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Morning Bid: Hammer comes down

  • May 23, 2025
  • Roubens Andy King
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By Mike Dolan

LONDON (Reuters) – What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets

Bond markets creaked again after the hammer came down on a lukewarm sale of 20-year U.S. Treasuries on Wednesday with President Donald Trump's sweeping tax and spending bill clearing a crucial hurdle overnight.

In today's column, I discuss how a long-standing trend of U.S. corporations acting as cash-rich net lenders might reverse due to increased investment in AI and re-industrialisation efforts, potentially creating new competition for funds with ever-expanding U.S. government borrowing.

But now onto all the market news.

Today's Market Minute

* U.S. President Donald Trump's sweeping tax and spending bill cleared a crucial hurdle on Thursday, as the House of Representatives voted roughly along party lines to begin a debate that would lead to a vote on passage later in the morning.

* Foreign investors could once barely imagine that China would invade neighbouring Taiwan, but with Donald Trump as president of the United States, many view it as a tail-risk scenario they must prepare for, although they cannot find ways to do so.

* Stocks and the U.S. dollar fell on Thursday, while longer-dated Treasury yields steadied near their highest in 18 months as worries of a worsening fiscal outlook in the world's biggest economy remained at the top of investors' minds.

* Bitcoin rose to its highest level on record on Wednesday, eclipsing the previous high from January, as risk sentiment continues to improve after last month's tariff-induced selloff.

* Oil prices fell more than 1% on Thursday following a report that OPEC+ is discussing a production increase for July, stoking concerns any potential increase in global supply would exceed demand growth.

* Solar farms are set for a record stretch of power sector dominance in Germany after becoming the single largest generation source in the country at the earliest point of the year ever.

Hammer comes down

Markets fear the bill will bake in elevated deficits and rising debt piles over the remainder of the administration's term at least. The proposed legislation lifts the $36.2 trillion debt mountain by another $3.8 trillion over the next decade, according to the nonpartisan Congressional Budget Office.

Lawmakers were due to vote again to pass the measure later today and send it on to the Republican-led Senate, which could take weeks to act. And it was not yet clear whether House Speaker Mike Johnson would secure the necessary support from his own narrow 220-212 seat Republican majority.

But bond markets are getting restive, as the poor 20-year auction displayed. The U.S. 30-year yield reached 5.108%, its highest since October 2023, and the 20-year yield hit 5.126%, its highest since November 2023.

The 30-year ‘long bond' yield is now just 7 basis points from 2023's peaks. A break above that would put it at its highest since the 2007 banking crash unfolded – a shock which forced the Federal Reserve to spend years in bond buying support.

Trouble at the long end of the Treasury market was reflected in government bond markets around the world, with Japan still grappling with surging ultra-long yields to record levels too and Britain's 30-year yield hitting its highest since April's volatility.

Bank of Japan board member Asahi Noguchi said on Thursday he saw no need for the central bank to intervene in the bond market to stem recent sharp rises in super-long yields, describing the moves as “rapid but not abnormal”.

Compounded by aggravated inflation readings and tariff-related price concerns, the debt worries unnerved stock markets again too. Wall Street stock indexes fell back more than 1% on Wednesday and markets in Asia and Europe were all lower earlier today.

There was some respite from crude oil prices, however. U.S. benchmark retreated 1% after a report that OPEC+ is discussing a production increase for July, stoking speculation that global supply could exceed demand growth.

The dollar got a modest lift meantime as signals from the G7 finance chiefs in Canada suggested Washington held back from demanding a higher yen in bilateral trade talks with Japan, as some pre-meeting speculation had fretted about.

U.S. Treasury Secretary Scott Bessent and Japanese Finance Minister Katsunobu Kato issued a statement on Wednesday that the dollar-yen exchange rate currently reflects fundamentals, a rare and explicit statement on the prevailing market situation.

Bessent and Kato “reaffirmed their shared belief that exchange rates should be market determined and that, at present, the dollar-yen exchange rate reflects fundamentals”, the Treasury Department said in a statement.

The somewhat contradictory statement also said that they did not discuss foreign exchange levels.

On Wednesday, South Korea's won rose sharply against the dollar after a media report that Washington had demanded that Seoul come up with measures to boost the won as part of any trade deal. The won gave up most of those gains today, however.

Elsewhere, attention was on worldwide business surveys for May. Composite readings for euro zone and Japanese firms showed activity there unexpectedly slipping back into contractionary mode this month, due largely to fresh weakness among service sector companies.

U.S. equivalents are due out later, along with weekly jobless numbers.

Be sure to check out today's column, which looks at potential rumblings in U.S. government debt markets from the perspective of domestic U.S. corporate demand for credit going forward.

Chart of the day

Longer-dated U.S. Treasury yields climbed again after a $16 billion sale of 20-year bonds on Wednesday met lukewarm demand from investors just as Congress thrashed out the details of Donald Trump's fiscal bill.

With long-term debt yields rising across the world, investors are concerned about mounting deficits, debt piles and tariff-related inflation risks.

The New York Fed's estimate of the 10-year term premium – the compensation investors demand for holding 10-year debt to maturity as opposed to just rolling over short-term securities – is close to its highest in more than a decade and almost twice its 20-year average.

Today's events to watch

* U.S. weekly jobless claims (0830EDT), flash May manufacturing surveys from S&PGlobal(0945EDT), Kansas City Federal Reserve May manufacturing survey (1100EDT), April existing home sales (1000EDT); Canada April producer prices (0830EDT)

* U.S. Treasury sells 10-year inflation-protected securities

* G7 finance ministers and central bankers meet in Banff in Alberta, Canada

* New York Federal Reserve President John Williams and Richmond Fed President Thomas Barkin speak; European Central Bank Vice President Luis de Guindos speaks; Bank of England Chief Economist Huw Pill speaks

* U.S. corporate earnings: Analog, Autodesk, Copart, Deckers, Intuit, Ralph Lauren, Ross, Workday

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

(By Mike Dolan; Editing by Gareth Jones)

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