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U.S downgrade, higher deficit incoming, USD PPP.. / RBA -25bps, PBOC -10bps / UK-EU 'deal' / UKR-RU ceasefire ?

  • Writer: Stéphan
    Stéphan
  • May 20
  • 4 min read


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  • Markets : Tom Lee said 'there is no signal in Moody's downgrade', move along please, new highs coming in Eq (always a bull), SK and U.S trade talks stalling, higher deficit coming : Hasset (bearish USD and bullish GOLD), Ray Dalio ''risk to UST's is even greater than what Moody's is saying'', GOP Sen. Johnson said to Trump "will increase [the deficit] by $4 trillion with the Big Beautiful Bill," and that Medicaid will be cut: "Now what are you going to cut? Medicaid, absolutely", RBA cut 25bps down to 3.85% (was fully priced), Trump said UKR and RU immediately starting ceasefire negotiations, Kremlin says no timeline yet.. Jamie Dimon talked about bad credit risks on the increase >>> overall JPY-JGB yields keeping JPY firm (on another inauguration 2.0 scenario, and long-end properly selling off, USDJPY 120 area in 2025 is the ultimate risk-off trade/hedge perhaps - one of them >> BUY 6-9mos #JPYcalls), while overall USD remains soft (USD, GOLD, BONDS #duaration moved swiftly together yesterday..) and SPX500 are levels to take profit/hedge/sit back and enjoy the summer...wait for new opportunities

  • Regarding the recent U.S. debt downgrade : it's important to understand that credit ratings tend to underrepresent the full scope of credit risk. These ratings primarily assess the likelihood of a government defaulting—i.e., not repaying its debt—while overlooking a more nuanced but significant risk: that of monetary debasement #USD (could argue most likely path leads to USD downside, GOLD upside, equity will they/won't they like softer usd.., lower bonds/steeper curves)

    In other words, governments may choose to print more money to meet their debt obligations, which doesn't reduce the nominal repayments but does erode the real value of the money received >>>> for investors concerned with preserving purchasing power, this represents a material risk that is not fully captured by traditional credit ratings. As such, the perceived safety of U.S. government debt may be overstated by the rating agencies

  • Japan’s Prime Minister says his country’s financial situation is worse than that of Greece >>>  Debt-to-GDP is over 260% — the highest in the developed world, aging population, fewer workers, higher int rates making debt payment unsustainable..Japan's 30y JGB yields 3.13%.. #duration #JPY

  • Germany drops its decade-old anti-nuclear stance. German and French officials confirm Germany will no longer oppose nuclear in EU energy policy. A historic shift!

  • #BTC this is a big test of the narrative form here on >>> higher 30y yields and softer USD, this is a big test to see if BTC breaks higher this summer..

  • EU likely to propose to G7 lowering price cap on Russian oil to $50 per barrel

  • NY Fed President John Williams says you can take the summer off, watching data..

  • #XAU Gold markets are cited by ECB as a risk to financial stability - “Additionally, disruptions in the physical gold market could increase the risk of a squeeze..."

  • TSMC plans 30% price hike for AI chips “Made in USA”

  • Iranian President Masoud Pezeshkian warned, on Sunday, that Tehran may block the Strait of Hormuz if efforts to restrict its oil exports persist. - Shafaq News

  • France's government covered up Nestle's illegal treatment of bottled water

  • FBI agent goes public with Russian intelligence Op that hooked Musk & Thiel







Out together by FT's Katie Martin














What happened to US exceptionalism? As we entered 2025, expectations for the US economy were at their highest compared to the previous two years (Chart 1) and there was widespread belief that strong growth and significant asset-price increases would continue in 2025. The Trump administration’s planned economic and policy reforms, including slashing red tape and cutting taxes, added to this optimism, suggesting that American exceptionalism would persist.






 
 
 

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