Government Bond ETFs
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What caused the rapid reversal of the latest sell-off in the USA? Deutsche Bank: The main reasons are policy easing and the economy not entering recession.
Deutsche Bank stated that this round of market reversal is mainly attributed to three points: macroeconomic data shows that the USA economy has not fallen into recession; the decline in oil prices has alleviated inflationary pressures, providing room for potential interest rate cuts. Finally, the policies of the USA government have softened, and the tendency for trade protectionism has weakened.
The policy of lowering the reserve requirement and interest rates has finally been officially announced, releasing trillions in liquidity, while the bond market responds with "silence".
① From today's bond market yield performance, long-term bond yields are rising rapidly, with the yield on the 10-year government bond active bond 250004 increasing by 1.7 BP to 1.638%. ② If funds are retracted through OMO while lowering the reserve requirement, it will promote Crediting, but not leverage in the bond market.
Bescent warns that the USA is at a "warning line" for debt, but still insists it will not fall into default.
① The U.S. Treasury Secretary Bentsen warned again on Tuesday in response to questions from the House of Representatives that the U.S. Treasury is at the "red line," close to exhausting its ability to stay within the federal debt ceiling; ② However, Bentsen assured once again that the U.S. government would never default on its debt and promised that the Treasury would not use "tricks" to circumvent the debt ceiling.
The USA Treasury's 10-year bond auction was strong, with robust overseas investment demand.
Compared to the almost "zero liquidity" tension during the last 10-year U.S. Treasury auction, the market is clearly much calmer this time. After the auction results were released, U.S. Treasury yields fell sharply. Michael Faulkender, Deputy Secretary of the U.S. Treasury, stated that today's 10-year U.S. Treasury auction was very successful.
Beijing Century claims that the USA is in a "warning stage" regarding the debt ceiling, and the US government will never default.
On Tuesday, the USA Treasury Secretary Yellen reiterated that the USA Treasury is on a "warning track", nearing the limit of its ability to remain within the federal debt ceiling, but he did not provide a specific timeline.
Deutsche Bank: The sell-off of USA Assets has been excessive.
Deutsche Bank pointed out that at the beginning of April, the USA market experienced significant volatility, but the panic regarding the dollar, USA Consumer data, and overall confidence in USA Assets may be exaggerated. From a relative valuation perspective, some cyclical USA Consumer stocks may begin to show investment attractiveness. Although policy volatility may persist, the narrative of "selling dollar Assets" may have reached its peak.
The New Taiwan dollar has surged, life insurance has become a major risk, and there is a large-scale mismatch of dollar Assets.
The life insurance industry in Taiwan, China, has long invested a large amount of Assets in US Bonds, and in order to maintain the yield, it only partially hedges its continuously expanding Forex risk exposure, effectively betting its solvency on the New Taiwan Dollar remaining weak against the US Dollar. As the New Taiwan Dollar surges, life insurance companies in Taiwan, China, are rushed to reduce or hedge their dollar exposure.
The "Big Four" mass layoffs in the USA.
Against the backdrop of slowing growth in the consulting Business, PwC laid off 1,500 employees in the USA. This is to address the historically high employee turnover rate, while low turnover has exacerbated the financial pressures faced by the Big Four accounting firms.
Just last Friday, under the dual pressures of the dollar and U.S. Treasury bonds, someone exploded!
The New Taiwan Dollar has seen astonishing gains for two consecutive trading days, possibly because Taiwan's insurance giants are collectively hedging against their dollar exposure in a state of panic. A long-brewing financial storm is quietly approaching: the $460 billion currency mismatch of life insurance companies is like a ticking time bomb, ready to detonate as the dollar depreciates. As the dollar enters a potential long-term depreciation phase, this financial storm may just be a prelude to the Global financial restructuring.
The sell-off is not over yet! USA Assets are still being "disdained" by overseas investors…
① According to data provided by Deutsche Bank, despite the market recovering over the past week, foreign investors' willingness to invest in USA assets continues to decline; ② Deutsche Bank's Forex research director George Saravelos believes that the recent data on USA capital flows is concerning.
"Debt ceiling" causes trouble! The U.S. Treasury Department's borrowing expectations for Q2 increase threefold, excluding the impact, borrowing decreases instead of increasing.
The U.S. Treasury announced on Monday that the estimated net borrowing for the second quarter is 391 billion dollars higher than expected in February, due to Congress not yet raising the federal debt ceiling, and the initial cash reserves at the beginning of the second quarter being far lower than previously anticipated. The Treasury stated that if the cash balance at the beginning of the season is not taken into account, the estimated borrowing for the second quarter is actually 53 billion dollars lower than the forecast made in February. Some analysts believe this is because DOGE is indeed having an effect, improving the fiscal situation and reducing financing demand.
Besent's new bond issuance strategy: short-term bonds "steady", long-term bonds "gradual", closely monitoring stablecoin "major investors".
On Wednesday, the USA Treasury will announce the bond auction scale for the quarter from May to July. The market expects the Treasury to continue issuing bonds at the established pace, with next week's quarterly redemption auction expected to remain around 125 billion dollars. Some believe the market may interpret this as the Treasury being more inclined to rely on short-term bonds, which is a positive signal for long-term bonds.
U.S. stock index futures slightly lower as the busiest week of Earnings Reports season approaches | Highlights for tonight.
①IBM plans to invest 150 billion USD in the USA over the next five years; ②MicroStrategy increased its shareholding by 15,355 Bitcoins last week; ③Rating agencies have downgraded the outlook for US ports to negative; ④Reports: Tencent, Alibaba, and ByteDance are scrambling to purchase computing power resources.
Economic officials of "Trump 1.0" state that the impact of tariffs will become apparent nationwide by the end of next month, with the poorest suffering the most.
The former director of the White House National Economic Council stated that the "soft data" reflecting future expectations is weakening; before commodity prices rise due to tariffs, those with lower income levels or economic strength will use 100% of their salaries to purchase commodities, while the wealthy will save a higher proportion of their income, with the former being more severely impacted.
Who can tame that "drunken dragon"? The market is completely counting on Besente.
The last line of defense on Wall Street?
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Trump's 'war' with the Federal Reserve has permanently damaged the credit of U.S. bonds.
Concerns about the independence of the Federal Reserve have led investors to intensify the selling of U.S. Treasuries, questioning the credibility of Treasuries as a safe-haven asset. Analysts point out that if the Federal Reserve shifts to a more lenient stance on inflation as Trump desires, or if Trump prematurely nominates a 'shadow chairman' to intervene in monetary policy, the Treasury market will decline further.
New Federal Reserve News Agency: Trump has made it "harder" for the next Federal Reserve chairman.
The market worries that Trump's public belittling and pressure on Powell will leave an indelible "original sin" for Powell's successor. Regardless of who the next chairman is, the independence of the Federal Reserve will be in question. An independent central bank is often seen as more objective and professional, making its decisions more likely to guide market expectations and stabilize the economy. Since President Clinton's era, most U.S. presidents have adopted a stance of "non-interference" with the Federal Reserve.
The U.S. Treasury's 7-year bond auction was lackluster, with the problem still lying in overseas demand.
The portion of indirect bids representing overseas demand only secured 59.3% of the total allocation, down from March's 61.2%, marking the lowest level since December 2021. This marks the second consecutive auction of the 7-year bond to experience a tail. Analysts say that if foreign demand really collapses, the Federal Reserve will have no choice but to intervene and start monetizing these government bonds.
Citadel CEO Griffin: Trump's trade war has become "meaningless", damaging the USA's Assets brand and making Americans poorer.
Griffin believes that Trump's actions have tarnished the once "unparalleled" excellent reputation of USA Assets, including US Treasury bonds, the strength of the US dollar, and national creditworthiness. His tariff policies have failed to bring manufacturing back to the USA and have instead made the USA "20% poorer all around," making the trade war "meaningless" and producing no winners.