Trump says he will not be removed from office. Uncertainty surrounding China’s best vaccine shot. Malaysia’s state of emergency raises concerns about a coup.
President Donald Trump has said he is does not run the risk of being removed from office after urging supporters who attacked the U.S. Capitol last week – but suggested that Pres. Joe Biden it could be. Democrats have called for Trump to be removed after last Wednesday’s riot, but the president has denied any responsibility, citing outrageous remarks he made before the attack. “Completely appropriate”. “The 25th amendment poses no risk to me, but will come back to Joe Biden and the Biden administration,” Trump said, referring to a constitutional amendment setting out a process for the president’s cabinet to remove him. He did not expand. Meanwhile more banks cut ties with the president over the riot. His top creditor, his hometown bank and even his mortgage lender turned him down. The question is whether his other banks and financial supporters – including the giant Capital One and JPMorgan – intend to retain him as a customer.
Asian equities look primer for a a sluggish start to trading Wednesday after their U.S. counterparts closed little changed and treasury yields fluctuated around a ten-month high. The dollar withdrew. Futures point to little movement in Japan, Hong Kong and Australia after the S&P 500 fluctuated between gains and losses before closing. Energy, materials and the consumer discretionary sector performed best as investors weighed on the prospects of an economic recovery. Crude oil is nearing an 11-month high as the dollar fell back after a three-day rally. The futures contracts of wheat rose on a tighter than expected supply outlook. Ten-year treasury yields rose earlier after a hefty demand was provided at a government auction.
Days before a global launch of Sinovac Biotech vaccine begins, uncertainty swirls over its effectiveness, for which four different numbers for the protection rate have been released in recent weeks. Indonesia, which is moving the fastest with the distribution of the Sinovac shot to its population, said a local trial shows an efficiency of 65% over Covid-19. But only 1,620 people in Indonesia took part in the trial – too small for meaningful data. Turkey and Brazil posted different results with different sample sizes. Meanwhile, Pfizer and federal health officials investigating the death of a health worker 16 days after the person received the company’s Covid-19 vaccine. So far, the evidence does not indicate a connection.
In explaining why Malaysia needed it Prime Minister Muhyiddin Yassin suspended democracy for the first time in half a century to fight the pandemic, assuring the people that he was not carrying out a military coup, although he remained vague about how he would use his new powers. But his opponents found it difficult to view the extraordinary move as anything other than a power grip. The Southeast Asian nation has seen a surge in coronavirus cases in recent weeks, and measures to combat the pandemic, have generally enjoyed widespread support across the political spectrum. But the latest step can change the perception. Here’s how the pandemic is disrupting Malaysian politics.
Some of the largest banks in the world are appealing to a US judge not to terminate Libor immediately after a group of lenders filed a lawsuit claiming that the measure was the work of a ‘pricing cartel’. The accused, including JPMorgan, Credit Suisse and Deutsche Bank, said in November that a sudden termination of the London interbank rate would be abruptly terminated. wreaking havoc on the financial markets and undermining the reference rate reform. Policymakers around the world have developed new benchmarks to replace Libor by 2021, and in November officials proposed expanding some Libor tenors by mid-2023. Here is more information on why Libor is a complicated task.
What we read
This is what we noticed in the last 24 hours:
And finally, here’s what Tracy is interested in today.
The big story right now is the rise in U.S. Treasury yields and what that could mean for risk assets such as equities and corporate debt. But because the yield on the standard 10-year is more than 1.1%, it is worth considering the effects of another type of flood. A new working paper from the Federal Reserve addresses the question of whether US government bonds are affected by what happens to debt in places like Germany, Japan and the UK, although German bonds, Japanese government bonds, British gold and so on have long been thought to be affected by U.S. Treasury yields (the correlation between these groups of debt jumped from 0.4 in the early 1990s to more than 0.7 in 2019), there has been far less work done or it goes in the opposite direction. So are U.S. Treasury yields affected by what happens to bonds in other advanced economies?
The testimony of Don Kim, a senior adviser to the Fed, and economist Marcelo Ochoa suggests that the answer is yes. Interestingly, they suggest that the spread effect is not due to what is going on in the world economy, but that investors are considering the relative attractiveness of different debt. ‘For example, negative news in Europe will lower European yields, which in turn will make the US treasury relatively more attractive if US futures premiums become depressed, as opposed to negative European news which obscures the US economic outlook and the expected path of lowering the federal fund rate “they write.
It makes intuitive sense. In a globalized financial system, large investors often evaluate a U.S. treasury against other investment opportunities, as they try to generate returns, rather than considering it on their own merits. Kim and Ochoa’s estimate of the extent to which foreign shocks affect US yields rose from 13% in the early 1990s to 30% in the 2019 period. No mortgage is an island – not even an American treasury.
You can follow Tracy Alloway on Twitter at @tracyalloway.
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