We’ve got good news, and bad news: A Morgan Stanley-led banking consortium breathed a sigh of relief Monday, offloading the final $1.23 billion in debt tied to Elon Musk’s 2022-era buyout of social media platform X Holdings (née Twitter).

The first-lien loan priced at 9.5% and a 98 cent on-the-dollar discount, Bloomberg reports, with demand for the issue topping $3 billion. By contrast, the lender syndicate had been fielding bids closer to 60 cents on the dollar only months ago, a discount which would have spelled serious pain.

“If I were Morgan Stanley, I’d be walking on air,” retired Johns Hopkins University finance professor Jeffrey Hooke relates to Bloomberg. “Could you have hoped for a better result as a lender? I don’t think so. [They] were deep in the abyss but got rescued.”

Yet as banks finally clear their balance sheets of the $80 billion in hung deal detritus lodged during 2022’s asset price downshift, primary markets are once again providing little accommodation in the wake of the April 2 tariff “Liberation Day.”  

Domestic junk bond issuance stands at $7.9 billion in the month-to-date, Bloomberg relays today, marking the slowest April since 2008, with the $5.1 billion in new leveraged loans representing the fifth-flimsiest single supply month dating to 2013.  Banks, which had planned to underwrite $38 billion in euro- and dollar-denominated financing transactions to help fund leveraged buyouts as of the end of March, have since been obliged to house $4.6 billion in orphaned paper.

More broadly, an extended primary market freeze-out would do little to help a notably large contingent of vulnerable credits. The tally of borrowers sporting a Moody’s rating of B3 (“considered speculative and subject to high credit risk”) and below alongside with a negative outlook registered at 16% of the U.S. speculative-grade population as of March 31, little changed year-over-year and modestly higher than the 15% long-term average share.  For context, option-adjusted spreads on Bloomberg’s high-yield gauge stood at 347 basis points at the end of Q1, well below the average 480 basis point pickup seen since 1993.

“Lingering speculative-grade distress. . . could worsen if market volatility continues to constrain access to capital for the lower end of [this] population,” analysts at the rating agency wrote last week.  “These issuers will find it tough to refinance their upcoming maturities and will have to restructure untenable debt burden[s].”

Bullish conditions remain in place as stocks shook off some early weakness to post a 0.6% gain on the S&P 500, narrowing year-to-date losses to 5%. Treasurys also remained on the front foot, with 2- and 30-year yields dipping a further two and five basis points respectively to 3.65% and 4.64%, while WTI crude sank to $60 a barrel and gold pulled back to $3,320 per ounce. Bitcoin finished little changed near $95,000 while the VIX continued to deflate at 24 and change.

- Philip Grant

A buoyant bounce in skeptic-centric stocks colors this week’s potent rally: the Goldman Sachs Most Shorted Rolling Index powered higher by 4% Thursday to extend its three-day rally to 11%, Accelerate Technologies founder and CEO Julian Klymochko points out, before consolidating that advance today.  The basket of battleground names declined by 29% from its Feb. 17 peak through Monday.

Magnificent Seven mainstay Tesla sports a modest short interest of less than 3% of the outstanding float by Bloomberg’s lights, but Elon Musk’s corporate pride and joy represents an apt barometer of broader risk appetite. Shares ripped higher by 10% Friday, capping a 25%, four-day run which cleaved year-to-date losses in half.  Musk’s Tuesday comment that he will soon devote far less time to his Department of Government Efficiency side-hustle helped ignite that rally.

The electric vehicle manufacturer could seemingly use some renewed managerial focus. Tuesday also brought word that first quarter adjusted earnings dropped 40% year-over-year to $0.27 per share, trailing the $0.43 analyst consensus which Wall Street had already trimmed by 39% since New Year’s Day.

“There is currently no inflationary risk in Europe, and we can now almost say ‘mission accomplished’ when it comes to bringing inflation back to our 2% target” crowed the ECB’s Francois Villeroy de Galhau earlier this week. “The significant deceleration of wages is another proof thereof.”  

Average compensation across the euro area rose 3.1% in the year-to-date through early April per the ECB’s latest wage tracker, down from 4.8% across calendar 2024. Nominal CPI, meanwhile, grew at an average 2.3% clip across the first three months of 2025, down slightly from the 2.4% seen last year.

The Old Continent’s inflation-beating pay picture is no outlier. The Organization for Economic Co-operation and Development found last month that annual real wage growth stood in positive territory in 31 of the 34 countries under its analytical purview as of Sept. 30, though the key metric remains below early 2021 levels in 22 of those 34 nations.

Workers in the world’s largest economy are among that fortunate dozen. According to the National Bureau of Economic Research, average hourly earnings have grown at a cumulative 21.4% over the four years through March, outpacing the 19.9% uptick in the CPI over that stretch. By contrast, economist Kathryn Anne Edwards relays in Bloomberg Opinion today that pay gains materially lagged CPI growth during the high-inflation episodes of 1973 to 1983 and 1987 to 1991.

“The takeaway is just how well the economy has moved past the pandemic era’s elevated rates of inflation and how well it was able to ‘zero out’ the net effect it had on wages,” Edwards writes. “As painful as the most recent experience with inflation was, it was relatively tame given how quickly price growth receded and how fast wages recovered and even gained ground.”

The booming – if sporadically interrupted – bull market of recent years has ensured an even sunnier result for the great and good. Thus, median CEO pay among S&P 500 firms at which the boss has held the top spot for at least two years reached $16.8 million in 2024, advisory firm ISS-Corporate finds, up 7.5% from the prior annum. That metric has shown 37% cumulative growth since 2021, nearly doubling the CPI’s 20.6% advance during those four years.  

Stocks rose by 0.7% on the S&P 500 to cap a stellar week for shareholders, as the broad index shook off Monday’s drop to log a near 6%, five-day advance. Treasurys maintained moderate strength with 2- and 30-year yields each declining three basis points to 3.74% and 4.74%, respectively, while WTI crude topped $63 per barrel and gold retreated to $3,308 an ounce. Bitcoin held steady north of $95,000 while the VIX closed before 25 for the first time since “liberation day.”

- Philip Grant

Call it a temporary tattoo, via the New York Daily News:

Earth Day environmental activists defaced Lower Manhattan’s iconic Charging Bull statue Tuesday, then rushed to clean it up before cops arrived, officials said.

Videos on social media and photographs from the scene show a handful of Extinction Rebellion activists spray-painting “Greed = Death” onto the flank of the life-size Arturo Di Modica sculpture on Broadway near Morris St. in the Financial District. . .

Photos show at least one cop removing an activist who was sitting on the bull’s neck as protesters began wiping off the green paint. When more cops arrived, the Bull had been completely cleaned off. No arrests were immediately made, an NYPD spokesman said Tuesday.

If you build it, they will borrow: MSCI and Moody’s announced plans Monday to launch a risk assessment service for direct loans, potentially offering new insight into the opaque, $2.5 trillion private credit category.  

The firms will each furnish in-house data to help provide monthly snapshots of profitability, leverage and other “forward-looking assessments of the probability of default,” Moody’s managing director David Hamilton told The Wall Street Journal. Such timely data is particularly useful today, “where the uncertainty has been turned up to 11,” he added.

Indeed, recent tariff-induced spasms could serve to further burnish the appeal of closely held credits, as investors have recently turned up their noses at a competing speculative-grade product, pulling a record $6.5 billion from leveraged loans over the week ended April 9 per LSEG Lipper.  

Last Wednesday, the U.S. leveraged loan market endured its 14^th consecutive session without a new launch, marking the lengthiest primary market freeze since at least 2013 by Bloomberg’s lights and compared to 10 such deal free days across the first three months of this year.  Insufficient demand, meanwhile, obliged Wall Street banks to house $4.5 billion in debt backing a pair of acquisitions on their own balance sheets last week, marking some of the first so-called hung deals since the 2022 downturn spurred a raft of scuttled sales.

Accordingly, direct lending is “set to take [market] share again,” a Thursday analysis from Moody’s predicted, as the category represents “a refuge in turbulent times.”  With long-frozen IPO markets continuing to exert a chill over leveraged buyouts and exits alike, Moody’s “expect[s] lower-rated companies to lean more heavily on private credit lenders for financing support,” utilizing so-called net asset value lending and similar maneuvers to scare up cash. Waxing interest from institutions such as insurance companies as well as high-net worth individuals will help provide that abutment.

Investors may maintain a shine towards non-traded assets, but those affections have notably overlooked one high profile effort at exchange-traded alchemy.  The State Street- and Apollo-managed SPDR SSGA IG Public and Private Credit ETF (ticker: PRIV), which recently launched to substantial fanfare, languishes with less than $55 million in assets, little changed from its initial seeding. Daily trading volumes have likewise shriveled below 4,000 shares on average over the past week from 207,000 shares in daily average turnover during the first five trading days.

“It’s been surprising that demand hasn’t been stronger for PRIV right out of the gate,” VettaFi investment strategist Cinthia Murphy told Bloomberg Thursday. “Appetite for private assets is real, but I think we’ve learned that so are the concerns about the difference in liquidity between the ETF wrapper and the underlying private assets.”

News snippets suggesting trade-related reconciliation helped stocks stage a steep Tuesday advance, with the S&P 500 climbing 2.6% to narrow year-to-date losses below 10%. Action in Treasurys was more muted, with the long bond dropping three basis points to 4.88% while two-year yields edged to 3.76% from 3.75%.  WTI crude climbed towards $64 a barrel, gold retrenched to $3,381 per ounce after touching $3,500 during the wee hours, bitcoin remained red hot at $91,000 and change and the VIX dropped below 31.

- Philip Grant

Is it safe?  The recent Treasurys tumult is spurring queasiness in high places, as Bloomberg reports that European Insurance and Occupational Pensions Authority chair Petra Hielkema called the safe-haven status of U.S. government bonds into question last week during a gathering of financial supervisors. Uncle Sam’s obligations have long been described as “risk-free” in some corners, but the Trump administration’s chaotic, antagonistic tariffs regime potentially changes the game.

The truism that markets make opinions may also inform Hielkema’s view, as Bloomberg’s U.S. Treasury Index has returned minus 9% on a nominal basis over the past five years, lagging the negative 6% showing for its global aggregate fixed income gauge.

Conversely, the S&P 500 virtually doubled over the five years through 2024, comfortably outpacing the 74% dollar-denominated return for the MSCI World Index. On that note, foreign investors have veritably covered themselves in red, white and blue in recent years, accounting for 18% of U.S. equity market ownership as of year-end according to Goldman Sachs. That’s the highest share on record, up from about 15% in 2020 and less than 8% throughout the 1960 to 2000 epoch.

It’s raining dollars: Venture capital funding spigots flowed freely at the start of 2025, with U.S. startups gathering $91.5 billion from January through March according to a Tuesday analysis from PitchBook. That represents an 18.5% uptick from the final three months of 2024 and the second-strongest quarterly showing on record. For context, full-year activity during the 2021 everything bubble registered at $358.7 billion, putting the first quarter on pace to challenge that figure.

Of course, current sentiment is far removed from that euphoric post-plague year, with tariff-induced tumult serving to obstruct the public market exit door. “Liquidity that everyone was hoping for doesn’t look like it’s going to happen with everything that has gone on [during] the past two weeks,” PitchBook lead U.S. venture capital analyst Kyle Stanford told TechCrunch.  Unicorns (meaning private firms valued at $1 billion and above) Hinge Health, Klarna Group and StubHub have each scrapped IPO plans since President Trump’s April 2 thunderbolt.

Noteworthy concentration, meanwhile, characterized the first quarter burst in VC activity, with OpenAI’s monster $40 billion round itself accounting for 44% of the total sum. Another nine firms gathered $500 million or more, collectively representing a further 27%.  “Those deals are really masking the challenges many founders are going through,” Stanford said. “I think there are a lot of companies that are going to need to come to terms with down rounds or getting acquired for large discounts.”

Yet smaller fish have enjoyed a surprisingly hospitable waters in the stock market this year, marking a noteworthy contrast with broader conditions. Thus, 63 firms have raised $100 million or less via U.S. IPOs in the year-to-date through April 9, Bloomberg relayed, racking up a size-weighted average gain of 30%. By contrast, the Renaissance IPO Index, which tracks the largest and most liquid domestic firms listed in the past 24 months, is down 19% since the start of 2025.

“Even in a volatile market, there’s room for well-structured, smaller offerings to gain traction, particularly if they’re positioned around clear narratives [with] focused use of proceeds and a targeted investor base,” Mike Bellin, IPO services leader at PwC, told Bloomberg.

Stocks floated through a forgettable session to settle slightly higher on the S&P 500, wrapping up the holiday-shortened week with a 1.5% loss. Treasurys largely reversed Wednesdays rally with 2- and 30-year yields 3.81% and 4.8%, respectively, up four and six basis points on the day, while WTI crude maintained recent momentum with a push towards $64 a barrel and gold pulled back only slightly at $3,315 per ounce. Bitcoin rose towards $85,000 while the VIX ebbed to just below 30.

- Philip Grant

Mr. Market’s under the microscope: Treasury Secretary Scott Bessent maintained a sanguine stance in the face of last week’s outsized government bond selloff, commenting on Bloomberg Television Monday that “we are a long way” from requiring an official response. Even so, Washington has “a big toolkit we can roll out,” he declared, pointing to enhanced buybacks of less-liquid, off-the-run Treasurys as one potential option.  

In turn, Deputy Treasury Secretary Michael Faulkender floated the prospect of easing the supplementary leverage ratio Tuesday, a tweak which would permit U.S. banks to add more Treasurys to their own balance sheets (that remedy was indeed employed on a temporary basis during the 2020 tumult).  

Such trial balloons are telling, as governments and investors alike struggle to adjust to the Trump administration’s tariffs regime. “The U.S. Treasurys market may have lost – at least temporarily – some of its legendary defensive characteristics,” MFS Investment Management senior managing director Benoit Anne mused to Bloomberg. “In the face of higher risk aversion, Treasurys do not seem to offer currently the protection that they used to.”

A suddenly-parched liquidity picture speaks to those concerns, as the head of Treasury trading at a high-profile U.S. fund told the Financial Times that market depth (as in the quantity of executable bids and offers at a given time) had shrunk by 80% from its typical baseline by the end of last week. “If a steep breeze blew through the Treasury market today, rates would move a quarter point,” quipped Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott.

Those crosswinds duly ripple across the corporate credit complex. Average bid-to-ask spreads have lurched wider across the investment-grade realm in recent weeks, Apollo-compiled data show, with off-the-run bonds – defined as those issued more than two years ago with a deal size of less than $900 million – seeing their gap nearly double to 20 basis points, the widest since the Covid crucible. 

That cohort, which accounts for half of the IG market by count, “has become virtually untradable and [is now] effectively a buy-and-hold instrument,” concludes Apollo’s Torsten Slok.

Some investors have instead opted to hit the bricks, pulling a net $6.08 billion from short- and intermediate-duration IG bonds over the seven days through last Wednesday according to LSEG Lipper, the largest weekly outflow since May 2022.

Meanwhile, the recent rebound in equity benchmarks represents a needed reprieve for the suddenly-besieged speculative grade credit realm, with yields on Bloomberg’s junk bond gauge plunging 20 basis points Monday to 8.38%, the best single-day showing since late 2023. That screaming rally comes on the heels of a major cash migration: U.S. high-yield bond funds logged a $9.6 billion outflow during the week through April 9, the largest since early 2023, with leveraged loan funds losing a net $6.3 billion, nearly doubling the previous record figure from December 2018.  

Primary markets have likewise remained in deep freeze as spring unfolds, with issuance across high-yield and leveraged loans at just $13 billion in the month through Friday per LSEG, compared to an average $52.5 billion seen over the same period during the past three years. This morning, liquified natural gas concern Venture Global Plaquemines brought $2.5 billion of double-B/double-B-plus-rated senior-secured paper to market, representing the first high-yield sale since President Trump’s April 2 tariff announcement.

Wall Street is undoubtedly watching that deal closely, as the FT reported on Monday that the likes of Citigroup, Morgan Stanley and JPMorgan Chase have each pulled back on planned bond and loan deals in recent sessions on account of weak demand. “Some existing commitments could get stuck on bank balance sheets,” Canyon Partners CIO Jeff Kivitz warned the pink paper, adding that lenders appear “less willing to provide indications for new commitments amidst the volatility.”

Stocks fluttered lower by 0.2% on the S&P 500 in the first low-key trading session since Trump’s early April thunderbolt, while 10-year yields ticked to 4.35% from 4.38% Monday with the two-year note holding at 3.84%. WTI crude finished little changed at $61.50 a barrel, gold rebounded to $3,228 per ounce, bitcoin edged below $84,000 and the VIX retreated to 30.

- Philip Grant

From Billboard:

Tens of thousands of music fans will descend on the California desert this weekend for the first of two iterations of the Coachella Music and Arts festival outside of Palm Springs, Calif.

Approximately 80,000 to 100,000 fans each weekend will have coughed up the $599 ticket price to see headliners Lady Gaga, Travis Scott, Green Day and Post Malone. But ticket [prices are] often just the cost of entry — many of those fans will spend more than $1,000 per weekend on lodging and cough up hundreds of dollars more for food, drinks and merchandise. . .

Approximately 60% of general admission ticket buyers at this year’s festival opted to use Coachella’s payment plan system, which requires as little as $49.99 up front for tickets to the annual concert. 

Join the party: the dollar value of distressed credits (defined as those trading at an option-adjusted spread of 1,000 basis points and above) within the Morningstar U.S. High-Yield Bond Index reached $106 billion as of April 9, LCD relays today, up a cool 40% from one week prior. The distressed ratio likewise lurched to 7.64% from 5.46%, with that 218-basis point rise nearly matching the 221-basis point week uptick logged during the Silicon Valley Bank episode in March 2023. 

That regional banking kerfuffle proved an advantageous entry point for junk bond investors, as the ICE BofA US High Yield Index saw its OAS shrink to 265 basis points at the end of last year from more than 500 basis points.  Will history rhyme?  We’ll know more later.

Port in a storm, or storm in a port? Tariff-induced tumult has hardly spared the Treasury complex, with yields on the benchmark 10-year note – often dubbed the most important price in financial markets – ratcheting higher by about half percentage point over the past five sessions. 

By contrast, German 10-year bunds wrapped up the week little changed, clinching the largest gap between those two assets since at least 1989 according to Bloomberg.  “Bunds have been one of the only rate markets that has acted as a risk-off asset during recent volatility,” notes Orla Garvey, senior fixed income portfolio manager at Federated Hermes Limited.

While political and financial factors alike figure into the ongoing Treasury rout, Uncle Sam’s deplorable fiscal condition certainly does not help.   

Thus, the U.S. budget deficit tipped the scales at $1.307 trillion from October through March, data released yesterday show.  That’s up 14.6% year-on-year, after adjusting for calendar-related spending shifts, and marks the largest six-month shortfall on record outside the Covid-era policy panic.  Meanwhile, Elon Musk now claims his Department of Government Efficiency will achieve $150 billion in savings during fiscal 2026, rather than a prior $1 trillion bogey (for context, outlays during January through March increased $139 billion from the same period last year).

Gross U.S. public debt to GDP reached 121% as of year-end per the U.S. Office of Management and Budget, up from 92% at the end of 2010.  By contrast, Eurostat measures German output-adjusted debt at 62.4% as of Sept. 30 (the most recently available data), down from 81% in 2010. “When volatility rises, you look at those relative debt levels and Germany stands out as being more appealing,” Tim Graf, head of EMEA macro strategy at State Street Global Advisors, tells Bloomberg. “Bunds act as a relative flight to quality in this environment,” adds Fidelity portfolio manager Shamil Gohil.

Instructively, the nascent global safe-haven is undergoing its own metamorphosis. The Financial Times reports that Schwarze Null (i.e., black zero) – a cardboard statue erected in Stuttgart to celebrate Germany’s successful efforts to balance its budget – is now “gathering dust in a government storage room between spare television screens and boxes of Christmas decorations.”

That mothballing move aptly underscores Germany’s pivot from fiscal conservatism, with the Bundestag last month scrapping its so-called debt brake (which caps structural deficits at 0.35% of GDP) and unleashing a €500 billion ($565 billion) spending package. “It is a massive deviation from this German idea of budgetary discipline,” historian Andreas Rödder told the FT.

What’s “cleanest dirty shirt” in German?

Stocks enjoyed a strong bid, rising 1.8% on the S&P 500 to wrap up a wild week with a tidy 5.7% advance. Treasurys remained mostly weaker as 2- and 10-year yields jumped 12 and 8 basis points, respectively, to 3.96% and 4.48%, though the long bond managed to tick to 4.85% from 4.86% Thursday.  WTI crude climbed towards $62 a barrel, gold ripped higher again to $3,235 per ounce, bitcoin advanced to just under $84,000 and the VIX settled just below 36, down 11 points from last Friday.

- Philip Grant

White House trade advisor Peter Navarro is “a moron” and “dumber than a sack of bricks,” Elon Musk tweeted this morning. The Department of Government Efficiency progenitor and Tesla boss evidently took exception to Navarro’s Monday remarks that the electric vehicle giant “isn’t a car manufacturer [but] a car assembler,” in reference to its use of foreign supply chains. “By any definition whatsoever, Tesla is the most vertically integrated auto manufacturer in America,” Musk rejoined.

Financial and fundamental developments alike may help explain Musk’s caustic mood. TSLA shares now change hands nearly 50% below the post-election peak logged just under five months ago. Citing data from CarGurus and Auto Trader, respectively, the Financial Times likewise reports that used Tesla prices dropped 7% year-over-year in the U.S. and 15% in the United Kingdom last month (that compares to broader EV declines of 1.5% and 10% in those regions).  

Worldwide new Tesla deliveries registered at 336,681 across the first quarter, well shy of the 390,000 sell-side expectation and down 13% from the first three months of 2024.

There can be no assurance: The artificial intelligence revolution ushers in a murky future for wage earners around the globe, as the United Nations Trade and Development group reckons that the game-changing technology could impact 40% of all global jobs. “The benefits of AI-driven automation often favor capital over labor, which could widen inequality and reduce the competitive advantage of low-cost labor in developing countries,” the outfit posits.

One North American technology mainstay offers a potential preview of that dynamic.  Shopify co-founder CEO Tobias Lütke laid down the law in a March 20 memo, which he posted to social media on Monday:

Before asking for more headcount and resources, teams must demonstrate why they cannot get what they want done using AI. What would this area look like if autonomous AI agents were already part of the team? This question can lead to really fun discussions and projects.

The Canadian e-commerce firm, which operates a fully-remote employment model, shrunk its corporate headcount to 8,100 as of Dec. 31 from 11,600 at the end of 2022.

Meanwhile, the eye-catching appearance of one cottage industry accompanies autonomy’s abrupt ascent. “Fake job seekers are flooding U.S. companies that are hiring for remote positions,” CNBC reports today, with research and advisory firm Gartner predicting that, by 2028, one in four job candidates will be fraudulent.

So-called deepfake software and other AI tools underpin that dubious practice, potentially allowing bad actors to steal company trade secrets and customer data, or install malware to then demand ransom for its removal.

The frequency of such fake job-hunters has “ramped up massively” during the past year, relays Ben Sesser, CEO of tech-focused staffing firm BrightHire. “Humans are generally the weak link in cybersecurity, and the hiring process is an inherently human process with a lot of hand-offs and a lot of different people involved. It’s become a weak point that folks are trying to expose.”  

Denizens of Kim Jong-Un’s domain appear to be a particularly prolific cohort. Last spring, the Department of Justice alleged that North Korean imposters “perpetrated a staggering fraud on a multitude of industries,” infiltrating some 300 U.S. companies – including at least a half-dozen Fortune 500 firms – which had unknowingly hired them for remote I.T. roles.  The fraudsters ultimately remitted millions of dollars back to North Korea to help fund the Mother Country’s illicit weapons program.  

“Every time we list a job posting, we get 100 North Korean spies applying to it,” Lili Infante, founder and CEO of cybersecurity-cum-cryptocurrency startup CAT Labs, advises the financial news network. “When you look at their resumes, they look amazing; they use all the keywords for what we’re looking for.”

President Trump et al., please copy. Source: Grant’s Interest Rate Observer, March 14, 2025.

Stocks saw another stomach-churning move as the S&P 500 raced higher by 4% after the open, swan-dove to a minus 3% showing in mid-afternoon then staged a (relatively, by current standards) modest rally into the bell to wrap up the day with a 1.6% decline.  

That result was outright bullish compared to the action in Treasurys, as 10- and 30-year yields jumped a further 11 and 13 basis points, respectively, to 4.26% and 4.71%, with the iShares 20+ Year Treasury Bond ETF finishing at session lows. WTI crude fell below $59 a barrel, gold rebounded to $2,984 per ounce, bitcoin edged below $77,000 and the VIX rose eight points to 55.

- Philip Grant

They’re back! Negative nominal interest rates have returned to the financial fore following an all-too-brief hiatus, with bid yields on Swiss government debt due in 2027 briefly dipping to minus .0004% this morning.  That’s the first sub-zero foray since 2022 for those benchmark two-year notes, which changed hands at 0.36% three weeks ago.

The global tally of negative yielding bonds, which, of course, guarantee a loss if held to maturity, reached $18.4 trillion in late 2020 before melting away during the post-Covid inflation conflagration.

Long-dormant capital markets have hit the snooze button: Buy-now, pay-later outfit Klarna Bank and ticketing middleman StubHub Holdings have abandoned plans to launch investor roadshows next week ahead of New York Stock Exchange listings, The Wall Street Journal reports.

A total of 164 companies staged U.S. public debuts from 2022 to 2024, finds Jay R. Ritter, professor at the University of Florida Warrington College of Business, trailing the 165 IPOs seen during the plague year and just over half the 311 logged during the 2021 speculative bacchanal.

Add one to the (short) winner’s list. Recent market spasms redound to the benefit of would-be homebuyers, with 30-year fixed rate mortgage rates dropping a dozen basis points to 6.63% per Mortgage News Daily. That’s down from nearly 8% on Halloween 2023 and 7.06% at the end of last year.  

Ebbing financing costs have already spurred one well-heeled cohort to action.  First quarter home sales in Manhattan jumped 29% year-over-year to 2,560, brokerage Douglas Elliman finds, with median prices registering at $1.165 million, up 11% from the first three months of 2024.

Beyond the Big Apple, the drop in rates arrives just in time for spring selling season, CNBC’s Diana Olick points out, with affordability looming increasingly large. Monthly payments for the typical U.S. homebuyer reached a record $2,802 over the four-weeks through March 30, data from Redfin show. Roughly 70% of households cannot afford a $400,000 home at current mortgage rates, the National Association of Home Builders relays, while estimating that the median price of a new dwelling stands near $460,000 (the U.S. Census pegs the latter figure at $414,500).

Tariff-induced price pressures could aggravate that dynamic, as respondents to a Realtor.com survey of homebuilders collectively expect average construction costs to rise $9,200 per unit. “The cost associated with tariffs on building materials gets passed along to new-home buyers, which works against the progress builders have made. . . to grow housing inventory and make homeownership more affordable,” commented Realtor.com senior economist Joel Berner.

Commentary from Fed chair Jerome Powell expressing little urgency to initiate further rate cuts helped ratchet up the pain in stocks, as the S&P 500 sat lower by another 4.5% as of early afternoon (quitting time for your correspondent: Let’s go Mets!).  

Conversely, the Treasury market seems inclined to call Powell’s bluff, with the policy-sensitive two-year yield dropping another 10 basis points to 3.62% after Thursday’s 20 basis point swan-dive.  

WTI crude sank below $62 a barrel, gold retrenched to $3,030 per ounce, bitcoin showed impressive resilience at $83,000 and change and the VIX hovered north of 40 after touching 45 this morning.

- Philip Grant

Countervailing winds blow across the investment-grade bond market, after a shaky macroeconomic backdrop helped push spreads on Bloomberg’s benchmark wider by 14 basis points over the first three months of this year. That’s the largest such quarterly updraft since the middle of 2022, though option-adjusted spreads remain south of 100 basis points, well below the 168-basis point pickup logged in June 2022.

As Bank of America credit strategist Yuri Seliger points out today, fundamentals within that high-grade cohort remain largely shipshape. March saw a net $80 billion worth of credit ratings upgrades, more than double the average $38 billion seen over the prior 12 months.  More constructive ratings actions are likely forthcoming, with the share of IG index bonds on a positive outlook/watch reaching 2.4%, up 10 basis points from February and “well above” the median 1.6% dating to 2010.

Someone is going to pay. President Trump has company in his efforts to turn the screws on China, as Bloomberg reports that Walmart “is continuing to push” suppliers to cut their prices by as much as 10% to help offset tariff-related costs.

Notably, those efforts persist three weeks after Communist Party officials read WMT executives the riot act and state media warned that retaliation could be in the cards.

As Walmart prioritizes margin preservation over diplomatic relations, the broader Sino-American grasp for negotiating leverage continues apace. Bloomberg seperately reports today that Beijing “has taken steps to restrict local companies from investing in the U.S.,” with the central planning National Development and Reform Commission withholding approval for such projects in recent weeks.  

On that score, Chinese commercial interests may not need further discouragement. Newly announced investment projects across North America registered at just $191 million in the fourth quarter according to Rhodium Group, down more than 90% from the last three months of 2023.

In turn, overseas firms are throttling back within the Middle Kingdom, with net foreign direct investment plummeting $168 billion last year to $4.5 billion, representing the largest single-year decline and smallest such influx since 1990 and 1992, respectively.

The messy aftermath of China’s titanic housing bubble may inform that faltering international project pipeline. The Financial Times reported on Monday that offshore lenders to 62 defaulted property developers have recouped just $917 million since the start of 2021, equivalent to just 0.6% of the $147 billion aggregate face value. For context, recovery rates on defaulted U.S. junk bonds and leveraged loans over the decade through March 2024 stood at 38% and 56%, respectively, according to ICE-compiled data.

Protracted negotiations have yielded little for those hapless creditors, who remain a less-than-urgent priority as China seeks to manage a towering $12 trillion in total developer liabilities per a 2023 guesstimate from the National Bureau of Statistics. “Everyone’s just thrown in the towel,” Debtwire analyst Dominic Soon told the pink paper. “The main problem is really the onshore debt.  Without solving that, there’s almost no money that can come out.”

Stocks staged an impressive intraday rebound for a third straight session, settling higher by 0.7% on the S&P 500 to nearly complete the retracement from Friday’s steep selloff. Tomorrow could be a different story, however, with S&P futures down substantially after Trump unveiled aggressive tariff plans after the close.

Treasury yields ticked modestly higher in bear-flattening fashion, WTI crude rose towards $72 a barrel for the first time since mid-February and gold edged higher at $3,124 per ounce. Bitcoin jumped to nearly $87,000 while the VIX ebbed to 21 and change.

- Philip Grant

The age of “kidults” is upon us. Citing data from analytics firm Circana, the New York Post reports that grownups represented 28% of global toy sales last year, up 2.5% from 2022 to surpass all other age groups, including preschoolers.

That eyebrow-raising trend has not escaped the attention of relevant purveyors, with Lego marketing 13% of its 563 newly-released sets last year as “specifically designed” for 19-year-olds and up.  

“We're seeing a good amount of growth with adult consumers,” Hasbro chief financial officer Gina Goetter relayed at a December conference. “In fact, over the past year, I think 40% of adults bought a toy for themselves.”  Ynon Kreiz, CEO of Mattel, told listeners-in on the March 13 earnings call that the toymaker will be “leaning further into momentum with adult fans.”

Revived price pressures could make for an uncomfortable pairing with President Trump’s April 2 “Tariff Liberation Day,” as The Wall Street Journal highlights an unwelcome trend change across physical products. Thus, the core goods component of the Consumer Price Index (exclusive of food and energy) edged lower by a cumulative 1.7% over the eight years through 2019, cushioning an average 2.7% annual uptick in services such as housing, healthcare and education over that stretch.

Following a post-Covid surge and subsequent retrenchment over the 12 months through last September, core goods inflation has since ticked higher by 0.1% per month on average, reaching a 0.2% sequential clip in February and spurring Fed chair Jerome Powell to flag “high readings” from that metric during his March 19 press conference.

“The recent data are telling us that, for goods, you won’t have the same deflationary impulse as you did during the 2010s,” TS Lombard chief U.S. economist Steven Blitz told the Journal.  Inflation as measured by the Personal Consumption Expenditures gauge will register near 3% in 2025, Blitz reckons, well north of the Federal Reserve’s 2% bogey.

Growing public expectations of prolonged price pressures present another worrying development for the monetary mandarins, as respondents to the University of Michigan’s monthly consumer survey projected a median 3.9% inflation rate over the next five years in March, up from 3.5% and 3.2% in February and January, respectively, to mark the most elevated reading since 1993.  By contrast, the market-derived, five year, five-year inflation expectation rate settled Friday at 2.16% per the St. Louis Fed, down 11 basis points in the year-to-date.  

“If you start seeing market-based, long-run inflation expectations start behaving the way these surveys have done in the last two months, I would view that as a major red flag,” Chicago Fed President and 2025 Federal Open Market Committee voting member Austan Goolsbee told the Financial Times last week.

Indeed, investors continue to express little concern that a renewed inflationary impulse will put the crimps on further policy easing.  Interest rate futures now point to a 3.56% Fed Funds rate as of year-end, equivalent to roughly three 25-basis point rate cuts from the current 4.25% to 4.5% range. As of Feb. 28, Mr. Market’s December guesstimate stood at 3.64%, while that figure registered at 3.9% at the close of 2024.

The bulls scored a much-needed win to wrap up the first quarter, as the S&P 500 erased steep overnight losses to settle higher by 0.6% and narrow its year-to-date decline to about 4%. Treasurys also caught a bid on the long end with 30-year yields dropping five basis points to 4.59%, while WTI crude jumped above $71 a barrel and gold reached $3,124 per ounce. Bitcoin remained stuck below $83,000 and the VIX finished higher on the day at 22 and change.

- Philip Grant