We have more confirmation of a huge and unusual rise in bank lending to this offshore category. It parallels other similar corroboration which raises several thorny issues, leaving us with two broad interpretations for what this really means. With new data becoming available, it raises the stakes for a possible next time. 

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While we wait to see if the Swiss National Bank opts for zero or negative policy rates next month, its chief Martin Schlegel had a lot to say yesterday about a range of topics, including negative prices, Treasury bonds, and global risks. Jamie Dimon then today chimed in today cautioning that stocks and risk markets are ready for heightened credit risks. One reason why is volatility in repo, where TIC data shows a huge increasing in offshore resales heading into everything April. 

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Bloomberg Dimon Warns Markets Are Underestimating Geopolitical, Inflation Risks
https://www.bloomberg.com/news/articles/2025-05-19/jpmorgan-s-dimon-warns-against-complacency-amid-mounting-risks

Bloomberg Swiss Inflation Risks Falling Below Zero in Individual Months This Year, Schlegel Says
https://www.bloomberg.com/news/articles/2025-05-19/snb-chief-sees-subzero-inflation-in-individual-months-this-year

Bloomberg SNB President Schlegel Sees No Alternative to US Treasuries
https://www.bloomberg.com/news/articles/2025-05-19/snb-president-schlegel-sees-no-alternative-to-us-treasuries

Bloomberg Singapore Central Bank Chief Says US Dollar Assets Irreplaceable
https://www.bloomberg.com/news/articles/2025-05-20/singapore-central-bank-chief-says-us-dollar-assets-irreplaceable

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In a late Friday news dump, Moody's announced it had downgraded U.S. federal government debt. The news sparked a selloff in Treasuries, at least initially. What are the implications for bonds or the economy? It's not what the mainstream thinks it does.

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Bloomberg What the US Losing Its Last AAA Credit Rating Means
https://www.bloomberg.com/news/articles/2025-05-19/us-lost-moody-s-aaa-credit-rating-what-s-at-stake-for-markets

S&P Global August 5, 2011
https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/6802837

Fitch August 1, 2023
https://www.fitchratings.com/research/sovereigns/fitch-downgrades-united-states-long-term-ratings-to-aa-from-aaa-outlook-stable-01-08-2023

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Japan did indeed fall back into recession in the first quarter before the tariff shock even had a chance to hit the economy, and positing a deeper negative GDP print than expected. Like everywhere else, the setback is being led largely by consumers. At the same time, American consumer confidence fell to another shocking low rather than rebound with trade deals and a rebounding stock market. 

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It’s still known as Black Tuesday almost a century later. In October 1929, the stock market crashes and plunges the world into the Great Depression. At least that’s what we’ve been told and what we all believe. But then why didn’t the Crash of 1987 lead to Great Depression 2? I mean, it didn’t even slow the economy down. Or the dot-com crash. Something is missing. As it turns out, there's a lot missing and so this is the first installment to fill in what Economics leaves out, or plain gets wrong. 

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It was a trifecta of disinflation disaster in today's numbers, with Walmart adding to the woes with its own deteriorating environment. Retail sales were more than soft, industrial output fell, but most concerning prices fell sharply - including wholesale services costs crashing the most on record. 

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Walmart Q1 earnings
https://corporate.walmart.com/content/dam/corporate/documents/newsroom/2025/05/15/walmart-releases-q1-fy26-earnings/q1-fy26-earnings-release.pdf

CNN Walmart warns it will raise prices because of tariffs
https://www.cnn.com/2025/05/15/business/walmart-prices-tariffs

CNBC Walmart CFO says price hikes from tariffs could start later this month, as retailer beats on earnings
https://www.cnbc.com/2025/05/15/walmart-wmt-q1-2026-earnings.html

Bloomberg US Retail Sales Barely Rise, Suggesting Some Spending Pullback
https://www.bloomberg.com/news/articles/2025-05-15/us-retail-sales-barely-rise-suggesting-some-spending-pullback

Bloomberg US Producer Prices Fell Unexpectedly in April as Margins Shrank
https://www.bloomberg.com/news/articles/2025-05-15/us-producer-prices-fall-unexpectedly-as-margins-decline

Reuters US manufacturing output falls in April on weak auto production
https://www.reuters.com/business/autos-transportation/us-manufacturing-output-falls-april-weak-auto-production-2025-05-15/

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Chinese banks cut lending - by a lot - in April, completing the defensive story seen in banking systems all around the world. However, China's is unique in several key aspects, starting with what authorities have been doing trying to change this. The reason why it has come to this for Chinese banks really is not what everyone believes. 

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Bloomberg Why China Is Hoping $1.6 Trillion Can Fix Its Hidden Debt Problem
https://www.bloomberg.com/news/articles/2025-04-16/china-economy-can-1-6-trillion-help-solve-xi-s-hidden-debt-problem

Rueters China's property 'whitelist' lifeline stutters amid sector gloom
https://www.reuters.com/world/china/chinas-property-whitelist-lifeline-stutters-amid-sector-gloom-2024-05-14/

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Microsoft announced another round of layoffs. Coming from a company that isn't struggling nearly as much as most, it's an ominous sign. The April CPI shows why and not just for Microsoft. It instead aligns with the biggest problem in the economy, and that's not inflation which was absent from the report despite the start of tariffs. A surprise to Economists, but not to BED. 

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CNBC Microsoft laying off about 6,000 people, or 3% of its workforce
https://www.cnbc.com/2025/05/13/microsoft-is-cutting-3percent-of-workers-across-the-software-company.html

Bloomberg Softer-Than-Expected Inflation Points to Muted Tariff Fallout
https://www.bloomberg.com/news/articles/2025-05-13/us-inflation-comes-in-softer-than-forecast-for-another-month

BLS BED/BDM
https://www.bls.gov/bdm/bdmover.htm

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Re-risking accelerated on Wall Street and for many other markets; even bond yields rose. The thinking is if trade wars broke everything, then trade deals fix it. However, the US and China don't have one, And that's only the first of several key misimpressions - starting with the 2018 example. Like then, the incoming data doesn't align with "trade wars broke it."

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Joint Statement on U.S.-China Economic and Trade Meeting in Geneva
https://www.whitehouse.gov/briefings-statements/2025/05/joint-statement-on-u-s-china-economic-and-trade-meeting-in-geneva/

Bloomberg US, China to Slash Tariffs During 90-Day Reprieve for Talks
https://www.bloomberg.com/news/articles/2025-05-12/us-and-china-agree-to-major-reductions-in-tariffs-for-90-days

Bloomberg Japan Rules Out Trade Deal With US That Excludes Auto Tariffs
https://www.bloomberg.com/news/articles/2025-05-12/japan-s-ishiba-says-won-t-do-trade-deal-with-us-excluding-autos

SCMP China’s consumer prices fall in April, fuelling fears of deflation
https://www.scmp.com/economy/economic-indicators/article/3309834/chinas-consumer-prices-fall-april-fuelling-fears-deflation

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What's in a single number? For this one, a whole lot of confirmation plus warning. Consumer sentiment has famously crashed and this one figure holds the key to why. Everything else that's happening comes down to this single deficiency. 

Eurodollar University's conversation w/Steve Van Metre

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