Trump says he will not be removed from office. Uncertainty involves China’s best vaccine. Malaysia’s state of emergency raises concerns about a coup.
President Donald Trump said that he does not risk being removed from office after encouraging supporters who attacked the United States Capitol last week – but he did suggest that President-elect Joe Biden could. Democrats called for the removal of Trump after last Wednesday’s riot, but the president rejected any responsibility, calling out fiery comments he made before the attack. “Totally appropriate”. “The 25th Amendment is zero risk to me, but it will come back to haunt Joe Biden and the Biden government,” said Trump, referring to a constitutional amendment that establishes a process for the president’s office to remove him. He didn’t elaborate. However more banks are severing relations with the president because of the riot. His main lender, his hometown bank and even his mortgage lender rejected him. The question is whether his other banks and financiers – including the giants Capital One and JPMorgan – plan to keep him as a customer.
Asian stocks looked set for a Negotiations started dull on Wednesday after its US peers closed with little change and Treasury yields fluctuated around a 10-month high. The dollar retreated. Futures pointed to little movement in Japan, Hong Kong and Australia after the S&P 500 fluctuated between gains and losses before closing stable. The sectors of energy, materials and discretionary consumption were those that performed better, as investors meditated on the prospects for an economic recovery. Crude oil has approached an 11-month high, with the dollar falling after a three-day high. Corn futures rose in a tighter than expected supply outlook. Ten-year Treasury yields reduced an earlier increase after a government auction was met with solid demand.
Days before the global launch of the Sinovac Biotech vaccine begins, The uncertainty revolves around its effectiveness, for which four different numbers of protection rates have been released in recent weeks. Indonesia, which is moving faster in distributing the Sinovac vaccine to its population, said a local test showed 65% effectiveness against Covid-19. But only 1,620 people in Indonesia participated in that test – too small for significant data. Turkey and Brazil showed different results with different sample sizes. Meanwhile, Pfizer and federal health officials are investigate the death of a healthcare professional 16 days after the person received the company’s Covid-19 vaccine. So far, the evidence does not suggest a connection.
In explaining why Malaysia needed suspending democracy for the first time in half a century to fight the pandemic, Prime Minister Muhyiddin Yassin assured the nation that he was not preparing a military coup, although he remained vague about how he will use his new powers. But his opponents found it difficult to see the extraordinary movement as anything more than a grab power. The Southeast Asian nation saw a sudden increase in coronavirus cases in recent weeks and measures to combat the pandemic have generally received wide support across the political spectrum. But the last move can change that perception. See how the pandemic is confusing Malaysian politics.
Some of the largest banks in the world are asking a US judge not to immediately cancel Libor after a group of borrowers filed a lawsuit alleging that the benchmark was the work of a “price-fixing cartel”. Defendants, including JPMorgan, Credit Suisse and Deutsche Bank, said in a November document that they abruptly ended the London interbank rate offered wreak havoc on the financial markets and undermine the benchmark reform. Lawmakers around the world have developed new benchmarks to replace Libor by the end of 2021, and in November, authorities proposed an extension to some Libor dollar terms by mid-2023. Here’s more about why to abandon Libor is a complex task.
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And finally, here’s what matters to Tracy today
The big story in the markets now is the increase in US Treasury yields and what that can mean for risky assets like stocks and corporate debt. But as the 10-year benchmark yield fluctuates above 1.1%, it is worth considering side effects of a different kind. A new Federal Reserve working paper addresses the question of whether U.S. government bonds are impacted by what is happening to debt in places like Germany, Japan and the United Kingdom. Although German bonds, Japanese government bonds, British grants have long been thought to have been impacted by US Treasury yields (the correlation between these debt groups jumped from 0.4 in the early 1990s to more than 0 , 7 in 2019), much less work has been done to find out if this is true in the opposite direction. So are US Treasury yields affected by what is happening with the bonds of other advanced economies?
Evidence from Don Kim, a senior consultant on the Fed board, and economist Marcelo Ochoa suggests that the answer is yes. Interestingly, they suggest that the spillover effect is not due to what is happening in the global economy, but occurs when investors consider the relative attractiveness of different debts. “For example, negative news in Europe would depress European yields, which in turn would make US Treasury bonds relatively more attractive, depressing US term premiums, as opposed to negative European news, darkening the US economic outlook. and reducing the expected federal funds rate trajectory, “they write.
This makes some intuitive sense. In a globalized financial system, large investors often assess the United States Treasury for other investment opportunities, while trying to generate income, rather than considering it on its own merits. Kim and Ochoa’s estimate of the extent to which foreign shocks are impacting U.S. bond yields rose from 13% in the early 1990s to 30% in the 2019 period. No bond is an island – not even a U.S. Treasury .
You can follow Tracy Alloway on Twitter at @tracyalloway.
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