The biggest opponent of Donald Trump he is not his political rival at Congress while a matter is being discussed mega tax package, but the bond market which is giving him very clear signals. While the US president is trying to get his broad bill which will require an expansion of the already enormous debt of several thousand billion, worried investors have been lukewarm to theit from last night on titles at 20 years and Treasury yields they have shot up again. A shiver runs through the operations rooms and that voice “Sell America” has once again suggested that investors should move away from US assets, causing a new Wall Street drop and weighing on the dollar. Looking for more assets, investors have turned to the Bitcoin which sees a new record of $111.000 for gold, but also for European stock markets which are showing much more firmness. Asian stock markets are weak. European stock markets expected to open lower. At Piazza Affari, eyes on Generali, Unicredit.
Tepid 20-year bond auction pushes yields above 5%
Il sentiment of investors towards the treasury bonds, who had already suffered a hard blow after that Moody's Ratings had stripped the United States of its highest credit rating late last week, is further got worse yesterday following an auction of 20-Year Treasuries for a value of 16 billion dollars which attracted a surprisingly lukewarm question.
The auction, while not a particularly significant maturity, saw debt sold at a yield that rose to 5,047%, about a basis point above the market level before the sale. Indirect bidders, including governments, fund managers and insurance companies, took an above-average share of 69%, indicating that foreign demand remained strong. Overall demand was slightly below average, at 2,46 times the amount of debt on offer, the lowest level since February. After the auction, yields on 20-year debt rose to 5,127%, the highest level since November 2023.
Treasury yields thirty years of reference up to 5,1%, bringing them just below the highest in the last two decades and triggering declines in stocks and the dollar.
The worst-case scenario indicated by the US Treasury Secretary is taking shape
In Congress, Trump is trying to pass, probably by this week, a mega bill with unfunded tax cuts, while the economy looks set to slow. According to independent analysts, it would add between $3000 trillion and $5000 trillion to the country's debt, which already stands at around $37 trillion.
While current US yields, ranging between 4% and 5%, are close to levels prevailing prior to the 2007 financial crisis, the real difference they do it debt and deficit which are now exponentially larger.
A look at the fiscal deficit reinforces why the bond market is anxious. public debt ratio total of the United States and size of the economy is around 100%, according to the Congressional Budget Office. The only interest payments amounted to about $880 billion in 2024, according to CBO data, exceeding the defense budget.
The amount of Treasury securities outstanding has soared to nearly $30.000 trillion from less than $14.000 trillion at the end of 2016, following tax cuts passed during Trump’s first term and a surge in borrowing during the Covid pandemic under both Trump and former President Joe Biden. Gross annual sales of government bonds hit a record $2.600 trillion last year, according to bond market watchdog Sifma.
This strengthens the worst case scenario painted by Treasury Secretary Scott Bessent who told U.S. lawmakers this month that “the path of national debt is unsustainable“, adding that it is “very difficult to know” the turning point at which investors will “rebel”".
Attention will also turn to the G7 meeting in Canada, where finance ministers will take a positive turn in discussions to try to reach agreement on a joint communiqué that will largely cover non-tariff issues.
Investors are also looking for signs that currency markets may be involved in the trade talks, despite the U.S. and Japan agreeing on Wednesday that the dollar-yen exchange rate currently reflects fundamentals.
Bitcoin Soars to New Record High, Dollar Heavy
In the meantime, Bitcoin rose for the fifth consecutive session and hit a new all-time high at $111.862,98, up 3,3% from yesterday's close.
The dollar hovering near a two-week low against other major currencies. In Asia hours, the dollar is down to 143,27 yen, its weakest level since May 7. Short-lived relief came after Japanese Finance Minister Katsunobu Kato said he did not discuss exchange rates during talks with U.S. Treasury Secretary Scott Bessent on the sidelines of the G7 meetings in Canada. South Korean currency hit its highest level since Nov. 4 on Wednesday at 1.368,90 per dollar, after the Korea Economic Daily reported that Washington had asked Seoul to take measures to strengthen the won. It weakened slightly to 1.377,00 on Thursday. Theeuro remained unchanged at $1,1330, after rising 0,4% on Wednesday, marking its third straight session of gains. The GBP remained stable at $1,3426.
Il Swiss franc rose 0,1% to 0,8245 per dollar.
The prices of Petroleum slowed today after a sharp rise in the previous session, as unexpected U.S. crude and fuel stockpiles raised demand concerns.
The prices of'gold rose for a fourth straight session, helped by a strengthening dollar and demand for safe-haven assets, reaching a nearly two-week high of $3.325,79, just $175 away from April's record peak.
Wall Street versus Europe
The performance of stock markets on both sides of the Atlantic continues to show opposing trends.
Yesterday in New York, the Dow Jones recorded a sharp decline (-1,91%), which touched 41.860 points. Along the same lines, the S&P-500 fell by 1,61%, falling to 5.845 points. The Nasdaq 100 was down (-1,34%); as well as, in the red, the S&P 100 (-1,43%).
Instead, European profits so far show that corporate health has been better than initially feared, with stocks riding a wave of temporary suspensions of U.S. tariffs and signs that China, a major customer of European companies, is trying to revive consumption. That has helped the pan-European STOXX 600 index outperform the S&P 500 and Nasdaq this year. The export-heavy German benchmark closed at a record high yesterday and is the world’s best-performing stock market.
In Asia, Tokyo weak, mainland China flat
Asian stock markets are also showing concern about what is happening in the US markets. The Japanese index Nikkei fell 1,09%, trailing Wall Street's decline. Mainland Chinese stocks were largely flat, while gains in banks and mining companies countered concerns about the fiscal health of the world's largest economy.
The index Shanghai Composite is flat at 3.387,63 points, while theblue chip index CSI300 appears up 0,13% at 3.921,28 points.
Banks outperformed, leading gains in morning trading, with the sub-index rising 0,85 percent. China's recent move to lower benchmark rates, including those on deposits at major state-owned lenders, is expected to lead smaller lenders to adopt similar measures to ease pressure on declining interest margins. The benchmark Hang Seng Index Hong Kong lost 0,55% to 23.695,88 points, while the Hang Seng China Enterprises Index fell 0,48% to 8.619,15 points.
European stocks expected to open lower. Eyes on Generali, Unicredit
Le European stock exchanges are seen opening in decline: -0,64% the futures on Eurostoxx50
Today the focus will be on manufacturing and service sector surveys for May, and forecasts indicate that economic activity in theeurozone and Germany remained substantially stable compared to the previous month. Later also in the United States.
Generali: normalized net profit in the first quarter reaches 1,2 billion (+7,6%). Life net collection was over 3 billion (+30%), with total premiums equal to 26,5 billion thanks above all to the P&C branch. Advisors chosen for Mediobanca's takeover bid on Banca Generali.
Unicredit. Consob has decided to suspend for 30 days the exchange offer launched by Unicredit on Banco Bpm in light of the uncertainty generated by the government decision regarding the golden power, which Unicredit's lawyers are busy demonstrating the impracticability of. A government source speaks of the government's unwillingness to review the conditions.
Bper-Bank/Popular of SondrioThe EU Commission has decided not to launch an in-depth investigation into the takeover bid launched by the Emilian institute on the Valtellina bank regarding foreign subsidies distorting the internal market.
Enel. The ordinary meeting is held on the balance sheet, dividend, buyback and the extraordinary meeting on the cancellation of own shares without reduction of the share capital and changes to the bylaws.
Mfe closed the first quarter with a net profit of 51,4 million euros, a sharp increase from the same period in 2024 thanks to the jump in the result of equity-accounted investments. EBIT fell to 6,3 million euros from 23,5 million a year ago.
Sole24Ore. Confindustria's voluntary takeover bid on Il Sole 24 Ore will start on June 3 and close on June 30, barring extensions
