For posterity, SpaceX traded 522 million shares in its initial Friday trading session, gaining 19.2%, and inflating market capitalization to $2.105 TN. By market cap, SpaceX trails only Nvidia, Alphabet, Apple, Microsoft and Amazon in the U.S. The world has its first trillionaire.
“‘Praise the Lord’: Traders Feel Lucky to Get a Piece of Space X.” “‘Manic Impulsiveness’ Drives SpaceX-Fueled Retail Risk Complex.” “SpaceX’s Goldilocks IPO Just Changed Markets Forever.” “Financials Up on Anticipation of Investment Banking Bonanza.” “Goldman and Morgan Stanley to Pocket $100 Million Each In SpaceX IPO Fees.” “The SpaceX Feeding Frenzy is Under Way.”
One would be hard-pressed to conceive of a more telling sign that a major market top is at hand. At least SpaceX, Trump claims of an imminent Iran deal, and an impending quarterly options/derivatives expiration made for lively market dynamics.
The Semiconductors rallied 9.4% (up 89% y-t-d!), while the Nasdaq100 recovered 2.3%. The Broker/Dealers surged 5.1% to within 1% of all-time highs. Not to be left in the dust, the small cap Russell 2000 jumped 3.9% to close the week at a record high (up 18.6% y-t-d). Curiously, the MAG7 Index dropped 2.5%, with losses from the May 29th high at 8.1%.
Crude was down 6% this week to a near three-month low. The Bloomberg Commodities Index dropped 2.4% to the low since March. It was almost enough to erase memories of Wednesday’s 4.2% y-o-y gain in May CPI, along with Thursday’s 6.5% y-o-y surge in PPI.
I would have expected more. Ten-year Treasurys this week mustered only a five bps yield decline, to 4.48%. I’ll note that 10-year yields closed the week 23 bps higher than when WTI last traded at the current level (April 17th). The rates market closed Friday pricing a 3.82% policy rate for December, down less than six bps this week.
Understandably, an apprehensive bond market remains on inflation watch. A $2 TN increase in perceived wealth (SpaceX) and all associated hoopla is not comforting. Financial conditions indicators pointed to looser conditions this week. High-yield CDS dropped 10 for the week to a near five-month low of 302 bps – and not far (13bps) from January’s multi-year lows. Investment-grade CDS declined two, also near a five-month low. “Broad Gains for Data Center-Heavy Week’s New US Junk Bonds.” “76% of Week’s New US Investment-Grade Bonds Sold Trade Tighter.” Wall Street is booming.
June 8 – Wall Street Journal (Sam Goldfarb): “Funding rounds and IPOs raising 11-figure sums. Blockbuster bond sales spanning three continents. The casual announcement of an $85 billion equity raise. Such is life on Wall Street at the dawn of the artificial-intelligence build-out. Tech companies are hungry for cash to invest in data centers, and investors are forking it over through all possible means, in all parts of the globe—a flurry of fundraising that has mostly supported markets by powering technological advances, even as it tests their ability to absorb it all. Alphabet’s announcement that it would raise $85 billion of equity was just the latest example. SpaceX, Anthropic and OpenAI are poised for public listings that could make this year the biggest ever for money raised through IPOs. Meanwhile, the AI hyperscalers Alphabet, Amazon.com, Meta Platforms, Microsoft and Oracle have issued $159 billion of bonds globally this year—up from $108 billion all of last year and just $17 billion in 2024…”
In such an extraordinary environment of excess, crosscurrents, and mounting fragility, it was helpful to have a new Z.1 (Q1) to sift through – data always good for illustrating where the rubber meets the road. Or, more descriptively, these days where hot rubber meets overheated pavement. This report sheds important light on historic Bubble developments.
Non-Financial Debt (NFD) expanded at a seasonally adjusted and annualized rate (SAAR) of $4.577 TN during Q1, up from Q4’s SAAR $3.829 TN - and significantly above Q1 25’s $2.706 TN. This degree of Credit growth is categorically inflationary. It’s worth noting that annual NFD growth averaged $1.874 TN during the decade 2010 through 2019. At SAAR $2.256 TN, the expansion of federal government borrowings accounted for roughly half of Q1 system NFD growth.
NFD expanded at a 5.67% rate during Q1, up from 2025’s 5.16%, which was the strongest growth back to 2022. Corporate borrowings jumped to an 8.83% pace (double 2025’s 4.25%), the fastest pace since 2020.
In an ongoing historic inflation of government debt, Treasury Securities increased a nominal $572 billion during Q1 to a record $30.642 TN. Treasuries expanded $2.194 TN over the past year – which would rank as the third largest annual increase. For perspective, prior to the pandemic, post-crisis 2010 held the record for growth in Treasury Securities at $1.590 TN. It’s also worth noting that Treasuries ended 2007 at $4.494 TN, about two years’ worth of current borrowings. Treasury Securities inflated a staggering $14.023 TN, or 84%, over the past 25 quarters, and $26.148 TN, or 582%, since 2007 – expanding from 31% of GDP to 96%. Including Agency Securities (up $74bn during Q1 to a record $12.562 TN), this ratio jumps to a record 136% of GDP.
As important as Washington’s unrelenting borrowing and spending binge has been, it’s recent financial sector ballooning that captures my analytical focus. Massive financial sector leveraging is a powerful source of liquidity fueling booming securities market Bubbles.
The firing on all cylinders Domestic Financial Sector expanded borrowings SAAR $2.514 TN during Q1, up from Q4’s SAAR $481 billion, a blistering 9.87% pace, more than double 2025’s 4.21% growth. Financial Sector assets rose $12.314 TN over the past year, or 8.5%, to a record $157.356 TN.
I’ll break with my typical routine and return to the banks, prioritizing the epic boom in market-based securities finance. Broker/Dealer Assets inflated a booming $414 billion, or 26.4% annualized, during Q1 to surpass the previous high from Q1 2008, to a record $6.689 TN. Broker/Dealer Assets rose $930 billion, or 16.2%, over the past year, and $2.265 TN, or 51%, over 14 quarters.
Broker/Dealer Repo assets (loans) rose $82 billion, or 16.5% annualized, to a record $2.072 TN, with six-month growth of $215 billion (22% annualized). Repo Assets were up $741 billion, or 56%, over 14 quarters. The asset “Loans” gained $34 billion, or 14.9% annualized, to a record $953 billion, with one-year growth at a blistering $210 billion, or 28.3%. Miscellaneous Assets gained $199 billion during Q1 to a record $1.912 TN, with one-year growth of $276 billion, or 16.9%.
Broker/Dealer Debt Securities holdings jumped another $109 billion, or 33.6% annualized, to a record $1.408 TN, with one-year growth of $235 billion, or 20%. Broker/Dealer Debt Securities surged $806 billion, or 134%, over a historic 14 quarters. Treasury holdings rose $78 billion during Q1 to a record $620 billion, with 14-quarter growth of $394 billion, or 174%. Up another $22 billion to $650 billion (matching the Q3 ’08 high), holdings of Agency Securities expanded $374 billion, or 135%, over 14 quarters.
How was such spectacular Broker/Balance sheet expansion financed, one might ask. For Q1, Repo Liabilities surged $213 billion, or 30% annualized, to $3.041 TN – the high back to Q1 2008. Repo Liabilities ballooned $343 billion, or 12.7% annualized, over the past year, and a noteworthy $1.427 TN (88%) over 14 quarters. This move mirrors the mortgage finance Bubble period’s 16-quarter doubling, which inflated Repo liabilities to the all-time 2007 high of $3.132 TN.
Elsewhere (sort of), “Other Financial Businesses” – the old “Funding Corps” - (“Includes funding subsidiaries, custodial accounts for reinvested collateral of securities lending operations.”) rose $51 billion (14.8% ann.) to a record (surpassing Q4 ’08) $1.529 TN – with one-year growth of $205 billion (15.5%). Funding Corp Assets have inflated a notable $900 billion, or 143%, since the end of 2019.
Total System Repo Liabilities surged another $293 billion, or 18% annualized, to $6.757 TN. Joining the Broker/Dealer 30% annualized Q1 growth club, Rest of World Repo Liabilities jumped $154 billion to a record $2.206 TN. Total System Repo Assets expanded $102 billion, or 4.9% annualized, to a record $8.341 TN. Repos Assets expanded $1.239 TN over five quarters. It’s worth mentioning that system Repo growth was reduced by the $109 billion contraction in the Fed’s Repo liability.
Money Market Fund Assets (MMFA) expanded yet another $99 billion to a record $8.290 TN. MMFA surged $892 billion, or 12.1%, over the past year. Over a historic 14-quarter monetary inflation, MMFA ballooned $3.205 TN, or 63%. Over this period, money market funds increased holdings of Treasury securities by $2.170 TN (to $3.426 TN) and Agencies by $608 billion ($1.100 TN). The MMFA largest holding, however, was Repos at $2.932 TN. For Q1, Agency holdings jumped $87 billion, or 34% annualized, to a record $1.100 TN (up $198bn y-o-y, 22%). By fund category, “government” funds gained 68% over 14 quarters to $6.756 TN.
While not at Wall Street’s intensity, the banking system is more than holding its own. Bank (“Private Depository Institutions”) Assets surged $568 billion, or 7.8% annualized, during Q1. Excluding the pandemic period, asset growth was second only to Q1 ’25 ($583bn). Total Bank Loans expanded another solid $239 billion (5.7% ann.) to a record $16.906 TN. Loans were $1.076 TN higher (6.8%) y-o-y. This compares to 2007’s annual record of $826 billion.
It’s worth noting that “Loans not elsewhere classified” (chiefly business) jumped $234 billion, or 16% annualized, during Q1 to a record $6.067 TN (up 14.3% y-o-y). Meanwhile, Mortgage loans added a tepid $29 billion (1.6% ann.), while Consumer Credit contracted $42 billion (6% ann.).
Banks’ Debt Securities holdings jumped $165 billion, or 10.3% annualized, to a 15-quarter high of $6.572 TN. Treasury holdings jumped $88 billion, or 18% annualized, to a record $2.050 TN, with one-year growth of a notable $309 billion, or 17.7%. Why are the banks such aggressive buyers of Treasuries? Corporate Bond holdings rose $53 billion, or 23% annualized, to $958 billion.
On the Bank Liability side, Total Deposits jumped $409 billion, or 7.5% annualized, to a record $22.162 TN, the strongest expansion since Q3 ’21. Total Deposits rose $1.014 TN, or 4.8%, over the past year.
Outstanding Corporate Bonds rose a solid $218 billion (5.2% ann.) to a record $17.071 TN ($646 TN, or 3.9%, y-o-y). Interestingly, the booming financial sector saw outstanding bonds expand $125 billion, or 9.6% annualized, during the quarter to $5.330 TN (high since ’09). Asset-backed Securities increased $38 billion, or 9.6% annualized, to a 13-year high of $1.622 TN.
Led by Treasuries, Total Debt Securities expanded $980 billion during Q1 to a record $66.163 TN, with one-year growth of $3.416 TN. Over the past 26 quarters, Debt Securities inflated $22.430 TN, or 51%. Debt Securities ended Q1 at 208% of GDP, up from previous cycle peaks 147% to conclude the nineties and 201% to end 2008. With the war slamming stocks in March, Equities Securities declined $3.290 TN during the quarter to $106.893 TN. Equities ended the quarter at 336% of GDP, up from previous cycle peaks, 188% (Q3 ’07) and 210% (Q1 2000). Total (Debt and Equities) Securities ended March at 544% of GDP, compared to previous cycle peaks 376% (Q3 ’07) and 357% (Q1 2000).
The bloated household balance sheet is a principal Bubble manifestation. Household Assets and Net Worth were little changed during Q1 (because of stock losses), though it’s worth noting the S&P500’s 14% return so far during Q2 – which equates to more than a $6 TN increase in Net Worth. Despite the down Q1, Household Assets inflated $14.057 TN, or 7.4%, y-o-y to a record $204.540 TN. With Liabilities up $686 billion y-o-y, Household Net Worth surged $13.371 TN y-o-y to a record $182.980 TN.
Household Financial Assets expanded $11.830 TN, or 9.1%, y-o-y, to $141.605 TN. The Z.1 has a new Total Equities category, which includes stocks held both directly and indirectly. Total Equities surged $8.879 TN, or 15.9%, y-o-y to $64.800 TN. Over the past three years, Total Equities inflated $21.922 TN, or 51%. And over three years, Debt Securities holdings jumped $1.019 TN, or 20%, to $6.129 TN.
During Q1, Household Total Deposits holdings rose $323 billion (8.8% ann.) to a record $15.105 TN. Money Fund holdings gained another $90 billion (6.8%) to a record $5.419 TN. Over the past year, Total Deposits jumped $455 billion (3.1%), and Money Funds surged $625 billion (13%). Over 24 quarters of historic monetary inflation, Deposits ballooned $3.636 TN (31.7%) and Money Funds surged an incredible $2.683 TN (98%). As such, Household Deposits and Money Fund holdings inflated $6.319 TN, or 45% over an incredible six-year period. There is no mystery surrounding the resilient consumer sector.
The Rest of World (ROW) has been aggressively partaking in Bubble dynamics. While down slightly during Q1, ROW Assets were up $8.607 TN, or 15.2%, y-o-y, to $65.180 TN. For perspective, ROW Assets ended the nineties at $7.878 TN.
ROW U.S. Debt Securities holdings increased $118 billion during Q1 to a record $15.929 TN, with Treasuries increasing $46 billion (to $9.317 TN) and Agencies adding $10 billion ($1.424 TN). Holdings of U.S. Corporate Bonds gained $59 billion ($4.909 TN).
But, as it is throughout, Repo is where the action has been. ROW Repo Assets jumped $123 billion (31.4% ann.) to a record $1.690 TN, with Repo Liabilities surging $154 billion (29.9% ann.) to a record $2.206 TN. Over four quarters, Repo Assets inflated $196 billion (13.1%) and Repo Liabilities $309 billion (16.3%). Over 22 bubbling quarters, Repos Assets ballooned $830 billion (97%) and Repo Liabilities $1.000 TN (83%). ROW U.S. assets inflated a staggering $26.465 TN, or 68%, over 22 quarters.
Rapid financial sector expansion ensures the perception of endless liquidity. In particular, historic Broker/Dealer, Repo, money market fund, banking system, and ROW ballooning stokes Bubble excess while creating acute financial fragility.
For the Week:
The S&P500 recovered 0.6% (up 8.6% y-t-d), and the Dow gained 0.7% (up 6.5%). The Utilities increased 0.5% (up 4.4%). The Banks jumped 3.4% (up 9.5%), and the Broker/Dealers surged 5.1% (up 9.1%). The Transports advanced 3.1% (up 30.2%). The S&P 400 Midcaps recovered 2.8% (up 14.9%), and the small cap Russell 2000 rallied 3.9% (up 18.6%). The Nasdaq100 recovered 2.3% (up 17.4%). The Semiconductors rallied 9.4% (up 88.8%). The Biotechs gained 1.3% (up 9.8%). While bullion fell $109, the HUI gold index increased 1.2% (down 2.7%).
Three-month Treasury bill rates ended the week at 3.6152%. Two-year government yields declined seven bps to 4.08% (up 61bps y-t-d). Five-year T-note yields fell six bps to 4.21% (up 48bps). Ten-year Treasury yields dipped five bps to 4.48% (up 31bps). Long bond yields dipped three bps to 4.97% (up 12bps). Benchmark Fannie Mae MBS yields fell nine bps to 5.43% (up 39bps).
Italian 10-year yields fell eight bps to 3.72% (up 17bps y-t-d). Greek 10-year yields declined seven bps to 3.67% (up 24bps). Spain's 10-year yields fell five bps to 3.42% (up 13bps). German bund yields dipped four bps to 3.00% (up 14bps). French yields gained five bps to 3.75% (up 18bps). The French to German 10-year bond spread widened about nine to 75 bps. U.K. 10-year gilt yields fell seven bps to 4.84% (up 36bps). U.K.’s FTSE equities index gained 1.0% (up 5.3% y-t-d).
Japan’s Nikkei 225 Equities Index declined 0.9% (up 31.1% y-t-d). Japan’s 10-year “JGB” yields declined five bps to 2.63% (up 56bps y-t-d). France’s CAC40 gained 1.6% (up 2.5%). The German DAX equities index slipped 0.5% (up 0.6%). Spain’s IBEX 35 equities index rallied 2.3% (up 8.4%). Italy’s FTSE MIB index jumped 3.2% (up 14.6%). EM equities were mostly higher. Brazil’s Bovespa index recovered 1.3% (up 6.2%), and the Mexico’s Bolsa index rallied 2.7% (up 5.6%). South Korea’s Kospi slipped 0.5% lower (up 92.8%). India’s Sensex equities index rose 1.7% (down 11.4%). China’s Shanghai Exchange Index was little changed (up 1.6%). Turkey’s Borsa Istanbul National 100 index added 1.8% (up 23.8%).
Federal Reserve Credit expanded $8.1 billion last week to $6.673 TN, with a 26-week expansion of $182 billion. Fed Credit was down $2.217 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.946 TN, or 79%. Fed Credit inflated $3.862 TN, or 137%, since November 7, 2012 (709 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt dropped another $23.5 billion last week to $2.928 TN - the low back to September 2010. “Custody holdings” were down $305 billion y-o-y, or 9.4%.
Total money market fund assets (MMFA) retreated $21.5 billion from last week's record to $7.873 TN. MMFA were up $866 billion, or 12.4%, y-o-y - having ballooned a historic $3.388 TN, or 72%, since October 26, 2022.
Total Commercial Paper gained $11.4 billion to $1.413 TN. CP declined $58 billion, or 3.9%, y-o-y.
Freddie Mac 30-year fixed mortgage rates added four bps to 6.52% (down 32bps y-o-y). Fifteen-year rates increased five bps to 5.84% (down 13bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down a basis point to 6.70% (down 26bps).
Currency Watch:
June 7 – Bloomberg (Hooyeon Kim): “South Korea’s won bounced back from its recent losses after the authorities said they would take tougher action against speculative trading and market activities that led to higher volatility.”
For the week, the U.S. Dollar Index slipped 0.3% to 99.747 (up 1.4% y-t-d). On the upside, the South Korean won increased 2.8%, the Brazilian real 2.2%, the South African rand 1.7%, the Mexican peso 1.4%, the New Zealand dollar 0.6%, the Singapore dollar 0.5%,the British pound 0.5%, and the euro 0.4%. On the downside, the Norwegian krone declined 0.7%, the Canadian dollar 0.4%, the Swedish krona 0.1%, and the Swiss franc 0.1%. China's (onshore) renminbi gained 0.38% versus the dollar (up 3.33% y-t-d).
Commodities Watch:
June 7 – Bloomberg (Jessica Zhou): “China’s central bank extended its gold-buying streak in May, adding to holdings as prices of the precious metal remained under pressure. Bullion held by the People’s Bank of China rose by 320,000 troy ounces last month… The latest addition extended its buying streak to 19 months…”
The Bloomberg Commodities Index dropped 2.4% (up 18.0% y-t-d). Spot Gold declined 2.5% to $4,219 (down 2.3%). Silver increased 0.3% to $68.0213 (down 5.1%). WTI Crude dropped $5.66, or 6.3%, to $84.88 (up 48%). Gasoline was about unchanged (up 78%), while Natural Gas dropped 3.4% to $3.12 (down 15%). Copper rallied 3.5% (up 15%). Wheat increased 0.8% (up 15%), while Corn declined 1.1% (down 6%). Bitcoin rallied $4,100, or 6.9%, to $63,600 (down 27.5%).
Market Instability Watch:
June 7 – Bloomberg (Jorgelina do Rosario and Francine Lacqua): “International Monetary Fund Managing Director Kristalina Georgieva said that after facing crisis upon crisis in recent years, the world needs to build foundations that can withstand shocks that have become more frequent. ‘I am worried that we are not completely internalizing yet that this is how the world is going to be,’ Georgieva said... ‘We are not going to get to a place where shocks are gone.’”
June 12 – Bloomberg (Joel Leon): “Investors used to watching US equities go nowhere but up since late March have spent the past week without a reliable playbook. Conviction in technology megacaps, the market’s most reliable bets for most of the spring, has deteriorated, forcing the group to flip-flop between losses and gains. Reversals stung the broader S&P 500 Index, too, as the gauge earlier this week clocked one of the biggest swings since the peak of the tariff-related rout in April 2025. The back-and-forth rotation is likely here to stay, say strategists at 22V Research… The firm’s regime dispersion indicator, a rough measure of how fast the moods are shifting from fear to greed, has jumped to the 94th percentile of observations… ‘The internals of the market are oscillating between risk-on and risk-off backdrops in a more extreme way than we have seen historically,’ said Dennis DeBusschere, chief market strategist at 22V Research.”
June 8 – Bloomberg (Ye Xie): “The next big risk confronting investors is tightening financial conditions as the Federal Reserve may need to raise interest rates ‘soon’ to curb mounting inflation pressures, according to Citadel Securities. The combination of a massive artificial-intelligence investment cycle, tighter energy markets and a strengthening labor market is raising upside risks to both economic growth and inflation, Nohshad Shah, head of EMEA fixed-income sales at Citadel Securities, wrote... ‘The next move from the Fed is most likely a hike … perhaps soon,’ Shah said.”
June 9 – Bloomberg (Sangmi Cha): “A leveraged exchange-traded fund tracking SK Hynix Inc. deviated sharply from the underlying stock’s move for a second day, underscoring the risk of investing in such products that have attracted strong retail interest. The KIM ACE SK Hynix Single Stock Leverage ETF, designed to deliver twice the chipmaker’s daily return, plunged 27% on Tuesday even as SK Hynix jumped 16%. The divergence followed Monday’s dislocation, when the ETF soared 50% despite the stock falling nearly 8%.”
U.S. Credit Trouble Watch:
June 12 – Financial Times (Eric Platt): “Investors sought to pull more than 13% from one of BlackRock’s flagship private credit funds, with the group limiting withdrawals for a second quarter as retail investors rush for the exits. BlackRock said redemption requests from its $13bn HPS Corporate Lending Fund climbed to roughly $1.6bn from $1.2bn in the first quarter. The world’s largest asset manager honoured requests equal to 5% of the fund’s net assets, worth about $620mn.”
June 10 – Bloomberg (Michael MacKenzie and Davide Barbuscia): “Pacific Investment Management Co. is warning that the ‘credit loss cycle is upon us’ as heavy spending on artificial intelligence could widen economic outcomes and hit lower-quality borrowers. Pimco’s Richard Clarida, Andrew Balls and Daniel Ivascyn said in the firm’s latest annual secular outlook report that ‘the default cycle is reasserting itself, and we expect significantly higher losses in lower-quality credit such as leveraged and private direct lending’… Pimco said that backdrop clashes with ‘elevated secular uncertainty,’ and ‘we interpret this as complacency rather than strength.’ While the US economy has been resilient, ‘AI will disrupt old economy companies, especially highly levered ones.’”
June 9 – Financial Times (Zehra Munir): “Fintech groups are seeking to capitalise on the growing number of Americans who struggle to pay for housing, offering ‘rent now, pay later’ loans as the cost of living pushes up demand for short-term financing. Affirm, a Nasdaq-listed company that is one of America’s biggest ‘buy now, pay later’ lenders, recently partnered with fintech Esusu to pilot so-called rent-split loans. Three other companies that specialise in these housing loans told the FT that their customer bases were rapidly expanding. Rent-split lenders cover a tenant’s monthly payment to their landlord and receive the money back in instalments spread over the course of the month, in effect splitting up the borrower’s rent bill into smaller sums.”
June 10 – Bloomberg (Davide Barbuscia): “Bond investors are increasingly scrutinizing financing deals linked to artificial intelligence infrastructure buildouts, according to Citigroup Inc. analysts. Out of the five data center bond sales in the investment-grade market worth more than $50 billion since October, one deal issued by QTS for a facility tied to Microsoft Corp. did not perform in lock step with the corporate bonds of the tech giant backing the project, said analysts Daniel Sorid and Mathew Jacob... The reason for the deviation is the debt was non-amortized, Citi said.”
June 10 – Bloomberg (Reshmi Basu and Scott Carpenter): “America’s Car-Mart Inc., a used car seller and subprime lender, is working on an eleventh hour capital raise to stave off a potential bankruptcy filing after a cash crunch put the company on the verge of default, according to people familiar with the matter. The company’s banker, Houlihan Lokey Inc., has been reaching out to investors to gauge interest in providing at least $500 million of fresh capital…”
Global Credit Bubble Watch:
June 9 – Bloomberg (Michael MacKenzie and Greg Ritchie): “The $31 trillion Treasury market has an unequivocal message for Kevin Warsh’s Federal Reserve: Interest rates aren’t high enough. Yields on policy-sensitive US two-year notes have surged to their highest level in more than a year after a trove of economic data led traders to price in at least one quarter-point rate hike as soon as October. At around 4.15%, the two-year yield trades well above the Fed’s current policy band of 3.5% to 3.75%, a divergence that began in March.”
June 10 – Reuters (Kanishka Ajmera): “Morgan Stanley forecasts AI-related global debt issuance to more than double to nearly $570 billion in 2026, pointing to rising bond supply and credit market activity as hyperscalers turn to alternative funding sources to meet massive AI-driven capex needs. Morgan Stanley estimates AI-related global debt issuance stood at nearly $236 billion as of May 31, 2026, fourfold more than the same period last year. Hyperscalers Alphabet, Amazon, Microsoft and Meta are expected to spend $700 billion in outlays this year. Morgan Stanley expects issuance to ramp in second half of 2026, as hyperscaler capex surpasses $1 trillion in 2027. ‘Hyperscalers have been broadening their investor base through non-USD issuance,’ the brokerage said.”
June 10 – Bloomberg (Hannah Benjamin-Cook and Alice Gledhill): “Governments are borrowing from syndicated bond markets at a record clip as public spending surges. Sovereign issuers have sold $504 billion of the debt — which is offered to investors via banks — so far this year… That’s more than in the first half of 2020, when nations were paying to support their economies during Covid-19 lockdowns. Budget deficits have been climbing since the global financial crisis… ‘The main driver of the supply is basically increased public spending, and thus bigger funding needs,’ said Jens Peter Sorensen, chief analyst at Danske Bank AS, pointing to greater outlays on the military, infrastructure and transition to cleaner energy.”
June 9 – Bloomberg (Esteban Duarte): “Blackstone Inc. is pushing forward in the fast-growing market for significant risk transfers as banks hedge possible losses in their swelling loan books. The world’s largest manager of private assets is a big fan of SRTs, having already bought deals linked to corporate, infrastructure and agricultural loans, according to Dan Leiter, who leads the international unit of Blackstone Credit and Insurance.”
June 10 – Bloomberg (Finbarr Flynn, Sheryl Tian Tong Lee, and Abhinav Ramnarayan): “Fears of a stagflation shock from the Middle East conflict are increasingly souring investor sentiment toward the weakest global corporate borrowers, many of which binged on cheap debt during the era of ultra-low interest rates. Global investors now require about 6.4 percentage points of extra yield to own high-risk CCC rated bonds over other junk notes that sit just below investment grade, the largest premium in 14 months… Credit funds are bracing for even greater stress in higher-risk loans and private credit where debt from a $2 trillion leveraged buyout boom is concentrated.”
June 10 – Bloomberg (Chunzi Xu): “Amazon.com Inc.’s record loonie bond sale has the Canadian fixed income market working hard to accommodate the deluge of debt, pushing risk spreads higher and spurring other borrowers to delay note sales of their own. Fund managers are selling high-quality bonds to make room for the C$14 billion ($10bn) Amazon debt sale, weighing on valuations across the market. Even so, the changes are relatively mild, and risk premiums remain low by historical standards as investors keep pouring money into the market.”
June 8 – Bloomberg (Chien-Hua Wan and Neha D'Silva): “Yields on Taiwan’s five-year government bonds jumped to their highest level since 2008 as tighter banking-system liquidity and growing expectations of higher interest rates weighed on demand for local debt. The yield rose 32bps to 1.71%, the highest since November 2008 and an auction of 10-year bonds saw the highest yield since 2013.”
Leveraged Speculation Watch:
June 7 – Bloomberg (Christian Dass, Yiqin Shen, and Bernard Goyder): “Friday’s sudden equities rout after a months-long rally is renewing concerns that the unwinding of crowded trades could exacerbate market losses… One issue that’s become central is the very nature of the multi-strategy hedge fund model, where portfolio managers at different funds often end up clustered into similar trades. Although central risk management at the firm-level is stringent, external crowding in over-the-counter derivatives can be difficult to fully capture… Hedge funds now absorb a growing share of the market risk that banks used to assume. Proprietary trading firms are also entering the fray: The Dutch market maker Optiver is even setting up a specialist exotics desk to take esoteric risks off bank balance sheets… One area attracting attention is the booming structured notes market, driven in part by retail investors’ hunt for ways to enhance yield. These debt-like securities carry a performance element tied to some other assets, often an equity index or single stock, and they’re on track to exceed a record $1 trillion in total sales this year…”
Iran War Watch:
June 12 – Associated Press (Munir Ahmed, Michelle L. Price and Russ Bynum): “Pakistan’s prime minister said Friday the United States and Iran have agreed to wording of an agreement aimed at ending their war in the Middle East and that mediators were working with both sides to finalize a deal. Prime Minister Shehbaz Sharif said the U.S. and Iran have reached a ‘final, agreed upon text.’ He said Pakistan, which has taken the lead in mediation efforts, was working with the warring countries on next steps. ‘Peace has never been this close as it is now,’ Sharif said…”
June 11 – Axios (Barak Ravid): “President Trump said the U.S. will hit Iran with new strikes Thursday and threatened to seize Kharg Island, Iran's main oil export hub. This will be the third consecutive night the U.S. military strikes Iran. U.S. officials say the goal is to push Iran to show more flexibility in the negotiations over its nuclear program. ‘The United States will be hitting Iran VERY HARD TONIGHT,’ Trump wrote… He added that ‘at some point in the not too distant future’ the U.S. will take over Kharg Island, and other oil facilities in the country ‘and assume total control of their Oil and Gas Markets’ like it did it Venezuela.”
June 11 – Wall Street Journal (Alexander Ward, Lara Seligman and Michael R. Gordon): “The U.S. and Iran exchanged a second successive round of fire overnight, after American forces launched strikes against several targets in Iran on President Trump’s orders. The volley of attacks came hours after Trump said Iran was ‘playing us for suckers’ because it hadn’t accepted U.S. terms for a nuclear deal. The Pentagon cast the attacks as an act of coercive diplomacy designed to force Iranian concessions at the negotiating table. Iran responded with strikes targeting Kuwait, Jordan and Bahrain, which published pictures of damage done to buildings and cars. ‘If we need to negotiate with bombs, we’ll negotiate with bombs. And we’re very good at it. Nobody better in the world,’ Defense Secretary Pete Hegseth said…”
June 10 – Financial Times (Andrew England): “US President Donald Trump has vowed to ‘assume total control’ of Iran’s main oil and gas markets in a dramatic escalation of his threats as he tries to pressure Tehran into agreeing to a deal that would reopen the Strait of Hormuz… ‘The United States will be hitting Iran (Whose Navy, Air Force, Radar, Anti Aircraft, and all other forms of Defense, together with most its offensive capability, are GONE!), VERY HARD TONIGHT,’ Trump wrote… ‘At some point in the not too distant future, we will be taking Kharg Island, and other oil infrastructure points, and assume total control of their Oil and Gas Markets, much like we have with Venezuela, which is working out brilliantly for both Venezuela and the United States of America,’ he added.”
June 9 – Axios (Dave Lawler and Barak Ravid): “The U.S. launched a series of strikes against Iran on Tuesday evening in response to Iran’s downing of a U.S. helicopter, with Iran's military announcing retaliatory strikes targeting U.S. bases in the region. The latest exchange carried the risk of military escalation with Iran even as President Trump is seeking a deal to end the war. American forces launched three rounds of strikes targeting Iranian air defense and radar systems near the Strait of Hormuz on Tuesday evening. Iran’s military said it targeted bases in Jordan and Kuwait, while a spokesperson for Bahrain's king said his country’s air defenses had repelled Iranian attacks. Iran fired at least four ballistic missiles and several drones in its initial response, according to a U.S. official.”
June 7 – Financial Times (Edward Luce): “Israeli Prime Minister Benjamin Netanyahu will have no choice but to accept any deal the US negotiates with Iran, Donald Trump said, because the US president ‘calls the shots’. ‘He won’t have any choice,’ Trump told the FT... ‘I call the shots. I call all the shots. He [Netanyahu] doesn’t call the shots.’”
June 7 – Financial Times (James Shotter and Najmeh Bozorgmehr): “Explosions were heard in central Tehran on Monday morning as Israel traded fire with Iran and its allies in a cycle of attacks that threatened to ignite a broader round of fighting in the Middle East. Iranian media reported explosions in western, south-western and eastern Tehran shortly before noon local time, hours after Israel said it had struck military targets in western and central Iran. On Sunday night, Iran launched a barrage of missiles at northern Israel in retaliation for an earlier Israeli strike on southern Beirut targeting the Iran-allied Hizbollah militant group.”
June 11 – Financial Times (Najmeh Bozorgmehr and Jacob Judah): “For 40 days, US and Israeli aircraft pounded the mountains around Yazd, trying to silence one of Iran’s most important military projects: a buried missile complex carved deep into the granite above the ancient desert city. Yet, according to residents, the Iranian missiles kept firing regardless. ‘US and Israeli forces kept bombing those mountains,’ said one resident of Yazd. ‘And Iran kept launching missiles until the final moments before the ceasefire.’ The resilience of Iran’s underground ‘missile cities’ has become one of the most significant and contested questions in the aftermath of the US-Israeli bombardment earlier this year.”
June 10 – Financial Times (Bita Ghaffari): “Iran said US air strikes had left 20,000 residents in its southern Hormozgan province without water after two storage reservoirs were destroyed in the latest exchange of fire between the two sides.”
June 11 – Bloomberg (Veena Ali-Khan and Alex Longley): “One thing that’s helped limit the Iran war’s disruption to global oil supply is the ability of Saudi Arabia to use an alternative export route to the Strait of Hormuz: the Red Sea. The fragility of this workaround was laid bare after the Houthis, an Iran-backed militant group that controls part of Yemen, declared a ‘complete and total ban’ on Israeli ships in the area, saying that these vessels are ‘legitimate military targets.’”
June 11 – CNBC (Barak Ravid): “Iran will treat all of Elon Musk’s companies in the Middle East, including SpaceX’s Starlink internet service, as military targets as it retaliates against the U.S., Iranian state media outlet Fars reported… Iran is targeting ‘all interests related to economic holdings managed by Elon Musk in West Asia,’ including a regional Starlink ground station… Iran asserts the U.S. has committed war crimes against it with the support of Musk-related companies, Fars reported, citing an ‘informed source.’ ‘The Islamic Republic of Iran reserves the right to attack all facilities related to [Musk]-managed holdings in the region and occupied territories,’ that source said.”
Iran War Ramifications Watch:
June 9 – Wall Street Journal (Carol Ryan): “‘Preppers’ hoard essentials like water, food and fuel. Hit by the second global energy crisis in four years, governments are developing their own bunker mentality. If they follow through on plans to stockpile more oil, energy prices could stay higher for longer no matter what happens next in the Middle East. As it is, oil prices remain elevated and have grown volatile in recent days on renewed fighting that threatened fragile ceasefires… Close to 500 million barrels of crude oil and refined product are needed to replenish the inventories used up outside the Persian Gulf so far, a number that rises by 5.8 million barrels for every day the strait remains closed, according to S&P Global Energy. Even if a 1-million-barrel-a-day surplus were to magically appear, it would take more than a year to get global oil inventories back to prewar levels."
June 10 – Wall Street Journal (Rebecca Feng): “A sharp fall in China’s crude oil imports during the Iran war has been instrumental in holding down oil prices and keeping the global economy humming. Clues are emerging in the mystery of the missing three million barrels—the oil that China would normally be importing but isn’t now. Chinese people are driving fewer gasoline-powered cars and taking trains instead of planes. The country is dialing back operations at the plants that turn crude oil into feedstock for materials such as plastics. And Beijing is beginning to draw down reserves. The question is how long the import cuts can last—and what would happen if China needs to start buying more again.”
June 10 – Fortune (Jordan Blum): “The nation’s emergency reserve for oil and fuel supplies is slipping below Biden-era lows to its most exhausted level since the Reagan era—when the nearly 50-year-old U.S. Strategic Petroleum Reserve was still being filled up. The SPR will hit its lowest volumes since 1983 any day now—if not already—and continue sinking lower as the Trump administration leans on its reserves to keep oil exports flowing to the rest of the world—and to stop domestic prices from further skyrocketing.”
June 12 – Wall Street Journal (Adam Whittaker): “Conflict in the Middle East is threatening to spike grain prices and exacerbate hunger among the world’s poor, the chief executive of fertilizer manufacturer Fertiglobe says. Global governments need to step up efforts to get fertilizer moving through the Persian Gulf and offer financial support for farmers to help offset the jump in prices, Ahmed El-Hoshy said…”
June 10 – Financial Times (Leslie Hook and Camilla Hodgson): “The Iran war is creating a ‘super-squeeze’ in industrial metals such as copper and aluminium, say executives and analysts who believe persistent tight market conditions mean prices could be set to stay high for years to come. The price of copper is close to its all-time closing high while aluminium is at its highest level in four years. Both have been boosted by strong demand from data centres — which use copper for wiring and aluminium for server racks — and for the construction of electric grids and vehicles, while supply has been hit in recent months by the Middle East conflict and the near-closure of the Strait of Hormuz. The sharp recent moves highlight how the fallout from the US-Israeli war against Iran, now in its fourth month, is ricocheting through commodity markets beyond oil and gas.”
June 6 – Bloomberg (Brendan Murray): “Container shipping rates jumped over the past week amid higher fuel costs, congestion at some Asian ports and a pickup in demand heading into a peak season for booking ocean freight. The spot rate for a 40-foot container to northern Europe from Asia rose to $3,649 as of Friday, a 27% increase from week earlier, according to Xeneta… The cost to the US West Coast from Asia was up 20%, to $3,933.”
June 10 – Reuters (Hritam Mukherjee, Nidhi Verma and Saurabh Sharma): “India urged the United States to halt strikes on shipping on Thursday after three U.S. attacks on Indian-crewed tankers this week, including one that killed three sailors. The deaths are the first reported since a U.S. blockade on Iran-linked shipping began on April 13 in which U.S. forces have disabled eight ships and turn back more than 100 others.”
June 6 – Financial Times (Andrew England): “Two years ago, Donald Trump’s family business said the $500mn luxury hotel and golf resort it was jointly launching in Oman would elevate the Gulf nation’s ‘status as a premier global destination’. Fast forward to last week, and the US president was threatening to bomb the country. Initially, some in Muscat believed Trump had misspoken, and must have meant Iran, before the US state department posted a video of him warning Oman to ‘behave like everybody else or we’ll have to blow them up’. The extraordinary outburst against a longtime US ally that has served as a regional mediator for years was fuelled by Trump’s suspicion that the Gulf nation supported Iran’s push to levy charges on vessels navigating the Strait of Hormuz.”
Trump Administration Watch:
June 8 – Financial Times (Demetri Sevastopulo and Joe Leahy): “Pete Hegseth warned a prominent Asian security forum in Singapore a year ago that a Chinese invasion of Taiwan could be ‘imminent’. But when the US defence secretary made a return visit just over a week ago, his speech did not even mention the word ‘Taiwan’. Last year Hegseth said the US was focused on ‘deterring aggression by Communist China’. This time, he told the defence ministers and military officials at the IISS Shangri-La Dialogue that Sino-US ties were in their best shape in years. And yet in the intervening 12 months, China’s People’s Liberation Army has only increased its threatening behaviour across the Taiwan Strait.”
June 6 – Axios (Mike Allen): “President Trump surprised tech CEOs by suddenly pushing the idea of the U.S. taking a small ownership stake in AI giants, so the American people share in the upside of what will be trillion-dollar companies. ‘There’s something very interesting about it, where it almost becomes a partnership with the American public,’ Trump told reporters… ‘It’s like you make them [partners] in this revolution. It would be a beautiful thing… It would make ‘em rich.’”
June 8 – Bloomberg (Madlin Mekelburg): “A federal judge struck down a $100,000 fee President Donald Trump ordered for H-1B visa applications, providing a reprieve for US technology companies that rely on hiring skilled foreign workers. The president’s decree dramatically increasing the cost of the popular visa is an unlawful tax and must be vacated, US District Judge Leo T. Sorokin in Massachusetts said…”
Trade War Watch:
June 10 – Financial Times (Aime Williams, Christine Murray and Ilya Gridneff): “Donald Trump has suggested he will not renew the trade deal he forged with Canada and Mexico in 2020, setting the stage for years of protracted talks between Washington and two of its largest trading partners. The three countries must confirm whether they want to renew the agreement for 16 years by July 1 or fall into a period of annual reviews… ‘I’m not looking to renew it,’ the US president said... ‘I made the deal, and the primary reason I made the deal is that [the North American Free Trade Agreement] was the worst trade deal I’ve ever seen,’ he said, referring to the trade deal between the three countries that preceded the USMCA.”
June 9 – Bloomberg (Mackenzie Hawkins and Debby Wu): “Taiwan authorities are considering much stricter export controls on AI chip sales to China to further align with US measures, according to people familiar with the matter, an effort to address semiconductor smuggling that risks drawing a rebuke from Beijing. The idea is to give authorities more legal tools to address diversion of advanced hardware, like AI servers with Nvidia Corp. chips, from Taiwan to China.”
Constitution Watch:
June 10 – Wall Street Journal (Dylan Tokar and Gina Heeb): “The Justice Department has sent far-ranging subpoenas to several of America’s largest banks including JPMorgan… and Bank of America, requesting information about whether they ‘debanked’ clients, or improperly closed customer accounts for political reasons… The subpoenas from the U.S. Attorney’s Office in Washington, D.C., headed by Jeanine Pirro, escalate a campaign by President Trump to root out evidence that banks allegedly discriminated against conservatives and politically controversial industries, including his own family. The president last year said he was cut off from bank accounts and denied new ones from JPMorgan and Bank of America after his first administration ended in violent riots at the Capitol. In August, he signed an executive order directing banking regulators to investigate whether financial institutions had engaged in ‘politicized or unlawful debanking’ and take appropriate action…”
Budget Watch:
June 9 – New York Times (Tara Siegel Bernard and Margot Sanger-Katz): “The financial forecast for Social Security worsened this year, according to the annual financial report released on Tuesday by the program’s trustees. If Congress does not develop a plan to shore up the program, it will need to cut benefits for millions of Americans in just a little more than six years. Social Security’s deteriorating finances have long been thought of as a future problem — for another president, or another Congress, to resolve. But now, it is creeping ever closer because funds will run out before the end of the next president’s term.”
New World Order Watch:
June 7 – Wall Street Journal (Jason Douglas): “Iran’s closure of the Strait of Hormuz showed how a country can weaponize an economic pinch point to seismic effect. The question now is what governments decide to do about it. Adm. Giuseppe Cavo Dragone, NATO’s top military commander, in an address to a gathering of defense and security officials in Singapore, said what countries are confronting is the ‘weaponization of economic interdependence,’ a challenge that he said requires closer cooperation between militaries, governments and industry to fight back. For years, the U.S. was the only real player in this strategic game, wielding the U.S. dollar and the control the currency gave it over the global financial system to pressure rivals and sanction enemies.”
June 10 – Reuters (Leo Marchandon): “Only 11% of Europeans across 15 countries view the United States as an ally, a historic low and down from 16% half a year ago and 22% in November 2024, according to a survey published by the European Council on Foreign Relations… The findings, released ahead of G7 and NATO summits, highlight Europe's waning confidence in Washington as a reliable security partner. Majorities in all surveyed countries expressed doubts that the U.S. would come to their defence in the event of an attack.”
U.S./Russia/China/Europe/Iran Watch:
June 9 – Wall Street Journal (Heather Somerville): “The Pentagon… updated its list of Chinese businesses the U.S. has identified as aiding Beijing’s military, designating around two dozen new companies, including tech giants Alibaba Group and Baidu, limiting their operations in America. The list of Chinese military-linked companies… is an expansion from last year underscoring the view from U.S. national security officials that China leverages its private sector to build and improve military technology.”
June 9 – Reuters (Kyu-seok Shim and Liz Lee): “Chinese President Xi Jinping said he and North Korean leader Kim Jong Un reached an ‘important consensus’ and agreed to safeguard regional and global peace, in a message of thanks following his visit to Pyongyang, North Korean state media KCNA said… In the message carried in full by KCNA, Xi said the two sides had ‘exchanged in-depth views on issues of common concern and reached a series of important joint consensus,’ reflecting their determination to further deepen ties.”
Ukraine War Watch:
June 10 – Politico (Veronika Melkozerova): “Several Ukrainian Flamingo FP-5 missiles travelled over 1,000 kilometers into Russia and struck a factory that produces key components for deadly drones, Ukrainian President Volodymyr Zelenskyy said... The cruise missiles targeted the Progress factory in Cheboksary… The facility produces the Kometa antennas that enable Russian drones and missiles to bypass Ukrainian air defenses during the Kremlin's massive strikes on the country.”
Taiwan Watch:
June 10 – Wall Street Journal (Joyu Wang): “Taiwan fired U.S. mobile missile launchers into the strategic waters directly facing China for the first time, sending a message of resolve to Beijing and Washington. The Taiwanese army… used truck-mounted High Mobility Artillery Rocket Systems, or Himars, to fire 32 test rockets from a site near a river mouth on Taiwan’s western coast, which has been regarded as a potential landing point for invading Chinese forces.”
June 6 – Bloomberg (Yian Lee): “China said it launched a special maritime operation east of Taiwan, ramping up its response to a recent agreement between Japan and the Philippines to negotiate maritime borders in the area and deepen defense cooperation. The Chinese Ministry of Transport organized a ‘special maritime traffic enforcement operation’ on Saturday…”
AI Bubble/Arms Race Watch:
June 11 – Bloomberg (Levin Stamm): “Analysts are too conservative in their outlook for artificial intelligence spending next year, according to Goldman Sachs Group Inc. strategists, who expect further gains for stocks linked to the theme. The team including Ryan Hammond sees hyperscaler spending climbing to as much as $1.4 trillion in 2027, supported by strong cash flows and additional investment-grade debt funding. This contrasts with current analyst estimates of about $920 billion.”
June 7 – Axios (Ben Berkowitz): “Investors were confronted this past week with four difficult realities that may fundamentally change the way they think about AI the business vs. AI the technology: AI is too expensive, say CEOs and even Microsoft itself. It’s not paying off nearly as much as companies expected, per a new Bain study. Infrastructure demand is strong — but not as strong as the most optimistic wanted, as Broadcom showed with its ‘weak’ forecast. Financing that infrastructure is going to be more expensive for longer, with signs pointing to the Fed raising, not lowering, interest rates. Those realities challenge assumptions that powered markets to historic heights over the past few years. It’s hard to justify chip or memory stocks rising 1,000%+ in a year if the boom isn’t what everyone assumed. The costs of AI are now. The profits are later — maybe. That ‘maybe’ is what's making people nervous.”
June 11 – Wall Street Journal (Bradley Olson and Tina Li): “The AI price war has begun. Big companies and startups, chafing at rapidly escalating artificial intelligence costs, are increasingly turning to tools that tap in to cheaper AI models, including some from China. That’s raising pressure on industry leaders OpenAI and Anthropic to lower their prices, a prospect that could hurt their ability to grow into profitable enterprises. The new cost-saving tools help businesses save on AI costs by dynamically switching among a mixture of third-party AI models and in-house AI systems built using freely available, open-source models.”
June 10 – Wall Street Journal (Keach Hagey and Berber Jin): “OpenAI is considering drastically lowering the prices it charges users as it seeks to win customers from its rival Anthropic. The company is weighing significant cuts to what it charges for tokens, the unit of measurement artificial-intelligence firms use to bill for their products… The move would be in anticipation of similar cuts the company expects at Anthropic, the people said. Business executives have begun to balk at the high prices for AI usage. OpenAI Chief Executive Sam Altman said at a recent event that costs had become ‘a huge issue.’ ‘I think we’ll have a lot of ways we can help people get more value for less spend,’ he said.”
June 10 – Financial Times (Rafe Rosner-Uddin): “Oracle… said it would invest $70bn in the coming year to finance its data centre build-out, as rising debt and flat revenue guidance spooked investors. The database group said capital expenditure would climb 25%, up from $55.7bn in the fiscal year that ended May 31. The planned spending was broadly in line with expectations and came as Oracle said it expected to raise $40bn in debt and equity over the next 12 months. The spending figure came even as the group said that its sales forecast for the next fiscal year would remain flat at about the $90bn it guided in March.”
June 8 – Reuters (Manya Saini and Pritam Biswas): “ChatGPT maker OpenAI confidentially filed for a U.S. initial public offering recently…, joining rival Anthropic in a push toward the stock market as investors seek exposure to the artificial intelligence boom. OpenAI did not disclose the size or terms of the offering, and said a timeline has not yet been determined. ‘It may be a while because there are things we want to do that are likely easier as a private company,’ it said…”
June 10 – Axios (Ashley Gold): “The government should legally be able to block or deter dangerous AI deployments, Anthropic CEO Dario Amodei wrote… Anthropic’s ideas for tech regulation and economic disruption from AI go far beyond anything currently under serious consideration in Washington. They’re also sure to stir up a new set of accusations that Anthropic is proposing strict rules to lock in its own dominance or using frightening future scenarios as a marketing ploy. Amodei’s new essay and proposed advanced AI framework argues that policy has to change in response to the rapid development of AI. Trump’s AI executive order should go further, he writes, and require mandatory testing for risks related to cybersecurity, biological weapons, loss of control or automated R&D. Even more aggressive regulation might be needed in the future if AI systems become more of a threat, he writes.”
June 9 – Financial Times (Michelle Chan and Eric Platt): “Apollo and Blackstone have finalised a $35bn private credit deal that will help finance Anthropic’s growth plans, as banks and investment groups across Wall Street pour capital into the AI boom. The two private investment groups led the financing, one of the largest private credit deals ever completed, which will fund Anthropic’s lease of Alphabet chips, which Broadcom helps develop.”
June 11 – Financial Times (Michelle Chan): “The US insurance industry’s standard setter has begun to examine credit risks linked to data centre projects, which are increasingly showing up in insurers’ investment portfolios. The National Association of Insurance Commissioners… was reviewing insurers’ data centre holdings and whether the credit ratings underpinning these projects were justified, according to people familiar with the matter.”
June 9 – Wall Street Journal (Peter Grant and Isabelle Bousquette): “The hot Manhattan office market is on pace this year for its best leasing performance since 2000. Back then, dot-com startups helped fuel demand. This time around, it’s AI. Artificial-intelligence firms leased 1 million square feet of Manhattan office space in the first quarter. That was greater than the space leased by AI firms for all of 2025. AI’s share of tech-sector leasing in Manhattan also jumped to 56% that quarter, which was more than double AI’s share during all of 2024, according to real-estate services firm Cushman & Wakefield.”
Bubble Watch:
June 9 – Bloomberg (Justina Lee): “The prospect of billions of dollars of oncoming demand for SpaceX stock from index-tracking funds risks creating a feedback loop that drives the shares of Elon Musk’s company even higher, academics and market observers have warned. Nasdaq Inc., FTSE Russell and MSCI Inc. are all set to fast-track the company into their gauges, after the first two index providers changed rules to allow its early addition. About 30% of SpaceX’s free float is now set to be owned by passive investors after just 15 days of trading, according to Intropic…”
June 9 – New York Times (Patricia Cohen): “Fifteen years ago, the world’s billionaires collectively had $4.5 trillion. By 2024, their wealth had more than tripled to $14.2 trillion. Now, their combined wealth totals $20.1 trillion — an amount that is equivalent to nearly a fifth of the entire world’s total yearly output. The stunning figures — calculated by the French economist Gabriel Zucman, director of the International Tax Observatory, a research organization funded by the European Union — reveal more than a surprisingly rapid increase in the concentration of wealth at the tippy top.”
June 8 – Bloomberg (Liam Denning): “Ford Motor Co. is now worth $11.4 billion more than it was on May 12. Is it, though? Its stock market value has certainly expanded by that much and was up by almost $22 billion at the recent peak. The reason is fairly straightforward: Morgan Stanley published an analyst note that day alerting investors of the potential for Ford’s new grid-battery business to tap into the artificial intelligence boom. Voila: The 122-year-old car company was now an AI stock.”
June 9 – Financial Times (Kate Duguid and Emily Herbert): “US markets are close to ending more than two decades of declining equity supply as a trio of mega initial public offerings brings a flood of new shares that investors warn could strain the limits of demand. The listing plans of SpaceX, Anthropic and OpenAI come as Wall Street’s existing Big Tech groups look to multibillion-dollar share sales to fund their vast AI spending, in a reversal of decades of share buybacks… Goldman Sachs estimates net supply of equity in the US — measured by new shares hitting the market less equity removed by buybacks or companies going private — will be almost flat in 2026, having been in negative territory since 2003. The bank expects an even greater influx of new shares in 2027, as lock-up periods on this year’s IPOs expire.”
June 8 – Bloomberg (Allison McNeely): “The value of private equity technology deals has plunged since the end of last year as investors have grown more cautious about what companies are worth in the age of artificial intelligence, according to a Bain & Co. report. Global buyout deal value fell 70% to $20 billion in the first quarter as fewer large deals were completed, Bain said in the report, which analyzed data from Dealogic. Valuations of software companies fell about 8% in the period…”
Crypto Bubble Watch:
June 8 – Bloomberg (Sid Verma and Vildana Hajric): “The easiest way to understand crypto used to be to look at Bitcoin. When the world’s largest cryptocurrency rose, money flooded into startups, venture funds, exchanges and thousands of speculative tokens. When it crashed, businesses disappeared, funding dried up and activity slowed across the industry. Bitcoin wasn’t merely the biggest digital asset. It was the center of gravity for the entire crypto economy… Much of the altcoin market is suffering an even deeper downturn that predates Bitcoin’s latest slide. The market value of altcoins, tokens other than Bitcoin, peaked at $431 billion in November of 2021, and is currently languishing around $170 billion, according to TradingView. Entire ecosystems that once promised to reshape finance are shrinking, consolidating or quietly disappearing.”
June 6 – Bloomberg (Olga Kharif and Vildana Hajric): “Charles Hoskinson is angry. The founder of Cardano, one of the world’s largest cryptocurrency networks, recently posted a video warning users to brace for more failures after a popular analytics platform announced it was shutting down. More projects will disappear, more businesses will run out of money and more developers will abandon the ecosystem, he predicted. ‘I suspect there’s going to be a wave of failures,’ Hoskinson said. ‘This year is going to be very hard.’”
Inflation Watch:
June 10 – Associated Press (Christopher Rugaber): “Rising gas prices pushed inflation to its highest level in three years last month… Consumer prices rose 4.2% in May from a year earlier, the Labor Department said Wednesday, up from 3.8% in April and the third straight monthly increase. On a monthly basis, prices rose 0.5% last month, after big gains of 0.6% in April and 0.9% in March… Families are dipping into savings to maintain their spending, and more people are falling behind on their credit card bills. Large retailers say they have also noticed changes in customer behavior, like buying smaller amounts of gas during visits to the pump.”
June 11 – Associated Press (Matt Wiseman): “U.S. producer prices climbed last month at the fastest pace since November 2022, fueled by a surge in energy prices after the start of the Iran war. The… producer price index — which captures inflation before it reaches consumers — jumped 6.5% from May 2025. It rose 1.1% from April, as it did the previous month. Wholesale gasoline prices surged by more than 23% from April to May, and nearly 70% from a year earlier. Excluding volatile food and energy prices, so-called core wholesale prices rose 0.4% from April and 4.9% from May 2025.”
June 10 – New York Times (Tony Romm): “Prices jumped in May for the third straight month, leaving U.S. families and businesses to suffer the sting from the war with Iran. And for the third time, the White House largely shrugged off the news, insisting that the problem was temporary — and that President Trump’s agenda was working. ‘No, I love it, the numbers were great,’ the president told reporters... ‘I love the inflation.’ It was a familiar pattern, one that appeared to underscore the widening chasm between Mr. Trump and the majority of Americans who say they are frustrated with the direction of the economy.”
June 12 – Bloomberg (Julia Fanzeres and Charles Gorrivan): “US plastic suppliers say they are running out of room to absorb high costs of raw materials, raising the prospect of price increases for consumer goods ranging from groceries to cars later this year. A gauge of wholesale prices of plastic resins and materials jumped by 14% to an almost four-year high last month as the Iran war choked off supplies of key components. For producers like Shawn Gross, whose… company supplies molded parts used in automotive and heating systems, the squeeze is reaching a breaking point. ‘We are going to need to pursue the price increases with our customers more aggressively,’ said Gross, chief executive officer of Viking Plastics. ‘What the world needs to understand is there is going to be a real impact that is not even yet felt.’”
June 11 – Axios (Matt Phillips): “Flash drive prices have exploded, ending a decades-long deflation in the ubiquitous devices often referred to as thumb drives. The spike shows how AI investment continues to seep into some of the more mundane corners of the economy. Prices for ‘computer software and accessories’ jumped a record 14.5% in May compared with the previous year, according to… Wednesday’s Consumer Price Index report. It was the highest in a series of surges since a quarter-century-long deflationary trend for this category suddenly came to an end last November.”
June 11 – Bloomberg (Enda Curran): “When Chris Barber, who’s been in the computer business for a quarter-century, says he’s never seen anything like the AI boom, he’s not talking about its potential to transform the future. He means what it’s doing to hardware prices right now. Barber runs ‘Cheaper Than a Geek,’ a Baltimore-based outfit that helps small companies with IT. Memory upgrades are a popular service, but nowadays he’s advising people that it’s barely worth the cost. RAM chips that sold for $100 six months ago are an ‘insane’ $300 now... ‘Parts themselves are just completely out of control,” Barber says. “This is the worst increase I’ve ever seen.’ Behind it lies the rush to build data centers, which power artificial intelligence and need vast quantities of memory chips.”
June 10 – Bloomberg (Ilena Peng): “Beef prices hit a fresh record, and hopes for consumer relief are fading as drought and the reemergence of a deadly cattle parasite keep the US herd smaller for longer. US consumers on average paid $7.064 for a pound of ground beef in May, slightly higher than the previous month but up 13% from a year earlier…”
Federal Reserve Watch:
June 7 – Financial Times (Myles McCormick): “Donald Trump has piled pressure on Kevin Warsh ahead of his first meeting as chair of the Federal Reserve by demanding lower interest rates days after a strong US jobs report fuelled bets on higher borrowing costs… The president warned that the country should not be ‘penalised by immediately raising interest rates’ as investor expectations rose that the Fed would increase them by the end of the year. ‘There’s no reason to raise interest rates,’ Trump told NBC’s Meet the Press. ‘We built the country by doing great and having rates low. What they do is when they raise interest rates, they try and kill success. I don’t want to kill success. We should actually lower interest rates.’”
June 6 – Bloomberg (Katanga Johnson): “Federal Reserve Governor Michael Barr criticized moves from regulators over the past year to relax the rules for US lenders, saying the proposals ‘considerably weaken bank regulation and supervision.’ ‘I believe that recent steps by the Federal Reserve and other agencies will undermine the safety and soundness of banks and increase financial stability risks,’ Barr said... ‘Vulnerabilities that result from deregulation may not be apparent today, but they will result in problems that will build over the coming years and could threaten serious harm to the economy.’”
U.S. Economic Bubble Watch:
June 6 – Wall Street Journal (Matt Grossman): “Economists had written off the great American job-creation machine. Now, it is revving back to life. Hiring has surged this spring, with employers adding more than half a million jobs between March and May. Factories, restaurants and city halls have all shifted into hiring mode, a pivot from last year, when the healthcare industry almost single-handedly propped up job creation. Friday’s May jobs report showed the labor market has now notched its best three-month stretch in more than two years. The momentum is a sea change from last year, when hiring was weak in many sectors.”
June 9 – Reuters (Lucia Mutikani): “The U.S. trade deficit narrowed in April as exports of petroleum products and capital goods jumped to record highs, a trend that if sustained, will put trade on course to contribute to economic growth in the second quarter… The trade gap contracted 1.2% to $55.9 billion… Exports increased 2.6% to $327.1 billion, a record high. Goods exports surged 4.1% to a record $221.3 billion. Petroleum exports increased to a record high of $36.7 billion from $27.6 billion in March…”
June 9 – Bloomberg (Mark Niquette): “An index of US small business optimism fell in May to the lowest level since October 2024, erasing almost all of the gains seen since President Donald Trump was elected for a second term. The National Federation of Independent Business optimism index fell 0.6 point to 95.3… The measure had climbed to a six-year high in December 2024 following the presidential election… 70% of small business owners reported that supply chain disruptions affected their business to some extent, up 6 points from April. The share of owners citing inflation as their most important business problem climbed for a third straight month.”
June 9 – CNBC (Diana Olick): “Sales of previously owned homes rebounded more than expected in May, after mortgage rates pulled back slightly in April. Existing home sales in May rose 3.2% from April to a seasonally adjusted, annualized rate of 4.17 million units… Economists were expecting less than a 1% gain. Sales were also up 3.2% from a year earlier, the strongest pace since December… Inventory in May rose 3.3%, month to month, to 1.55 million units for sale and was up a little less than 1% from a year ago. At the current sales pace, that is a 4.5 months’ supply. Six months is considered balanced… The median price of an existing home sold in May was $429,300, an increase of 1.3% from the year before and a record high price for the month.”
June 10 – CNBC (Diana Olick): “Mortgage rates moved slightly higher last week, but both current homeowners and potential homebuyers returned to the mortgage market, perhaps for the last spring push… Applications for a mortgage to purchase a home climbed 7% for the week and were 4% higher year over year.”
China Watch:
June 9 – Bloomberg: “China is preparing to spend around 2 trillion yuan ($295bn) over the next five years on building data centers across the country, fueling Beijing’s ambition to propel the domestic AI sector and surpass the US in a potentially game-changing technology.”
June 9 – CNBC (Anniek Bao): “China’s wholesale prices rose at the fastest pace in nearly four years in May, driven by surging raw material costs due to the Iran war and an artificial intelligence investment boom, while consumer inflation came in below estimates. The producer price index jumped 3.9% from a year ago, the highest since July 2022, topping economists’ forecast of 3.8%, and outpacing 2.8% in April…”
June 12 – Bloomberg: “China’s credit expansion slowed in May from a year earlier, as private demand remained subdued even though regulators pushed banks to lend more. Aggregate financing, a broad measure of credit, increased 2.03 trillion yuan ($300bn)… While that exceeded the median estimate…, it was more than 11% weaker than in the year prior… Household loans contracted for the second straight month. Lending to non-financial companies increased as a result of a boom in bill financing, with medium and long-term loans — a measure of corporate investment confidence — continuing to fall. Slower issuance of government bonds compared with last year is also creating a drag on the overall credit figures.”
June 9 – Associated Press (Chan Ho-Him): “China’s exports picked up pace in May, rising 19.4% from a year earlier…, as technology-related shipments remained robust despite impacts from the Iran war. The stronger than expected performance was an improvement from April’s 14.1% year-on-year increase. Imports in May jumped 27.4%, also at a faster pace compared with April’s 25.3% year-on-year expansion. Exports to the U.S. in May surged more than 35% from the year before — the strongest pace since early 2021 — after an 11% increase in April.”
Central Banker Watch:
June 12 – Bloomberg (Alexander Weber): “The European Central Bank is prepared to raise interest rates for a second straight meeting next month if the shock from the war in the Middle East requires it, according to Governing Council member Joachim Nagel. The fallout from the war is proving too strong to ignore, making Thursday’s increase in the deposit rate necessary even if the situation moderates quickly, the Bundesbank president said. High energy costs are having repercussions for other prices and are affecting core inflation, he said.”
June 12 – Wall Street Journal (Jihye Lee and Fabiana Negrin Ochoa): “Bank of Korea Gov. Shin Hyun-song warned against falling behind the curve on taming inflation, signaling growing urgency for policymakers to act before it is too late. With the Middle East conflict dragging on, concerns over inflationary pressures have increased, Shin said… The remarks will likely reinforce market expectations that the BOK will resume tightening as soon as next month, as the Iran crisis drives up energy prices and disrupts supply chains.”
June 8 – Financial Times (Diana Mariska and A. Anantha Lakshmi): “Indonesia’s central bank has unexpectedly raised its benchmark interest rate to prop up the rupiah which is trading at record lows, as a sell-off rocks assets across south-east Asia’s largest economy. Bank Indonesia increased the rate by 0.25 percentage points on Tuesday to 5.50% in an off-cycle move. This followed a 0.50 percentage point rise just three weeks ago in what was its first rate increase in two years.”
Europe/UK Watch:
June 7 – Telegraph (Eir Nolsoe): “Britain’s national debt is growing at a faster pace than any country in the world except Botswana, as Labour’s warring factions grapple with how to control public spending. The UK’s debt as a share of GDP has tripled over the past 25 years, piling pressure on the Government’s finances, according to… the International Monetary Fund (IMF). That was a bigger increase than any other country over the same period bar Botswana, an unusual outlier. Economists and politicians warned the ‘crippling’ debt levels were piling unnecessary pressure on families and risked triggering a bond market meltdown. The IMF measures net government debt by calculating what a country owes, minus what it owns…. The UK’s debt as a share of GDP shot up from 30.4pc in 2001 to 95.5pc today – a rise of 65 percentage points.”
Japan Watch:
June 10 – Bloomberg (Mia Glass and Alice French): “Bank of Japan Governor Kazuo Ueda’s hospitalization is generating uncertainty among investors over the central bank’s messaging at its policy meeting next week, even as they remain convinced officials will raise interest rates. Ueda is expected to miss the BOJ’s meeting on June 15-16 and will refrain from casting a vote, but will express his views via a statement. Deputy Governor Ryozo Himino will serve as acting chair while another deputy, Shinichi Uchida, will host a post-meeting press conference.”
June 9 – Bloomberg (Mia Glass): “Japan’s 30-year government bond auction drew the weakest demand since June 2025 as a decline in yields dented investor appetite, with concerns over inflation and fiscal policy weighing on sentiment… The bid-to-cover ratio fell to 2.94 compared with 3.49 at the previous auction and a 12-month average of 3.4.”
June 9 – Bloomberg (Molly Smith and Erica Yokoyama): “Japan’s corporate goods prices jumped again in May, signaling strengthening inflationary pressures rippling across domestic supply chains as the war in Iran drags on and keeps energy prices elevated. The measure of input prices for Japanese firms rose 0.9% from a month earlier, and April’s increase was revised higher... On an annual basis, prices climbed the most in three years…”
Emerging Market Watch:
June 7 – Bloomberg (Hooyeon Kim): “Investor fervor for artificial intelligence that has driven South Korea’s volatile stock market to the top of global rankings is taking a toll on another market: government bonds. The nation’s government bonds have lost 7.5% this year in local-currency terms, the worst performance among 44 markets tracked by Bloomberg. The benchmark three-year yield rose to about 3.9% Friday, its highest level since 2023. At the heart of the rout lies a growth story too strong for bonds to bear. A surge in AI investment and semiconductor demand has reignited Korea’s economy, lifted prices, and fueled bets the central bank will need to raise rates to rein in momentum.”
June 12 – Bloomberg (Andrew Rosati): “Brazil’s annual inflation climbed over the upper bound of the target range in May, complicating central bankers ability to deliver additional interest rate cuts when they gather next week. Official data released Friday showed consumer prices rose 0.58% from a month earlier, above the 0.53% median estimate… From a year ago, inflation hit 4.72%, above the target of 3%, plus or minus 1.5 percentage points.”
June 10 – Bloomberg (Prima Wirayani): “Indonesia’s bonds and stocks resumed their selloff Thursday, underscoring expectations that the central bank will have to raise interest-rates again to limit capital outflows. The benchmark 10-year yield surged 10 bps to 7.45%, near its highest level since 2022, while the five-year yield ended three basis points higher.”
June 7 – Bloomberg (Cliff Harvey Venzon): “Philippine financial regulators are sounding off potential foreign exchange risks as big conglomerates face large debt maturities of about 1.6 trillion pesos ($26bn) over the next three years. ‘Large conglomerates face a sizable wall of upcoming maturities and FX obligations,’ according to the 2025 Financial Stability Report... The maturities make up nearly a quarter of total debt by Philippine conglomerates and are scheduled to mature between 2027 and 2029…”
Social, Political, Environmental, Cybersecurity Instability Watch:
June 11 – Bloomberg (Matt Day and Michelle Ma): “Amazon.com Inc. said its data centers used 2.5 billion gallons of water worldwide last year, or about 5% of the amount metro Seattle consumes annually. The world’s largest cloud-computing company said the disclosure shows that it cools server farms more efficiently than some of its large tech industry peers.”
June 11 – Bloomberg (Brian K Sullivan and Lauren Rosenthal): “US scientists say the El Niño weather phenomenon that has emerged in the equatorial Pacific is on track to become one of the strongest on record, raising the odds of destructive droughts and floods in the months ahead. The US Climate Prediction Center said… the Pacific’s surface has warmed enough to trigger a response in the atmosphere above it. El Niño notices from forecasters in the Philippines and Japan came earlier in the week. As the ocean continues to heat up, the event is expected to grow and exert more force over global weather patterns, peaking toward the end of the year. ‘It’s in the ballpark of some of the strongest events we’ve had since 1950,’ said CPC meteorologist Matthew Rosencrans. He pointed to a recent string of ‘wind bursts’ and an unusually large accumulation of warm water in the tropics as key factors. ‘It’s the piling up of all of it together that gets you to this amplitude.’”
June 12 – Bloomberg (Lauren Rosenthal and Ari Natter): “Dangerous heat and humidity will stress power grids along the US East Coast Friday, putting pressure on prices as the risk of severe thunderstorms spreads from the Midwest. Temperatures are expected to spike above 100F (38C) from southern Virginia to North Carolina Friday, with sweltering humidity that makes the heat feel more intense. With cooling demand surging into the weekend, the Trump administration declared a power emergency in the southeastern US this week to shore up the grid.”
June 8 – Bloomberg (Todd Woody): “A new United Nations assessment of ocean health documents a ‘deepening crisis’ as climate change, pollution, overfishing and biodiversity loss threaten marine ecosystems crucial to human survival. The result is rising sea levels, acidifying seas, dying coral reefs and declining fish stocks that supply 20% of the animal protein humans consume, according to the report… compiled by 600 scientists from 86 nations… ‘The coming decade is decisive: without rapid, coordinated global action, ocean health will continue to decline, threatening climate stability, biodiversity resilience, food security, livelihoods and the well-being of billions,’ Ian Butler, a lead author of the assessment and a marine ecologist with the Australian government, said…”
June 9 – Financial Times (Kenza Bryan and Steven Bernard): “Europe’s intense spring heatwave showed how quickly climate extremes had become ‘the new normal’, scientists said, after the month of May broke a series of national records and was the second warmest globally. The EU’s Earth observation service Copernicus said… the speed of the swing from cooler-than-average temperatures to high temperatures in western countries had given people, crops and ecosystems little time to acclimatise. ‘[The] unusually early and intense heatwave demonstrates how quickly climate extremes are becoming the new normal rather than the exception,’ said Samantha Burgess, strategic lead for climate at the European Centre for Medium-Range Weather Forecasts.”
Geopolitical Watch:
June 10 – Wall Street Journal (Timothy W. Martin): “North Korea’s uranium-enrichment capacity could soon expand by 75% once a new facility reaches full production, a clear signal that leader Kim Jong Un intends to expand his arsenal in defiance of international pressure. The new facility in Yongbyon is estimated to house more than 9,000 centrifuges capable of producing roughly 160 kilograms of highly enriched uranium a year…”
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