White House downplays U.S. credit downgrade as business titans warn of economic trouble ahead
Treasury Secretary Scott Bessent dismissed concerns after Moody's downgraded the U.S. credit rating. But major business leaders like Ray Dalio and Jamie Dimon warn there may still be significant economic risks ahead. Natasha Sarin and David Gura discuss on The Eleventh Hour.
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Yahoo
21 minutes ago
- Yahoo
This is the most 'significant' thing for bond and stock investors to watch
Listen and subscribe to Opening Bid on Apple Podcasts, Spotify, Amazon Music, YouTube or wherever you find your favorite podcasts. Bond and stock investors need to be on the lookout for the ballooning US deficit, says BlackRock's (BLK) chief investment officer of global fixed income Rick Rieder. "At the end of the day, I think the debt, the size of the debt in the country is the most significant issue we have to watch for everything we do, certainly in fixed income, but I would argue for other asset classes," Reider said on Yahoo Finance's Opening Bid podcast (watch above; listen-only below). Rieder is one of the top minds in the bond market. He manages $2.7 trillion in assets at BlackRock and was inducted into the Fixed Income Hall of Fame in 2013. "We're rolling too much debt. Like we roll $573 billion a week of debt, that's like rolling [the total debt of] Australia every single week," Rieder added, noting the new spending bill will only make the matter worse. This embedded content is not available in your region. The bond market has been in sharper focus ahead of the summer months. On May 16, Moody's downgraded the US credit rating to AA1 from its longstanding position of AAA. On May 22, the House passed the Trump administration's reconciliation package, which included tax cuts and a $4 trillion lift to the debt ceiling. Tesla (TSLA) CEO Elon Musk has clapped back at the president's signature tax bill. "I'm sorry, but I just can't stand it anymore," Musk wrote on X this week. "This massive, outrageous, pork-filled Congressional spending bill is a disgusting abomination. Shame on those who voted for it: you know you did wrong. You know it." The yield on the 10-year Treasury (^TNX) has continued to climb amid fears of an out-of-control debt position for the US. The yield now stands around 4.32% — up sharply from 4% on April 4. The advance could increase the cost of borrowing for businesses and households further, stunting the US economy. Former top Biden administration economist Ben Harris said on Opening Bid that if interest rates climb toward 5% or higher on the 10-year, investors may buy more Treasurys instead of other assets. This will create a drag on the overall economy, which Harris says is "guaranteed" if the US takes on another $4 trillion or more in debt. 'The real threat is that this could spark some sort of fiscal crisis,' Harris said. Goldman Sachs (GS) chief US strategist David Kostin said this week that bond yields remaining at current levels will likely "constrain the magnitude" of potential S&P 500 (^GSPC) valuation expansion. Kostin's work shows that a 100 basis point change in real Treasury yields is associated with a roughly 7% change in the forward price-to-earnings multiple of the S&P 500. Three times each week, Yahoo Finance Executive Editor Brian Sozzi fields insight-filled conversations and chats with the biggest names in business and markets on Opening Bid. You can find more episodes on our video hub or watch on your preferred streaming service. Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 hours ago
- Yahoo
Ireland joins the likes of China and Vietnam on list of countries the U.S. is monitoring for currency manipulation
The U.S. has added Ireland to a list of countries it is keeping tabs on owing to a large and growing trade surplus that has stoked the ire of President Donald Trump. As part of the U.S. Treasury's semiannual report on the macroeconomic and foreign exchange policies of its largest trading partners, the body added Ireland and Switzerland to a nine-strong 'Monitoring List' of countries whose macroeconomic policies or currency practices 'merit close attention.' The other countries on the U.S.'s monitoring list are China, Japan, Singapore, Vietnam, Taiwan, South Korea, and Germany. 'In line with President Trump's America First Trade Policy, the United States Treasury will be vigilant in identifying and taking action against currency manipulation and will continue to closely monitor a range of relevant macroeconomic and financial policies implemented by our trading partners that propagate imbalances, contribute to significant exchange rate misalignments, or result in an unfair competitive advantage in trade,' said Treasury Secretary Scott Bessent in a statement. The U.S. started its monitoring list under the Barack Obama administration in 2016 to identify trading partners that may have gained an advantage over the country through unfair practices. Following its monitoring, in 2019, the U.S. officially labeled China as a currency manipulator. While a largely symbolic move, the announcement allowed then-Treasury Secretary Steve Mnuchin to go to the International Monetary Fund (IMF) to try and 'eliminate' alleged manipulation On this occasion, the U.S. has exercised restraint and refused to label China a currency manipulator. The Trump administration is currently in tense negotiations with China to ward off unprecedented import tariffs on Chinese imports, which are currently on hold. Ireland previously made the list in 2019 and in 2021, and continues to bounce on and off the lineup as its external economy grows in significance. The country recorded a record €50.1 billion ($57.3 billion) trade surplus with the U.S. last year. The country's €72.6 billion ($83 billion) worth of goods exports to the U.S. were driven by pharmaceuticals, mostly produced by U.S.-based companies with production facilities in Ireland. Eli Lilly's Zepbound and Pfizer's Viagra drugs are largely produced in Cork and shipped to the U.S. Ireland wooed U.S. multinationals to its shores with tax incentives, and has since gained a talent and infrastructure advantage from companies investing in the country. In addition to the pharmaceuticals sector, the country proved successful in convincing tech giants like Google, Meta, and Apple to base their European headquarters in Ireland. This globalization trend has irked Trump, who in March complained to Ireland's Taoiseach, Michael Martin, about the trend of American companies setting up bases in the country. In its report, the U.S. said exhange rate declines in recent months had shifting trading balances in a way that was likely to increase its deficit with Ireland, Tawan, and Korea, further. Germany is another European country with a heavy trading surplus over the U.S., leading to its inclusion on the list. As part of his April 5 'Liberation Day' onslaught of 'reciprocal' tariffs, Trump's team was found to have used a formula based on the U.S.'s trade balance with other countries. While Ireland's heavy surplus with the U.S. would have indicated an aggressive tariff, its membership of the EU, whose member states received a collective tariff of 20%, spared it from the worst of Trump's onslaught. These tariffs, like those implemented against Chinese imports, are currently on a 90-day pause pending negotiations. A representative for Ireland's Department of Enterprise, Trade and Employment didn't immediately respond to a request for comment. This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
New York Post
2 hours ago
- New York Post
Stalled ‘beautiful' bill drains nation's rainy-day fund — and things could soon turn ugly for US households
Congress' dithering over President Trump's 'Big Beautiful Bill' has the potential to make life difficult in the coming months – by possibly spiking interest rates, On The Money has learned. Most Americans don't appreciate all the ways our elected officials have saddled them with trillions upon trillions of dollars in debt. The national debt stands at around $36 trillion, and needs to go higher to pay for all the stuff the House didn't cut in passing the buck to the Senate. Until Congress crafts a budget and amends that annoying law known as the debt ceiling, Treasury Secretary Scott Bessent has been tapping something known as the Treasury General Account. Jack Forbes / NY Post Design Until Congress crafts a budget and amends that annoying law known as the debt ceiling, Treasury Secretary Scott Bessent has been tapping something known as the Treasury General Account. The account, known on Wall Street bond trading desks as the 'TGA,' is needed to pay short-term bills and acts like a rainy-day fund. It's like your checking account, except hundreds of billions of dollars larger. However, it's massively underfunded and in need of cash (aka more borrowing) so the government can keep the lights on – which could mean a nasty spike in interest rates sometime this summer when the selling begins since higher yields will be needed to attract more buyers, according to the smart Wall Street folks at the Bear Traps Report. Bessent has been toying with ways to get banks to hold more treasuries as part of the capital cushion. Foreign buyers are needed but Trump's trade war makes it difficult to get saving nations like China and Japan to once again come to our rescue. 'The longer it takes for Congress to pass the bill and raise the ceiling, the more Bessent depletes the government's checking account, and therefore the more money he has to raise once the ceiling is lifted,' Bear Traps analyst Robbert Van Batenburg tells me. Bessent, right, has been toying with ways to get banks to hold more treasuries as part of the capital cushion. AP 'Yellen in the 2023 debt ceiling crisis drove this checking account down to less than $50 billion, forcing her to raise a whopping $800 billion in the summer of 2023.' To be sure, the dangerous TGA drawdown comes from overspending, but also from how spending works via the debt ceiling law. The ceiling is supposed to apply the brakes on borrowing so future generations don't have to pay for government largesse we consume today. Given our addiction to big government and debt to finance it, the ceiling is a misnomer — it's constantly flouted and amended higher, though the politics of raising it often gets messy. Charlie Gasparino has his finger on the pulse of where business, politics and finance meet Sign up to receive On The Money by Charlie Gasparino in your inbox every Thursday. Thanks for signing up! Enter your email address Please provide a valid email address. By clicking above you agree to the Terms of Use and Privacy Policy. Never miss a story. Check out more newsletters When the debt ceiling is finally raised in the coming weeks, the government might have to issue another $400 billion in additional debt just to get back to where it was at this time last year, Van Batenburg said. Yes, that's an extra $400 billion on top of the nearly $800 billion deficit this quarter that Bessent will cover once the budget deal is passed, the debt ceiling is lifted and the government goes back to mortgaging your kids' future. The full yearly deficit is likely to hit $2 trillion or more. You might be asking why we need TGA in the first place. The answer is that if we don't fully fund the TGA, it would send a terrible message to the markets that we can't pay for stuff. It could be interpreted as a default of sorts, which would send interest rates even higher. Sounds like a no-win situation for the American taxpayer.
