Treasury Spasm Rocks Markets
Treasury yields spiked lower Thursday amid a rout in emerging markets, with Brazil’s real tumbling in a third day of sharp declines. The plunge in yields coincided with a large block trade, which saw the 10-year contract spike higher by 15.5 ticks over a 10-minute period in the New York afternoon, with more than 185,000 contracts traded. The risk-off mood led the dollar to erase its decline, while buoying havens such as the Swiss franc and yen. South Africa’s rand and Mexico’s peso also slumped, as did U.S. tech shares.
Trump the Peacemaker
President Donald Trump said he may sign an accord to formally end the Korean War with North Korean leader Kim Jong Un at their June 12 meeting, and raised the possibility of later hosting Kim at the White House. “We could absolutely sign an agreement,” Trump said Thursday during a news conference at the White House with Japanese Prime Minister Shinzo Abe. “We’re looking at it. We’re talking about it with them.” Trump predicted “great success” in the talks with Kim. He said the public will able to tell the outcome based on his language. Trump said that if he again starts to talk about his “maximum pressure” campaign on the country, that would indicate a breakdown in negotiations. He added that if the talks don’t go well he has a list of 300 additional sanctions against North Korea he’s ready to impose.
America Versus the World at the G-7
Before heading to Singapore for the much anticipated meeting, however, Trump heads to Canada for the G-7 leaders summit. He will cut a lonely figure at the gathering of the world’s club for wealthy nations. From steel tariffs to Iran sanctions and climate change, the U.S. president will find himself isolated from other Group of Seven leaders. The meetings on Friday and Saturday will be the first opportunity for America’s closest allies to express their frustration in face-to-face meetings with Trump after he imposed steel and aluminum tariffs last week. President Emmanuel Macron of France has warned that he will not sign the summit’s traditional joint statement unless progress is made on tariffs and other contentious issues, an official said Wednesday.
ZTE Rises from the Ashes
The U.S. reached a deal to allow ZTE Corp. to get back in business after the Chinese telecommunications company pays a record-large fine and agrees to management changes, eliminating a key sticking point as the two countries try to avert a trade war. Under the deal, the ban is suspended for 10 years and can be activated by Commerce should the company commit additional violations during that decade-long “probationary period,” the department said in a statement. But now it’s Google in the hot seat: members of Congress are probing the Alphabet unit about its relationships with Chinese telecom companies including Huawei Technologies and Xiaomi, asking whether user data was stored on phones or allowed on the Chinese companies’ servers, and how storage agreements were monitored and enforced.
Rising Defaults Test China Bond Market
China’s efforts to connect the world’s third-biggest bond market with the international financial system are hitting dual headwinds -- a climb in global borrowing costs, and the country’s own campaign to reduce financial leverage. The dynamics have contributed to defaults by 12 bond issuers in 2018 through June 4, after 18 for the whole of 2017, according to Fitch Ratings. Firms from JPMorgan to Fidelity International are warning to prepare for more. But with about 8.2 trillion yuan ($1.3 trillion) of domestic corporate and local-government securities due to mature in the coming 12 months, it’s an open question whether China is prepared to let chips fall where they may.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Some big-name macro hedge funds are posting major returns.
- The 32-year-old king of cyprtocurrency mining is considering an IPO.
- Malaysia is planning the arrest of a former Goldman Sachs banker in connection with the 1MBD probe.
- Fujifilm’s CEO said the company may walk away from its efforts to take over Xerox.
- Airbnb has frozen a swathe of listings in Japan at the behest of regulators.
- China’s new solar policy may delay India’s first-ever auction to build solar facilities.
©2018 Bloomberg L.P.