up 22.5%), and Mexico’s Bolsa index added 0.4% (up 8.8%). South Korea’s Kospi surged 9.0% (up 39.0%). India’s Sensex equities index jumped 5.8% (down 9.0%). China’s Shanghai Exchange Index rose 2.7% (up 0.4%). Turkey’s Borsa Istanbul National 100 index surged 8.8% (up 25.0%).
Federal Reserve Credit jumped $17.4 billion last week to $6.638 TN, with a 17-week expansion of $148 billion. Fed Credit was down $2.252 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.911 TN, or 78%. Fed Credit inflated $3.827 TN, or 136%, since November 7, 2012 (700 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped $15.3 billion last week to $2.997 TN - the low back to November 2010. “Custody holdings” were down $297 billion y-o-y, or 9.0%.
Total money market fund assets (MMFA) added $8.0 billion to $7.819 TN - with a 40-week surge of $796 billion, or 14.6% annualized. MMFA were up $813 billion, or 11.6%, y-o-y - having ballooned a historic $3.235 TN, or 70.6%, since October 26, 2022.
Total Commercial Paper recovered $28.1 billion to $1.362 TN. CP contracted $20 billion, or 1.4%, y-o-y.
Freddie Mac 30-year fixed mortgage rates dropped nine bps to 6.37% (down 25bps y-o-y). Fifteen-year rates dipped three bps to 5.74% (down 8bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down four bps to 6.57% (down 26bps).
Currency Watch:
April 9 – Bloomberg (Simon White): “The US’s war with Iran has put a potentially irreversible strain on the global trading system, with gold reserves having eclipsed central bank holdings of valuation-adjusted dollar assets for the first time in several decades… The dollar’s demise has been greatly exaggerated on many previous occasions. But it will not be a dramatic point-in-time event. Sterling’s fading as a reserve currency was punctuated by several milestones over an extended period — the end of World War I, coming off the Gold Standard, Bretton Woods and the Suez crisis.”
April 8 – Bloomberg (Chien-Hua Wan and Jacob Gu): “Taiwan’s foreign reserves saw their steepest monthly drop in nearly 15 years in March, as the central bank sold the greenback to stabilize the local currency against capital outflows spurred by the Iran war. Forex reserves dropped by $8.6 billion to $596.9 billion at the end of last month…”
For the week, the U.S. Dollar Index fell 1.5% to 98.65 (up 0.3% y-t-d). On the upside, the Mexican peso increased 3.5%, the South African rand 3.4%, the Brazilian real 3.0%, the New Zealand dollar 2.6%, the Norwegian krone 2.5%, the Swedish krona 2.5%, the Australian dollar 2.5%, the British pound 2.0%, the South Korean won 1.8%, the euro 1.8%, the Swiss franc 1.5%, the Singapore dollar 1.0%, the Canadian dollar 0.8%, and the Japanese yen 0.3%. China's (onshore) renminbi gained 0.77% versus the dollar (up 2.33% y-t-d).
Commodities Watch:
April 7 – Bloomberg (Yihui Xie): “China’s central bank bought the most gold in more than a year in March, demonstrating that a key pillar of support for the precious metal remains intact as prices come under pressure amid the Iran war. Bullion held by the People’s Bank of China rose by 160,000 troy ounces last month, or about 5 tons… The central bank, among the world’s largest buyers, has added to holdings for 17 months straight.”
The Bloomberg Commodities Index fell 3.7% (up 20.5% y-t-d). Spot Gold added 1.6% to $4,750 (up 10.0%). Silver jumped 3.9% to $75.8765 (up 5.9%). WTI Crude sank $14.97, or 13.4%, to $96.57 (up 68%). Gasoline lost 7.6% (up 77%), and Natural Gas fell another 5.4% to $2.648 (down 28%). Copper rallied 5.4% (up 4%). Wheat dropped 4.6% (up 13%), and Corn fell 2.5% (unchanged). Bitcoin jumped $6,030, or 9.0%, to $72,930 (down 16.8%).
Market Instability Watch:
April 8 – Bloomberg (Natalia Kniazhevich): “Hedge funds are rushing to close out bets against US stocks at a pace not seen since the market rebounded from the crash set off by the pandemic in March 2020. Goldman Sachs Group Inc.’s trading desk division reported that hedge fund managers sharply accelerated the covering of short positions tied to macro products — like major indexes and exchange-traded funds — late Tuesday, just after President Donald Trump announced a temporary ceasefire deal in his war against Iran. The bank said the volume of such unwinding is on track to reach the levels seen early in the pandemic. ‘This is the offramp the market has been waiting for,’ John Flood, Goldman’s head of Americas equities execution services and partner, wrote…, adding that investors he’s speaking with see a high likelihood the move marks ‘the beginning of the end’ of the conflict.”
April 8 – Bloomberg (Justina Lee): “A trade that went from niche to one of the biggest options strategies on Wall Street in recent years posted its worst monthly performance in more than a decade in March… The dispersion trade, which buys options on individual US stocks while selling those on the broader index, suffered a 4.9% loss last month, the steepest since 2011 in backtested data… Bank swaps tied to the approach fell 2.6%, according to Premialab… The losses lay bare the strategy’s vulnerability to such a major geopolitical event.”
April 9 – Bloomberg (Tom Rees): “Financial Stability Board Chair Andrew Bailey warned stresses may be emerging in private credit after the shock to markets from the Iran war. Bailey, who is also Bank of England governor, said… regulators needed to focus on the threat posed by private credit given its rapid rise and the febrile market responses to the conflict in the Middle East. ‘Private credit is a relatively opaque world and it’s not yet, of course, because of its relative newness, actually come under stress, and we may be seeing that now,’ Bailey said in a hearing in the European Parliament. Bailey has repeatedly warned of dangers from private credit after its boom since the financial crisis, when efforts to tighten regulation on banks drove corporate borrowers toward investment funds and other routes outside public markets.”
Leveraged Speculation Watch:
April 8 – Financial Times (Costas Mourselas and Amelia Pollard): “Hedge funds were blindsided by the onset of the US and Israeli war with Iran last month, suffering their biggest losses since the lockdowns in March 2020 shuttered the global economy at the start of the Covid-19 pandemic. The flagship hedge fund performance index of data provider HFR recorded a 3.1% fall last month, more than any month since a 9.1% drop six years ago… ‘I’ve been managing money for 40 years and I’ve never been less certain on how things are going to turn out,’ said one macro hedge fund manager. Major multi-manager hedge funds such as Ken Griffin’s Citadel, Izzy Englander’s Millennium Management and Dmitry Balyasny’s eponymous firm were down 1.9%, 1.2% and 4.3% in their flagship funds for March respectively… But the pain was most acute among macro hedge funds that trade assets such as bonds and currencies to make bets on economic trends.”
April 7 – Bloomberg (Liza Tetley and Nishant Kumar): “Macro hedge funds struggled in March as the war in the Middle East upended inflation expectations, leading to steep losses at many of the industry’s largest firms. Said Haidar’s Jupiter Fund lost about 12% in March, paring quarterly gains to 13.4%... The Brevan Howard Master Fund declined 6.6% for the worst monthly loss in its two-decade-plus history... Diego Megia’s Taula Capital Management lost 8.6%, bringing year-to-date losses to 7.6%, while Edouard de Langlade’s EDL Global Opportunities Master Fund was down 11% in March…”
April 6 – Bloomberg (Hema Parmar): “Some of the hedge fund industry’s most prolific stock-pickers incurred big losses in March as the US and Israeli war against Iran roiled markets. Tiger Global Management’s main hedge fund tumbled 7.3% last month, while Maverick Capital’s dropped 5% and Viking Global Investors’ lost 4.1%... Coatue Management declined 4.8% in March… Maverick’s other vehicle, the Long Enhanced fund — which uses leverage to turbocharge bullish bets — declined 8.1%.”
April 7 – Financial Times (Rachel Rees, Jonathan Vincent and Ray Douglas): “Hedge funds have amassed a record number of short positions against European stocks, in a bet that the region will be hard hit by the economic fallout from the Iran war.”
U.S. Credit Trouble Watch:
April 7 – Wall Street Journal (Heather Gillers): “Of the about $6 trillion in invested assets held by life and annuity companies, nearly $1 trillion is now in private-credit investments, according to A.M. Best, a credit-rating firm that rates insurers. About $419 billion of that debt carries a so-called private letter rating. In some ways, such a rating resembles what the ratings firms provide for publicly traded bonds: The firm issuing or packaging the debt pays a ratings company to assign a grade based on the likelihood the borrower will repay it… But unlike bond ratings, ‘private’ letter grades are available only to the debt’s issuer and investors.”
April 8 – Financial Times (Eric Platt): “Wealthy investors attempted to pull more than $20bn from private credit funds in the first quarter, underscoring the growing strain on an asset class that had boomed into a dominant force on Wall Street. The $20.8bn in redemption requests hit huge groups in the sector, including Apollo Global Management, Ares Management, Blackstone, Blue Owl and KKR… The funds tracked by the FT, which collectively manage investment portfolios worth about $300bn, have honoured just over half of the redemption requests they received. Many investors have been forced to wait until a redemption window opens up later this quarter to exit.”
April 7 – Reuters (Gursimran Kaur, Arasu Kannagi Basil and Natalia Bueno Rebolledo): “Moody’s… cut its outlook on a $36-billion Blue Owl non-traded fund to ‘negative’ from ‘stable’ on Tuesday, citing redemption requests that were significantly higher than at peers… The downgrade highlights the mounting strains in the $2 trillion private credit industry after a strong run… Moodys also said the change in the outlook on Blue Owl Credit Income Corp (OCIC) is due to the majority of the redemption requests coming from a very limited number of investors, revealing some concentration in the equity-holder base.”
April 9 – Reuters (Isla Binnie and Manya Saini): “Investors have asked to pull more than 15% of their assets from Carlyle’s flagship private credit interval fund…, in the latest rush away from funds that give broad access to the rarely-traded asset class. Scrutiny is intensifying on the multi-trillion-dollar private credit market, as investors question the health of loan portfolios and how the software companies that have borrowed from funds will manage disruption from artificial intelligence.”
April 9 – Wall Street Journal (Isaac Taylor): “Carlyle Group’s flagship private-credit interval fund is the latest to be hit with a wave of share-redemption requests, as investor fears about a potential private-credit meltdown continue. The Carlyle Tactical Private Credit Fund, or CTAC, received repurchase requests amounting to roughly 15.7% of shares outstanding, more than three times the 5% redemption limit… The fund, which had more than $7 billion in total assets, including leverage, as of late January, has an emphasis on direct lending, which accounts for 41% of the fund’s portfolio… A representative for Carlyle said the CTAC fund also was exposed to redemption requests from investors looking for liquidity after being unable to fully redeem shares from other private-credit funds.”
April 6 – Bloomberg (Nabila Ahmed): “A Barings LLC private credit fund capped redemptions after investors asked to pull out 11.3% of the shares in the first quarter. Barings Private Credit Corp. is paying out less than half of the requests, capping withdrawals at 5%... ‘We seek to balance near-term liquidity needs with prudent stewardship of capital for both exiting and remaining investors,’ the fund said…”
April 7 – Bloomberg (Rene Ismail): “A swelling wave of redemptions has driven Moody’s… to revise its outlook for private credit investment vehicles to negative, after holding the line at stable for over two years. The ongoing exodus from nontraded vehicles, which make up 60% of the sector’s assets, and elevated leverage in their publicly-traded counterparts are key drivers of the credit grader’s revision… The ‘disruptive force’ presented by artificial intelligence is expected to compound the group’s worries and put it ‘on defense’ in the coming year, Moody’s analysts wrote. An abrupt reversal in the first quarter spurred the first ever net outflow for the sector, Moody’s said.”
April 7 – Bloomberg (Amanda Albright and Erin Hudson): “The concerns building in the private-credit industry are starting to inflict pain in a rapidly growing segment of the US municipal debt market. The anxiety around private credit… has roiled select munis in a sector known as prepaid energy bonds. These securities allow municipal utilities to buy electricity or natural gas at a discount by locking in decades of supply upfront… Investors point to deals involving insurer Athene Annuity and Life Co., which is owned by Apollo Global Management Inc., one of the big asset managers whose shares have slid amid private-credit jitters. Some of these prepaid energy bonds have weakened more than benchmark munis…”
April 7 – Wall Street Journal (Peter Grant): “America’s battered office market is holding a fire sale, featuring some buildings marked down by more than 90%. In Chicago, real-estate developer Marc Calabria bought a 485,000-square-foot office building for $4 million. The building sold for $68.1 million a decade ago. Developer Asher Luzzatto paid a mere $5.3 million for the Denver Energy Center… The two-building complex sold for $176 million in 2013. Even the federal government’s landlord is getting in on the act. The General Services Administration last month sold a 940,000-square-foot building to a residential converter for $24 million, a tiny fraction of its value a few years ago. Landlords and their lenders held on to their office towers for years, hoping for a turnaround after Covid. Now, they are accepting enormous losses.”
April 9 – Reuters (Ross Kerber and Isla Binnie): “Several big North American pension systems are standing by their private credit holdings even as the sector faces choppy waters, a sign of both the industry’s potential resilience and its long reach into workers’ retirement plans. For instance, the California State Teachers’ Retirement System, or CalSTRS, has holdings in private credit funds including some run by Blue Owl Capital Inc, and it is the biggest investor in one of that firm's publicly traded business development companies (BDCs), Blue Owl Capital Corp, according to LSEG data.”
Iran War Watch:
April 4 – Axios (Barak Ravid): “U.S. special forces rescued the second crew member of the F-15 fighter jet that was shot down over Iran… The crew member, a weapons system officer, was wounded after ejecting from the aircraft on Friday but could still walk, and evaded capture in the mountains for more than a day… Both crew members were rescued in special forces operations inside Iran. One official said Saturday’s operation was conducted by a specialized commando unit with a high volume of air cover, that the U.S. forces unleashed a hail of heavy fire, and that all of the forces were now out of Iran.”
April 8 – Financial Times (Humza Jilani, Abigail Hauslohner and Demetri Sevastopulo): “The White House pushed the idea of a temporary ceasefire with Iran even as Donald Trump escalated threats against the Islamic republic and claimed it was ‘begging’ for a deal, according to people familiar... For weeks the Trump administration was leaning on Islamabad to convince the Iranians to agree a pause in fighting where it would reopen the Strait of Hormuz, the people said. Pakistan’s crucial role, as a Muslim-majority neighbour and intermediary, was to sell it to Tehran. The back-channel efforts led by Pakistan’s military strongman Asim Munir culminated on Tuesday night in the announcement by the US, Iran and Israel of a two-week ceasefire, hours after Trump had threatened to destroy Iran’s ‘whole civilisation’ if Iran didn’t meet his terms.”
April 8 – Associated Press (Kareem Chehayeb and Abby Sewell): “Israeli strikes hit busy commercial and residential areas in central Beirut without warning on Wednesday, hours after a ceasefire was announced in the U.S.-Israeli war with Iran. Lebanon said at least 182 people were killed and hundreds were wounded, making it the deadliest day in the latest Israel-Hezbollah war. U.S. President Donald Trump told PBS News Hour that Lebanon was not included in the deal because of the Lebanese militant Hezbollah group. When asked about Israel’s latest strikes, he said, ‘That’s a separate skirmish.’ Israel had said the agreement does not extend to its war with the Iran-backed Hezbollah, although Iran and mediator Pakistan said it does.”
April 8 – Bloomberg (Eltaf Najafizada): “The passage of oil tankers through the Strait of Hormuz was halted as a consequence of Israeli attacks on Lebanon, Iran’s semi-official Fars news agency reported. The report followed an overnight ceasefire between the US and Iran that Fars said had resulted in the transit of two oil tankers. The halt to tanker movements happened simultaneously with attacks on Lebanon, it reported.”
April 8 – Wall Street Journal (Yaroslav Trofimov): “The Iranian government hailed the cease-fire with the U.S. by posting images on social media of President Trump waving the white flag and collapsing on his knees in defeat. America’s allies and partners in the Middle East fear that Tehran may have a point—and that they will end up paying the price for a war in which the overwhelming military might of the U.S. and Israel failed to secure political gains. Subjected to thousands of Iranian missile and drone strikes since the war’s start, the Gulf states are grappling with how to survive next to an emboldened Iran that, as of now, retains control over the crucial Strait of Hormuz and seeks to become a regional hegemon.”
April 8 – Financial Times (Najmeh Bozorgmehr, Alice Hancock, Verity Ratcliffe and Rachel Millard): “Iran will demand that shipping companies pay tolls in cryptocurrency for oil tankers passing through the Strait of Hormuz, as it seeks to retain control over passage through the key waterway during the two-week ceasefire. Hamid Hosseini, a spokesperson for Iran’s Oil, Gas and Petrochemical Products Exporters’ Union, told the FT… Iran wanted to collect tolling fees from any tanker passing and to assess each ship. ‘Iran needs to monitor what goes in and out of the strait to ensure these two weeks aren’t used for transferring weapons,’ said Hosseini, whose industry association works closely with the state. ‘Everything can pass through, but the procedure will take time for each vessel, and Iran is not in a rush,’ he added.”
April 9 – Axios (Barak Ravid and Alex Fitzpatrick): “President Trump on Thursday demanded Iran stop charging tolls for tankers to cross the Strait of Hormuz, as Iran’s supreme leader promised the country would control the crucial waterway. The already shaky ceasefire between the two countries is getting more strained by the day, even as they prepare for peace talks in Islamabad on Saturday… ‘There are reports that Iran is charging fees to tankers going through the Hormuz Strait — They better not be and, if they are, they better stop now!’ Trump posted… That followed a… report that Iran is demanding the right to toll ships passing through the strait: $1 per barrel of oil aboard, paid in cryptocurrency. Trump later added… ‘Iran is doing a very poor job, dishonorable some would say, of allowing Oil to go through the Strait of Hormuz. That is not the agreement we have!’”
April 5 – Financial Times (Abigail Hauslohner, Steff Chávez, Demetri Sevastopulo, Jill R Shah and Simeon Kerr): “Donald Trump has threatened to bomb Iran’s power plants and bridges if it does not reopen the Strait of Hormuz... The US president gave Iran until 8pm eastern time on Tuesday to reopen the crucial shipping lane after earlier threatening to unleash ‘hell’ in an expletive-laden social media post. ‘Tuesday will be Power Plant Day, and Bridge Day, all wrapped up in one, in Iran,’ Trump wrote… ‘There will be nothing like it!!! Open the Fuckin’ Strait, you crazy bastards, or you’ll be living in Hell - JUST WATCH! Praise be to Allah’.”
April 8 – Wall Street Journal (David S. Cloud): “When Iran agreed to a two-week cease-fire only hours before President Trump had vowed to unleash punishing new attacks, it was in many ways a moment of triumph for the battered regime. Tehran emerged from 38 days of war against the U.S. and Israel having won not only its primary goal—its own survival—but also two potential strategic gains: control of the Strait of Hormuz and a newly established deterrence against large-scale attacks by its longtime adversaries. Despite huge military losses, Iran’s stranglehold on the vital waterway for 20% of the world’s oil exports won’t be broken anytime soon. Tehran’s asymmetric tactics were carefully planned to offset U.S. and Israeli military advantages, raising the pressure on Trump to halt the conflict.”
April 9 – Bloomberg (Grant Smith): “Oil tankers and other vessels seeking to transit the Strait of Hormuz must liaise with the Iranian military to ensure their safe passage, the country’s deputy foreign minister told ITV… ‘Each tanker and vessel should make necessary arrangements with Iranian authorities to securely pass,’ Saeed Khatibzadeh said. There are ‘technical restraints’ resulting from the conflict, such as mines, that require caution, he added.”
April 9 – Reuters (Enas Alashray, Yomna Ehab and Sheila Dang): “Attacks on Saudi energy facilities have cut the kingdom’s oil production capacity by around 600,000 barrels per day and throughput on its East-West Pipeline by about 700,000 bpd, Saudi state news agency SPA reported… The latest attacks, including previous strikes on some facilities, also disrupted operations at key oil, gas, refining, petrochemical and electricity sites in Riyadh, the Eastern Province and Yanbu Industrial City, SPA said.”
April 6 – Wall Street Journal (Rory Jones, Brian Spegele and Austin Ramzy): “In the first Trump administration, the U.S. launched a ‘maximum pressure’ campaign to cut Iranian oil from the global market and eliminate Tehran’s biggest source of revenue. Today, Iran sells billions of dollars’ worth of oil every month. For that, it can thank one country: China. Tehran’s Asian partner has dramatically increased the amount of Iranian oil it buys as sanctions have gotten tighter. It now takes nearly every drop Iran produces, compared with around 30% a decade ago. To make those purchases possible, Chinese buyers have worked closely with Iran to expand what U.S. officials and researchers say has become one of the world’s largest sanctions-evasion networks.”
April 7 – Associated Press (Qassim Abdul-Zahra): “American journalist Shelly Kittleson, who was kidnapped from a Baghdad streetcorner last week, was released Tuesday… The development came after the powerful Iran-backed Iraqi militia Kataib Hezbollah said… it had decided to free Kittleson, who was abducted on March 31. Its condition was that Kittleson must ‘leave the country immediately’ upon her release.”
Iran War Ramifications Watch:
April 8 – Bloomberg (Alex Wickham): “The ceasefire in Iran has reinforced views among both adversaries and the NATO alliance that President Donald Trump’s campaign against the Tehran regime marks a strategic setback, bolstering China and Russia while squandering American strengths, according to people familiar with the thinking across capitals in Europe and the Middle East. While Moscow and Beijing fear US military and intelligence superiority, they have seen it couldn’t force Iran’s capitulation... The tensions in the North Atlantic Treaty Organization, which culminated in Trump threatening to leave the alliance, have left lasting doubts over his commitment to its defense.”
April 8 – Axios (Ben Geman): “Untangling the largest disruption in oil market history won't happen quickly or easily — and that means continued high prices and scarcity in major importing countries. A big thing to watch following the U.S.-Iran ceasefire deal is whether it gives tanker owners enough certainty to begin resumption of large-scale traffic of oil, petroleum products and other commodities through the Strait of Hormuz. ‘Confidence-building measures in coming days are going to be key to restoring shipments,’ Joe Brusuelas, chief economist at… RSM US, said… He notes that insurance for the tankers will need to be reestablished, and that means figuring out the specific conditions Iran may impose, which remain murky right now.”
April 7 – Reuters (Alex Lawler): “European and Asian refiners are paying record high prices of near $150 a barrel for some crude oil grades, far exceeding prices for paper futures, highlighting the worsening supply crisis from the U.S.-Israel war with Iran. The Iran war has forced the shutdown of at least 12 million barrels per day - about 12% of world supply - from the Middle East due to Iran’s effective closure of the Strait of Hormuz.”
April 8 – Wall Street Journal (Collin Eaton): “The last South Korea-bound oil tanker to sail through the Strait of Hormuz dropped off its cargoes late last month. That is a grim omen for California, which relies on the Asian nation for jet fuel shipped 6,000 miles across the Pacific. The reverberations of the Iran war are poised to hit California harder than other states. That is because California imports roughly 75% of its crude oil, almost one-third of which comes from the Middle East. It also gets jet fuel and gasoline from countries whose refineries depend on the flow of oil from the Persian Gulf.”
April 7 – Reuters (Shariq Khan and Siddharth Cavale): “Fuel prices could keep rising for months even after the Strait of Hormuz reopens, the U.S. Energy Information Administration said…, deviating from President Donald Trump’s assurances that consumers will see immediate relief when the war with Iran ends… The agency said full restoration of oil flows through the Strait of Hormuz will take months even after the war ends, keeping prices elevated until flows resume fully and Middle Eastern producers return to normal output.”
April 6 – New York Times (Alexandra Stevenson and Murphy Zhao): “The energy shock caused by the war in the Middle East caught China, the world’s top buyer of oil, by surprise. But Beijing has been preparing for a crisis like this for years. China has stockpiled increasingly large amounts of oil. It has pursued renewable sources of energy like solar, wind and hydropower so aggressively that its demand for refined oil, diesel and gasoline is falling. And it has harnessed technology to reduce its reliance on the foreign-sourced raw materials that go into the massive output of its factories.”
April 6 – Reuters (Michael S. Derby): “Supply chain pressures heated up in March to levels last seen at the start of 2023, data released by the Federal Reserve Bank of New York said… In its latest Global Supply Chain Pressure Index, the bank said that the measure rose to 0.68, a modest rise from the 0.54 seen in February.”
April 6 – Associated Press (Ken Sweet): “JPMorgan… CEO Jamie Dimon warned in his annual shareholder letter that a ‘resilient’ U.S. economy could face renewed inflation pressures if the war in Iran disrupts global energy markets. Dimon described inflation as the potential ‘skunk at the party’ this year, cautioning that turmoil in oil and commodity markets could ripple through the economy, affecting everything from gasoline prices to manufacturing costs. He also warned that sustained inflation could force the Federal Reserve to keep interest rates higher for longer, posing risks to the broader economy and financial system.”
Trump Administration Watch:
April 9 – CNBC (Anniek Bao): “President Donald Trump said… U.S. military forces will remain deployed in and around Iran until Tehran fully complies with the ‘real agreement,’ warning that any breach would trigger a military response larger than anything seen before. ‘All US ships, aircraft, and military personnel...will remain in place in, and around, Iran, until such time as the REAL AGREEMENT reached is fully complied with,’ Trump wrote… ‘If for any reason it is not...the ‘Shootin’ Starts,′ bigger, and better, and stronger than anyone has ever seen before….’ ‘In the meantime our great Military is Loading Up and Resting, looking forward, actually, to its next Conquest,’ Trump added. He ended the post, which was published near midnight, with a declaration: ‘AMERICA IS BACK!’”
April 8 – Wall Street Journal (Lara Seligman, Alexander Ward and Michael R. Gordon): “President Trump’s declaration of ‘total victory’ in Iran left some close allies and several senior aides worried Wednesday that he is overstating what is a fragile cease-fire with Tehran, which remains capable of blocking ships in the Strait of Hormuz and attacking U.S. forces in the region. The president has been advised on the risks that could cause the cease-fire to crater and warned that Iran still retains dangerous military capabilities… More than half of Iran’s missile launchers have been destroyed, but a substantial number remain mostly buried deep underground, according to another U.S. official. The Islamic Revolutionary Guard Corps also retains dozens of small boats that can threaten ships in the Strait of Hormuz, the official said, even as strikes have sunk more than 90% of Iran’s regular Navy.”
April 8 – Axios (Barak Ravid): “Vice President Vance said Wednesday Israel has proposed to restrain itself when it comes to strikes in Lebanon as long as the negotiations between the U.S. and Iran are taking place. The Israeli military’s renewed attacks in Lebanon posed an immediate challenge to the stability of the ceasefire and led Iran to threaten to pull out of negotiations with the U.S. planned for Saturday. At least 254 people have been killed in Israel’s strikes… Stopping the Israeli strikes against Hezbollah… was one of Iran’s key demands for the ceasefire…. ‘The Iran–U.S. Ceasefire terms are clear and explicit: the U.S. must choose— ceasefire or continued war via Israel. It cannot have both. The world sees the massacres in Lebanon. The ball is in the U.S. court, and the world is watching whether it will act on its commitments,’ Foreign Minister Abbas Araghchi wrote…”
April 8 – Financial Times (Andrew England): “In the space of a drama-filled day, Donald Trump shifted from warning that Iran’s ‘whole civilisation will die tonight’ to announcing it was an ‘honour to have this Longterm problem close to a resolution’. Less than two hours before the US president’s deadline for the Islamic republic to reopen the Strait of Hormuz or face being bombed back to the ‘stone ages’, Trump agreed to a two-week ceasefire… It was conditioned on Tehran agreeing to the immediate reopening of the key waterway… Shortly afterwards, the Islamic regime announced it had accepted the ceasefire, and would allow safe passage through the strait ‘via coordination’ with Iran’s military — the very force holding the waterway hostage.”
April 8 – Wall Street Journal (Annie Linskey and Robbie Gramer): “The White House is considering a plan to punish some members of the NATO alliance that President Trump thinks were unhelpful to the U.S. and Israel during the Iran war, according to administration officials. The proposal would involve moving U.S. troops out of North Atlantic Treaty Organization member countries deemed unhelpful… and stationing them in countries that were more supportive… The plan, which has circulated and gained support among senior administration officials in recent weeks, is early in conception and one of several the White House is discussing to punish NATO. It underscores the growing rift between the Trump administration and European allies following the president’s decision to launch the war with Iran.”
April 7 – CNBC (Kevin Breuninger): “President Donald Trump… heaped praise on Hungarian Prime Minister Viktor Orbán after Vice President JD Vance called his boss from the stage of a political rally… in Budapest. ‘I love that Viktor, I’ll tell you, he’s a fantastic man, we’ve had a tremendous relationship,’ Trump said as Vance held his phone’s speaker up to a microphone on the stage. The efforts by Trump and Vance, who traveled to Hungary for the first time as a public official to boost Orbán’s candidacy, came as polls show the incumbent leader is set to lose his upcoming election. Orbán, a conservative nationalist whose closeness with Russian President Vladimir Putin throughout the war in Ukraine has made him an outlier among European leaders, has long been a favorite of Trump.”
April 9 – Reuters (Katharine Jackson): “White House economic adviser Kevin Hassett said… he was confident Kevin Warsh would start as Federal Reserve chairman in May and that he did not expect current Fed chairman Jerome Powell to remain on the board. ‘I’m highly confident that that will happen,’ Hassett told Fox…, adding that he believed a confirmation hearing for Warsh was on track to begin next week.”
Budget Watch:
April 7 – New York Times (Tony Romm and Annie Karni): “For decades, the U.S. government has helped poor Americans pay their home heating and cooling bills. It sends money to states, which then administer the aid, assisting nearly six million households nationally. With a roughly $4 billion budget, the bipartisan program known as LIHEAP is just a sliver of a sprawling federal balance sheet that ranges well into the trillions each year. Yet it counts among the vast set of federal aid that President Trump is trying to eliminate, as he scrounges for ways to cut costs at home and fund a larger, more expensive military. Mr. Trump has eyed a series of potentially unpopular and divisive domestic spending cuts for the next fiscal year, in a move that may test the political appetite and financial health of a cost-weary American public.”
New World Order Watch:
April 9 – Politico (Victor Jack, Nette Nostlinger and Eli Stokols): “U.S. President Donald Trump unloaded his frustration with NATO allies in a bad-tempered meeting with Secretary-General Mark Rutte… — and indicated he was considering reprisals for lack of support over the war in Iran. Rutte met Trump behind closed doors as part of a long-scheduled visit that quickly turned into a life-support mission after the U.S. president repeatedly threatened to quit the alliance… According to two European officials…, Trump used the White House meeting as a venting session for the president to air out his frustration about Europe’s refusal to participate in the Iran operation.”
April 6 – Wall Street Journal (Yaroslav Trofimov): “Crowning a year of disputes with the Trump administration over trade tariffs, support for Ukraine and the future of Greenland, the Iran war has placed America’s friends in Europe, Asia and the Middle East in front of an uneasy dilemma. Their most important ally is acting in ways that they see as erratic and that have already caused hardship and uncertainty. The war has sapped their economies and even bigger shocks loom if the Strait of Hormuz remains closed, deepening the worldwide energy crisis. Many—on both sides of the Atlantic—wonder if they are even allies anymore.”
April 8 – Politico (Nicholas Vinocur): “Donald Trump makes a mess. Europe gets called on to clean it up, or at least pay a hefty price to deal with it. That’s a pattern the EU fears is about to repeat itself in the Strait of Hormuz after the U.S. president announced a ceasefire agreement with Iran, five EU diplomats and officials said. European leaders had already promised to help clear the contested waterway once the fighting stopped. Not only could France, Germany and the U.K. now be on the hook to pay for an expensive operation escorting ships and clearing mines in the strait, but their commercial vessels may also have to pay large fees that didn’t exist before the war just for the privilege of passing through. Trump said on Wednesday he was considering a ‘joint venture’ with Iran and Oman to levy a toll.”
April 8 – Politico (Chris Lunday): “The U.S. under Donald Trump is seen as more of a threat than an ally, according to a new POLITICO European Pulse survey of six major EU countries. Since returning to power in January 2025, Trump has questioned Washington’s commitment to NATO, threatened to annex Greenland and Canada, hit allies with tariffs and launched a war with Iran that European countries refused to join. Only 12% of those polled in March in Poland, Spain, Belgium, France, Germany and Italy saw America as a close ally while 36% saw it as a threat. By contrast, China was seen as a threat by 29% of those polled across the six countries.”
U.S./Russia/China/Europe/Iran Watch:
April 8 – CNBC (Anniek Bao): “U.S. President Donald Trump appears to have set his eyes on Greenland again while venting frustration at NATO, as the diplomatic fallout from Iran war exposes rifts in Washington’s ties with the security alliance. In a… post…, Trump said that ‘NATO WASN’T THERE WHEN WE NEEDED THEM, AND THEY WON’T BE THERE IF WE NEED THEM AGAIN. REMEMBER GREENLAND, THAT BIG, POORLY RUN, PIECE OF ICE!!!’”
April 4 – Washington Post (Cate Cadell and Lyric Li): “As the war in Iran erupted five weeks ago, social media sleuths across Western and Chinese platforms flagged a wave of viral posts detailing equipment at U.S. bases, the movements of American carrier groups and granular breakdowns of how military aircraft were assembling for strikes on Tehran. The intelligence came from a fast growing new market: Chinese firms — some with links to the People’s Liberation Army — marrying artificial intelligence with open-source data to market information they claim can ‘expose’ the movements of U.S. forces.”
April 7 – Associated Press (Edith M. Lederer and Farnoush Amiri): “Russia and China… vetoed a U.N. Security Council resolution aimed at reopening the Strait of Hormuz that had been repeatedly watered down in hopes those two countries would abstain. The vote — 11-2, with two abstentions from Pakistan and Colombia — took place shortly after U.S. President Donald Trump issued an unprecedented threat that a ‘whole civilization will die tonight’ if Iran does not open the strategic waterway and make a deal.”
Taiwan Watch:
April 9 – Financial Times (John Thornhill): “Iran’s effective blockade of the Strait of Hormuz has highlighted the alarming impact of tightening a trading chokehold. Yet there is an even bigger potential pain point in the global economy: Taiwan’s control of more than 90% of the world’s leading-edge silicon chips, which run almost every western smartphone, data centre, AI model and smart weapons system. The rise of Taiwan’s chip industry is one of the most remarkable industrial stories of our century. But the island of 23mn people lies on a geostrategic… faultline, roughly 100 miles off the coast of China. Beijing has long trumpeted its ‘national rejuvenation’ mission to incorporate the island. It has also significantly boosted its military capabilities to help achieve that end. Any serious disruption to the global supply of the world’s most valuable semiconductors would surely bring the current AI investment boom in the US screeching to a halt.”
AI Bubble/Arms Race Watch:
April 6 – Wall Street Journal (Max Rust and Will Parker): “Maine looks poised to become the first state to freeze building of new data centers with legislation that could pass this spring, but community backlash against these properties is spreading across the country. Lawmakers in more than 10 states have proposed temporary bans on data-center construction this year. Dozens of county and city governments have already passed such measures.”
April 8 – Los Angeles Times (Queenie Wong): “The artificial intelligence boom has driven up San Francisco’s median home sales price to a record $2.15 million. Real estate brokerage firm Compass said that recent transactions showed that some parts of the tech capital have emerged from its doom loop on the back of the surge in AI investment and hiring. The March median home price, up 18% from last year, surpassed the April 2022 peak of $2 million, according to Compass. Median condo sale prices jumped to $1.36 million, up 27% from a year earlier, and slightly below the $1.37 million peak in April 2022. The new data show how the rise of AI is making it more expensive and competitive to live in San Francisco…”
Bubble Watch:
April 9 – Reuters (Kanchana Chakravarty): “Assets under management for U.S. exchange-traded funds could more than double to $25 trillion by the end of this decade, Citigroup said…, as investors seek the increasingly popular asset class for low-cost, diversified exposure across markets. As of March 2025, the U.S.-listed ETF industry’s total assets stood at about $10.4 trillion… The Wall Street brokerage had previously forecast the industry's AUM to hit $19 trillion by 2030 and $29 trillion by 2035.”
April 5 – Financial Times (Alexandra Heal): “The value of buyouts by private equity groups fell by more than a third in the first quarter of the year… Private equity groups agreed acquisitions worth $172bn in the three months to March, a 36% fall from the previous quarter, according to Dealogic. The figure was an 8% drop from the same period last year… Rising concerns about the effect of AI on software groups — one of the buyout industry’s most lucrative sectors in recent years — have also punctured hopes that private equity was turning a corner after a prolonged downturn.”
Crypto Bubble Watch:
April 6 – Bloomberg (Melos Ambaye): “Bitcoin accumulator Strategy Inc. registered a roughly $14.5 billion unrealized loss in the first quarter as the value of the Michael Saylor-led company’s cryptocurrency holdings fell. Bitcoin tumbled more than 20% in the three months… Strategy held more than $50 billion of cryptocurrency at quarter-end.”
Inflation Watch:
April 10 – CNBC (Jeff Cox): “Consumer prices spiked in March as the Iran war sent energy costs soaring and took the Federal Reserve further from its inflation target, according to a Bureau of Labor Statistics report... The consumer price index increased a seasonally adjusted 0.9% for the month, putting the annual inflation rate at 3.3%, pushed by a 10.9% surge in energy costs… The annual rate was the highest since April 2024 and up from 2.4% in February.”
April 9 – Associated Press (Christopher Rugaber): “A key measure of inflation stayed high in February, before the war in Iran spiked gas prices, a sign that everyday costs were elevated even before the conflict began. An inflation gauge monitored by the Federal Reserve rose 0.4% in February from January, up slightly from the previous month. Compared with a year ago, prices rose 2.8%... Excluding the volatile food and energy categories, core inflation also rose 0.4% in February from January, and it was 3% higher than a year earlier. The annual figure is slightly below January’s reading of 3.1%... ‘Consumer inflation was firming even prior to the outbreak of war in the Middle East, and it is primed to jump sharply higher in March,’ Kathy Bostjancic, chief economist at Nationwide, wrote…”
April 6 – Bloomberg (Mark Niquette and Vince Golle): “Skyrocketing fuel prices due to the Iran war are fanning the embers of transportation costs, which were already rising due to a shrinking pool of drivers in the US. Trucking operators saw diesel prices spike by almost 50% since the start of the US-Israel war against Iran at the end of February. Haulers have responded by raising the weekly per-mile fuel surcharge paid by shippers to its highest since 2022… Those surcharges come on top of a months-long increase in truck-equipment rates…”
April 6 – USA Today (Maddie McGay,): “If you think your budget has been tight lately, you might look at your insurance bill. A 45.8% increase in regulator-approved home insurance rates is one that's severely impacting housing affordability. A new report from LendingTree… found that home insurance rates have been rising nearly twice as fast as inflation in recent years… From 2020 to 2025, there was a 19.7 percentage point gap between this 45.8% home insurance rate increase nationwide and the 26.1% inflation rate. This means that home insurance rates rose about 1.8 times faster than inflation during this time…”
April 8 – Bloomberg (Rainier Harris and Charles Gorrivan): “Surging prices for plastic caused by disruptions from the Iran war have pushed one US toymaker to buy up more inventory than needed before the conflict boosts costs even higher. Factories in China, Vietnam and India have seen price hikes as high as 55% for materials such as low-density polyethylene, a widely used plastic…”
April 9 – Wall Street Journal (Nicole Friedman): “Americans are paying more than ever to homeowners associations, adding to the mounting costs that are driving many would-be buyers out of the housing market. The median monthly condo fee was $420 in 2025, up 29% from 2019, according to a Realtor.com... For single-family homeowners, median HOA fees rose 26% from 2019 to $63 last year. HOA and condo fees aren’t the biggest expense in many household budgets, but they are rising at the same time as near-record home prices and elevated mortgage rates have worsened home-buying affordability. Property-tax bills, home-insurance premiums and utility costs have also climbed in many parts of the country.”
April 9 – Wall Street Journal (Esther Fung): “The U.S. Postal Service said it plans to raise the price of a First-Class Mail Forever stamp about 5% to 82 cents starting July 12, up from 78 cents, as the agency tries to navigate a financial crisis.”
April 6 – Bloomberg (Laura Nahmias): “New York families need six-figure incomes to live without government assistance in all five boroughs of New York City, according to two new reports. One report, released by the Fund for the City of New York, measures the ‘self-sufficiency standard,’ or the income a working household needs to earn to meet its basic needs… The median annual income necessary for a four-person family with two school-age kids to afford to live in the city reached $133,000 in 2026…”
Federal Reserve Watch:
April 9 – New York Times (Colby Smith): “Early on in the war with Iran, Jerome H. Powell, the chair of the Federal Reserve, seemed vexed about the state of inflation after the central bank’s prolonged battle to try to tame it. Overall consumer price growth, based on the Fed’s preferred gauge, had in the past year made little progress toward its 2% target. Another closely watched metric, tracking inflation in services such as transportation and personal care, had also barely budged, sitting well above its 20-year average of 2.7%. ‘It’s frustrating,’ Mr. Powell told reporters… The Fed, which had been wrestling with elevated price pressures for five years, needed to see progress on a multitude of fronts to feel confident about its grip on inflation, he said. Mr. Powell warned that without that, additional interest rate cuts would be hard to justify.”
April 8 – Axios (Courtenay Brown): “Some Federal Reserve officials wanted to keep interest rate increases on the table, given the stubborn inflation that was set to be amplified by the Iran war, according to minutes from the central bank’s March 17-18 policy meeting… ‘Many participants judged that, in time, it would likely become appropriate to lower the target range for the federal funds rate if inflation were to decline in line with their expectations,’ the minutes show. But even a couple of those officials said they pushed out their projections for rate cuts ‘further into the future in light of recent readings on inflation,’ the minutes show. ‘Some’ officials cited a ‘strong case’ for the Fed to describe future interest rate decisions as ‘two-sided’ — acknowledging the possibility for both rate cuts and rate hikes…”
April 7 – Reuters (Michael S. Derby): “Federal Reserve Bank of New York President John Williams said… the Middle East war energy shock will drive up overall inflation over the course of this year, while reiterating monetary policy is in the right place to deal with what happens in the economy. The war impact ‘will directly go into headline inflation because energy prices are an important component of that,’ Williams said… ‘I expect headline inflation to actually be elevated, you know, in the middle of this year’ and come in at around 2.75% for the year, he added.”
April 6 – Associated Press (Christopher Rugaber): “A top Federal Reserve official said… an interest rate hike could be appropriate if inflation remains persistently above the central bank’s 2% target, the latest sign that some policymakers are moving away from a bias toward reducing borrowing costs. Beth Hammack, president of the Federal Reserve Bank of Cleveland, said… her general preference is for the Fed keep its benchmark interest rate unchanged ‘for quite some time’… ‘I can foresee scenarios where we would need to reduce rates… if the labor market deteriorates significantly… Or I could see where we might need to raise rates if inflation stays persistently above our target’.”
April 7 – Reuters (Ann Saphir): “Chicago Federal Reserve Bank President Austan Goolsbee said… he is worried that the Iran war will drive inflation higher even as it slows the U.S. economy, putting the Fed in an uncomfortable position where there is no obvious ‘cookbook’ for what to do. ‘The prices spiked from tariffs and they were supposed to go away, and this is now hitting before that went away… You’re just in a very uncomfortable situation and there's not an obvious cookbook of should we… heat things up or cool things down. It’s not obvious which way to do it,’ Goolsbee said.”
U.S. Economic Bubble Watch:
April 6 – Bloomberg (Julia Fanzeres): “The US service economy expanded in March at a slower pace as employment shrank by the most since 2023 and input prices accelerated sharply. The Institute for Supply Management’s gauge of prices paid for services and materials jumped to 70.7, the highest since October 2022… The 7.7-point increase from a month earlier was the largest in nearly 14 years, comparable to the change seen in the group’s manufacturing survey. The ISM services index fell 2.1 points to 54, dragged down by weaker employment and less growth in business activity.”
April 6 – Reuters (Lucia Mutikani): “U.S. services sector growth slowed in March, while prices paid by businesses for inputs increased by the most in more than 13 years, an early indication that the prolonged war with Iran was boosting inflation pressures… ‘Companies across many industries reported seeing higher gas and diesel pricing, and inventories of multiple goods increased to withstand supply chain disruptions or short-term oil price impacts,’ said ISM Services Business Survey Committee Chair Steve Miller. ‘Such construction products as lumber, copper and steel were noted as up in price’.”
April 9 – Associated Press (Matt Ott): “U.S. applications for unemployment benefits rose last week... The number of Americans applying for jobless aid for the week ending April 4 jumped by 16,000 to 219,000 from the previous week’s 203,000… The total number of Americans filing for unemployment benefits for the previous week ending March 28 fell by 38,000 to 1.79 million, the fewest in nearly two years.”
April 9 – Bloomberg (Julia Fanzeres): “Wage growth among higher-income US households is now outpacing lower-earning cohorts by the widest margin in over a decade, according to an analysis by the Bank of America Institute. While higher-income households’ after-tax wages and salaries climbed 5.6% in March from a year earlier…, middle-income earners saw their pay rise a more tepid 2%. Wages among low-income groups advanced just 1%. The gap is the widest since the data series began in 2015.”
April 7 – Financial Times (Emily Peck): “Confidence among American small-business owners fell for a second consecutive quarter, according to the U.S. Chamber of Commerce Small Business Index… The numbers signal a ‘growing unease’ over rising inflation and the Iran war… The survey took place from Feb. 25-March 11… The index is still higher than this time last year, after President Trump’s ‘Liberation Day’ tariffs crushed business confidence. Researchers surveyed 750 small-business owners and operators who run companies with 500 or fewer people. 53% of the small-business owners said inflation was their top challenge, up from 45% in the last three months of 2025. Only 37% said they expect to make new investments in the year ahead, down from 44% in Q4.”
April 9 – Associated Press (Paul Wiseman): “The American economy, slowed by last fall’s 43-day government shutdown, grew at a sluggish 0.5% annual pace from October through December… U.S. gross domestic product… decelerated in the fourth quarter after registering impressive growth of 4.4% from July through September and 3.8% from April through June. The latest number was marked down from the… previous estimate of 0.7% fourth-quarter growth.”
April 7 – Reuters (Lucia Mutikani): “New orders for key U.S.-manufactured capital goods increased more than expected in February while shipments of those products rose solidly, suggesting business spending on equipment was on firmer footing before the war with Iran… Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, rose 0.6% after a downwardly revised 0.4% drop in January…”
China Watch:
April 6 – Bloomberg: “China’s unrelenting housing downturn is forcing the country’s banks to confront a thorny issue: sinking real estate values are pushing millions of mortgages underwater, increasing the risk of losses for lenders and property owners. Behind the scenes, Chinese bankers and officials are getting creative to contain the fallout. Several state-owned banks have approached cash-strapped borrowers and offered them payment holidays on their mortgages for as long as two years… Some lenders are working with individual customers to find buyers for their homes, instead of calling defaults and foreclosing on the properties, the people said.”
Europe Watch:
April 5 – Financial Times (Henry Foy and Amy Kazmin): “EU officials are urging governments to avoid excessive support to offset surging energy prices, warning that the shock triggered by the Iran war could tip into a fiscal crisis. The European Commission is insisting in discussions with member states that proposed energy subsidies, tax cuts and price caps be limited in time and scope… Brussels is seeking to avoid a repeat of the 2022 energy crisis, which fuelled rampant inflation and ballooning deficits.”
Emerging Market Watch:
April 7 – Financial Times (Delphine Strauss): “Emerging markets have become much more vulnerable to global shocks such as the Iran war because of their increased reliance on ‘flighty’ sources of capital such as hedge funds in recent years, the IMF has warned. Purchases of emerging market stocks and bonds by foreign investors have increased eightfold since the 2008 global financial crisis, with cumulative inflows approaching $4tn in 2025, mostly in the form of debt, the fund said… Debt held by foreign investors now averages 15% of GDP in emerging markets, up from 9% in 2006, the IMF said. Four-fifths of this capital comes from non-bank sources such as hedge funds and investment funds, double the share seen two decades ago.”
Social, Political, Environmental, Cybersecurity Instability Watch:
April 9 – Wall Street Journal (Mike Cherney): “From the Baltic Sea to the Pacific Ocean, a global scramble is under way to protect submarine cables vulnerable to potential sabotage. Governments, militaries, cable owners and tech startups are taking action to bolster the defenses of the world’s underwater cable network, through which most international data traffic travels. In Northern Europe, the North Atlantic Treaty Organization is using ships and drones to ward off possible sabotage, after a Russia-linked vessel cut vital cables in 2024. On Thursday, the U.K. exposed what it called a secret, month-long operation by Russian submarines carrying out ‘nefarious activity’ over key underwater infrastructure. It warned Russian President Vladimir Putin that any damage would be met with ‘serious consequences.’ In Asia, Taiwan is increasing coast guard patrols and penalties for damaging cables, hoping to deter would-be saboteurs.”
April 9 – Bloomberg (Lauren Rosenthal): “An unusually hot, snowless winter has fueled a fast start to the spring fire season across large swaths of the western, central and southeastern US, disrupting businesses and upending daily life. Nearly 19,000 have ignited nationwide since Jan. 1, about 6,900 more than normal compared to the past decade. In recent weeks, flames have scorched nearly 1 million acres of cattle grazing land and prairie in the Great Plains and dampened tourism in parts of the Everglades… Air tankers, frequently deployed over the West, are already in high demand, weeks ahead of schedule.”
April 9 – Bloomberg (Lauren Rosenthal): “A planet-heating El Niño is favored to emerge by August, with rising odds of an unusually powerful event that threatens record-breaking temperatures during the Northern Hemisphere’s summer. In an outlook…, the US Climate Prediction Center said there’s a 25% chance for the El Niño to become ‘very strong’ — based on warming in a key stretch of the tropical Pacific — by February 2027. Even mild El Niño events can disrupt crops in Vietnam, Brazil and parts of Africa, while raising wildfire risks in Australia and suppressing hurricane activity in the Atlantic. The possibility of a strong event with sharper impacts on global weather patterns hinges on the development of wind anomalies across the equatorial Pacific in the coming months, forecasters said.”