Latest news with #ByteTree
Yahoo
23-05-2025
- Business
- Yahoo
Trump's $4.5 trillion tax cuts risk making bond markets ‘puke'
'This is a fate worse than death,' bemoaned Charlie Morris on Wednesday, as the founder of investment advisory firm ByteTree was caught up in the Bloomberg blackout. Confronted by a blank screen as he sat at his terminal, Morris was one of countless City traders unable to access data or execute trades as Britain's Debt Management Office (DMO) was about to auction £4.25bn of UK government bonds. The DMO, which is charged with raising money for the Government, was forced to extend the length of its auction while a fix was found. The drama ultimately proved to be just a temporary hiccup, as the auction letter attracted bids of £11.6bn. However, the same could not be said across the Atlantic, where bond markets were suffering more serious convulsions. The US Treasury Department revealed on Wednesday that it had attracted tepid demand for a $16bn (£12bn) sale of 20-year bonds. This pushed the yield on 30-year Treasury bonds – the benchmark for the cost of long-term US government borrowing – to an 18-month high. It remained above 5pc on Thursday. 'The move reflects a change in the perceptions of investors around the safe-haven value of holding long-dated US paper,' says Joseph Brusuelas, US chief economist at RSM. 'Investors are growing increasingly concerned about the intersection of government spending, taxes, trade, inflation and growth.' The bond auction was the first since Moody's last week became the last of the three major credit rating agencies to strip the US of its prized triple-A status. Moody's said the decision was a result of America's mountainous debts, which it said are on track to reach 134pc of GDP by 2035. Thomas Pugh, chief economist at RSM UK, says: 'It's not a magic money tree in the traditional way, but certainly the US has been able to run deficits that no other developed country would get away with. 'It is a far larger deficit that is far longer than any other country would do, and that's because there's almost an infinite demand for US assets.' The debt market, however, is going through a regime change, says Pugh, as the end of the low interest rate era pushes up borrowing costs. And that is before you throw in the effects of Donald Trump, Pugh adds, as the US president is trying to borrow vast sums to finance a package of sweeping tax cuts. 'That is adding to this risk premium effect, where, if you're locking up your money for 10-20 years, there is now a lot more uncertainty on that timeframe than there was three to six months ago,' he says. Initially, the market reaction to the Moody's downgrade was muted, with a brief rise in yields on Monday petering out by Tuesday. But by the end of the week, that had all changed, with yields moving higher amid lacklustre demand for 20-year Treasuries. Concerns rose further after signs of distress also appeared in other parts of the world. In Japan, an auction of 20-year notes on Tuesday attracted the weakest demand in more than a decade, taking the country's 30-year yield to the highest level since records began in 1999. 'These moves in long-dated bond yields, not just in the US but frankly almost everywhere, are getting a little bit scary,' says Riddell. 'If Japanese government bond yields go much higher, then a lot of domestic Japanese investors – life insurance companies – are then incentivised to sell Treasuries, Bunds or gilts and actually repatriate the money back home and switch that into Japanese government bonds.' Such a move poses a huge risk for Trump. Money moving from US bonds means that the US Treasury would be forced to increase the yield it offers to attract demand, pushing up the cost of servicing the government's $36 trillion debt pile. Such an event would come just as the US president has passed the first hurdle in getting his tax-cutting 'big beautiful bill' through the Senate. The Republican-controlled House of Representatives passed a revised version of his 1,000-page tax bill on Thursday by 215 votes to 214, with Democrats staunchly opposed. Should it pass the Senate, it will extend some $4.5 trillion in tax breaks introduced during Trump's first term in 2017. The Committee for a Responsible Federal Budget has pegged the cost of the bill at $3.1 trillion over the next decade – which is about 10pc of this year's GDP. As a result, the Congressional Budget Office now projects deficits near 7pc of GDP in the coming years. 'That's wartime borrowing in a peacetime economy with low unemployment,' says Stefan Koopman, an analyst at Rabobank. 'Perhaps inspired by Moody's downgrade, markets are finally taking notice that the fiscal outlook is completely unhinged. 'There is no serious effort at fiscal consolidation or to reduce the structurally large deficits.' Those outside the sphere of financial markets might ask, what is the problem with the US running huge fiscal deficits? US administrations – and indeed governments around the world – have long run huge budget shortfalls without the world falling over. 'US presidents have been emboldened by the fact that they seem to have ample fiscal space,' says Bill Papadakis, an analyst at bank Lombard Odier, citing the example of Covid. 'They feel they have the space to do that and obviously that's a dangerous dynamic in that, if you keep doing it, at some point, of course those dynamics might change.' Many economists have taken solace from Trump's decision last month to suspend his 'liberation day' tariffs following the upheaval caused in financial markets. 'We did see a little bit of Trump reacting to market conditions that were sending warning signs,' said Papadakis. 'The dollar weakened a bit, Treasury yields went up, people started talking about the end to US exceptionalism and after this event he did seem to walk back on some of the announcements he had made.' But since the tariff onslaught was announced on April 2, the S&P 500 and the Nasdaq on Wall Street have clawed back all their losses. Riddell warned it could take another drop in stocks for the president to water down his tax cuts, by which time it could be too late. 'Back in February and March, the focus really was all about Doge,' he says. 'It was about Elon Musk. It was about getting the deficit to 3pc and how they were slashing away at the government sector. 'This has massively moved to the back seat now. It is all about corporate tax cuts and the last thing a long-dated bond needs is tax cuts. We need to have higher revenue, not more fiscal easing and this is what makes me nervous. 'It increases the chance of a really violent bond market sell-off at the long end, which will then at some point feed into risk assets and cause a bit of a puke like we saw earlier this year.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. 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
Telegraph
23-05-2025
- Business
- Telegraph
Trump's $4.5 trillion tax cuts risk making bond markets ‘puke'
'This is a fate worse than death,' bemoaned Charlie Morris on Wednesday, as the founder of investment advisory firm ByteTree was caught up in the Bloomberg blackout. Confronted by a blank screen as he sat at his terminal, Morris was one of countless City traders unable to access data or execute trades as Britain's Debt Management Office (DMO) was about to auction £4.25bn of UK government bonds. The DMO, which is charged with raising money for the Government, was forced to extend the length of its auction while a fix was found. The drama ultimately proved to be just a temporary hiccup, as the auction letter attracted bids of £11.6bn. However, the same could not be said across the Atlantic, where bond markets were suffering more serious convulsions. The US Treasury Department revealed on Wednesday that it had attracted tepid demand for a $16bn (£12bn) sale of 20-year bonds. This pushed the yield on 30-year Treasury bonds – the benchmark for the cost of long-term US government borrowing – to an 18-month high. It remained above 5pc on Thursday. 'The move reflects a change in the perceptions of investors around the safe-haven value of holding long-dated US paper,' says Joseph Brusuelas, US chief economist at RSM. 'Investors are growing increasingly concerned about the intersection of government spending, taxes, trade, inflation and growth.' 'Magic money tree' The bond auction was the first since Moody's last week became the last of the three major credit rating agencies to strip the US of its prized triple-A status. Moody's said the decision was a result of America's mountainous debts, which it said are on track to reach 134pc of GDP by 2035. Thomas Pugh, chief economist at RSM UK, says: 'It's not a magic money tree in the traditional way, but certainly the US has been able to run deficits that no other developed country would get away with. 'It is a far larger deficit that is far longer than any other country would do, and that's because there's almost an infinite demand for US assets.' The debt market, however, is going through a regime change, says Pugh, as the end of the low interest rate era pushes up borrowing costs. And that is before you throw in the effects of Donald Trump, Pugh adds, as the US president is trying to borrow vast sums to finance a package of sweeping tax cuts. 'That is adding to this risk premium effect, where, if you're locking up your money for 10-20 years, there is now a lot more uncertainty on that timeframe than there was three to six months ago,' he says. Initially, the market reaction to the Moody's downgrade was muted, with a brief rise in yields on Monday petering out by Tuesday. But by the end of the week, that had all changed, with yields moving higher amid lacklustre demand for 20-year Treasuries. Concerns rose further after signs of distress also appeared in other parts of the world. In Japan, an auction of 20-year notes on Tuesday attracted the weakest demand in more than a decade, taking the country's 30-year yield to the highest level since records began in 1999. 'These moves in long-dated bond yields, not just in the US but frankly almost everywhere, are getting a little bit scary,' says Riddell. 'If Japanese government bond yields go much higher, then a lot of domestic Japanese investors – life insurance companies – are then incentivised to sell Treasuries, Bunds or gilts and actually repatriate the money back home and switch that into Japanese government bonds.' 'Big beautiful bill' Such a move poses a huge risk for Trump. Money moving from US bonds means that the US Treasury would be forced to increase the yield it offers to attract demand, pushing up the cost of servicing the government's $36 trillion debt pile. Such an event would come just as the US president has passed the first hurdle in getting his tax-cutting 'big beautiful bill' through the Senate. The Republican-controlled House of Representatives passed a revised version of his 1,000-page tax bill on Thursday by 215 votes to 214, with Democrats staunchly opposed. Should it pass the Senate, it will extend some $4.5 trillion in tax breaks introduced during Trump's first term in 2017. The Committee for a Responsible Federal Budget has pegged the cost of the bill at $3.1 trillion over the next decade – which is about 10pc of this year's GDP. As a result, the Congressional Budget Office now projects deficits near 7pc of GDP in the coming years. 'That's wartime borrowing in a peacetime economy with low unemployment,' says Stefan Koopman, an analyst at Rabobank. 'Perhaps inspired by Moody's downgrade, markets are finally taking notice that the fiscal outlook is completely unhinged. 'There is no serious effort at fiscal consolidation or to reduce the structurally large deficits.' Those outside the sphere of financial markets might ask, what is the problem with the US running huge fiscal deficits? US administrations – and indeed governments around the world – have long run huge budget shortfalls without the world falling over. 'US presidents have been emboldened by the fact that they seem to have ample fiscal space,' says Bill Papadakis, an analyst at bank Lombard Odier, citing the example of Covid. 'They feel they have the space to do that and obviously that's a dangerous dynamic in that, if you keep doing it, at some point, of course those dynamics might change.' Tariff turmoil Many economists have taken solace from Trump's decision last month to suspend his 'liberation day' tariffs following the upheaval caused in financial markets. 'We did see a little bit of Trump reacting to market conditions that were sending warning signs,' said Papadakis. 'The dollar weakened a bit, Treasury yields went up, people started talking about the end to US exceptionalism and after this event he did seem to walk back on some of the announcements he had made.' But since the tariff onslaught was announced on April 2, the S&P 500 and the Nasdaq on Wall Street have clawed back all their losses. Riddell warned it could take another drop in stocks for the president to water down his tax cuts, by which time it could be too late. 'Back in February and March, the focus really was all about Doge,' he says. 'It was about Elon Musk. It was about getting the deficit to 3pc and how they were slashing away at the government sector. 'This has massively moved to the back seat now. It is all about corporate tax cuts and the last thing a long-dated bond needs is tax cuts. We need to have higher revenue, not more fiscal easing and this is what makes me nervous. 'It increases the chance of a really violent bond market sell-off at the long end, which will then at some point feed into risk assets and cause a bit of a puke like we saw earlier this year.'
eNCA
09-05-2025
- Business
- eNCA
Bitcoin tops $100,000 for first time since February
LONDON - Bitcoin on Thursday topped $100,000 for the first time since February, as investors' appetite for riskier assets grew after Britain and the United States unveiled a trade deal. "Now that the United States appears more reasonable and concludes agreements with other countries, cryptocurrencies are on the rise again," said Stephane Ifrah, analyst at crypto platform Coinhouse. Bitcoin broke through the symbolic $100,000 threshold for the first time in December, reaching $109,241.11 on January 20 just a few hours before the inauguration of US President Donald Trump. The Republican leader vowed to support cryptocurrencies during his campaign for a second White House term. But a wave of US tariffs unleashed on countries around the world dampened financial markets, causing a wave of uncertainty. Even though they were not directly concerned by the Trump tariffs, cryptocurrencies have a reputation for volatility and investors swiftly fled for safer havens such as gold. The sector has also been dealt several blows amid scandals such as the collapse of the cryptocurrency $LIBRA, once backed by Argentine President Javier Milei. The price collapsed after a handful of early investors decided to sell at a huge profit, causing colossal losses for the majority of those who purchased $LIBRA. It also dragged down prices of other cryptocurrencies, including bitcoin. Argentine prosecutors are reportedly examining whether Milei engaged in fraud or criminal association, or was in breach of his duties, when he praised the $LIBRA cryptocurrency on social media in February. Also in February, Dubai-based cryptocurrency exchange Bybit reported that hackers stole $1.5 billion worth of digital assets in what marked the largest crypto theft in industry history. In early April, bitcoin dropped to $75,000. "Bitcoin is strong in line with the stock market," said Charlie Morris, analyst with ByteTree. "The UK trade deal is one good reason to be bullish because many more trade deals are likely to follow."
New Straits Times
09-05-2025
- Business
- New Straits Times
Bitcoin tops US$100,000 for first time since February
LONDON: Bitcoin on Thursday topped US$100,000 for the first time since February, as investors' appetite for riskier assets grew after Britain and the United States unveiled a trade deal. "Now that the United States appears more reasonable and concludes agreements with other countries, cryptocurrencies are on the rise again," said Stephane Ifrah, analyst at crypto platform Coinhouse. Bitcoin broke through the symbolic US$100,000 threshold for the first time in December, reaching US$109,241.11 on January 20 just a few hours before the inauguration of US President Donald Trump. The Republican leader vowed to support crypto currencies during his campaign for a second White House term. But a wave of US tariffs unleashed on countries around the world dampened financial markets, causing a wave of uncertainty. Even though they were not directly concerned by the Trump tariffs, crypto currencies have a reputation for volatility and investors swiftly fled for safer havens such as gold. The sector has also been dealt several blows amid scandals such as the collapse of the crypto currency $LIBRA, once backed by Argentine President Javier Milei. The price collapsed after a handful of early investors decided to sell at a huge profit, causing colossal losses for the majority of those who purchased $LIBRA. It also dragged down prices of other cryptocurrencies, including bitcoin. Argentine prosecutors are reportedly examining whether Milei engaged in fraud or criminal association, or was in breach of his duties, when he praised the $LIBRA cryptocurrency on social media in February. Also in February, Dubai-based cryptocurrency exchange Bybit reported that hackers stole US$1.5 billion worth of digital assets in what marked the largest crypto theft in industry history. In early April, bitcoin dropped to US$75,000. "Bitcoin is strong in line with the stock market," said Charlie Morris, analyst with ByteTree. "The UK trade deal is one good reason to be bullish because many more trade deals are likely to follow." In late April, the UK government published draft legislation aimed at regulating cryptocurrencies like bitcoin and ethereum, after the European Union introduced its own framework.
Yahoo
10-04-2025
- Business
- Yahoo
UK Bond Yields Hit 5.6%, Stirring ‘Memories of 2022 Pension Crisis'
As of Wednesday morning, the yield on the UK's 30-year government bond soared to 5.6%—its highest level since 1998—mirroring a broader climb in U.S. sovereign yields and sparking fresh concerns about financial market stability. Surging global bond yields are exerting significant downward pressure on risk assets. Since the U.S. equity sell-off began last Thursday, the Nasdaq has dropped 10%, while bitcoin (BTC) has fared slightly better, down 8% over the same period. In the same time the U.K. 30-year bond yield is up 8%, while the U.S. 30-year is up 12%. Charlie Morris, founder of ByteTree, believes investors will start to seek diversification into other assets including bitcoin. 'It appears that the UK has been living beyond its means for too long. It hasn't balanced its budget since 2001, the gilt market has had enough', Morris said. 'Investors seeking diversification away from financial assets will not only buy gold, but bitcoin too'. The dramatic spike in yields has revived unsettling memories of the UK's 2022 pension crisis, when a sudden surge in borrowing costs triggered a near-collapse of the financial system and ultimately cost then-Prime Minister Liz Truss her job. This latest bond market turmoil is being driven by escalating uncertainty around global trade, stoked by President Donald Trump's proposed tariff plans. These levies could disrupt global supply chains and increase costs, adding pressure to already jittery markets. 'Alas, in politics you never get what you want by making civil arguments from high principle,' former UK MP Steve Baker told CoinDesk in an exclusive interview. 'President Trump said he was using brute economic force—and he is. It's time to rediscover free trade at home and abroad, fast, before this chaos wrecks our futures.' The recent yield surge echoes the events of 2022, when a surprise mini-budget announcement on Sept. 23 sent gilt yields soaring, crashed the pound, and exposed deep vulnerabilities in the UK pension system. Many defined benefit pension schemes had adopted complex liability-driven investment (LDI) strategies, using leverage and derivatives to match long-term liabilities. But as yields spiked, these funds suffered massive mark-to-market losses and faced margin calls, forcing rapid gilt sales into a thin market and creating a destabilizing "fire sale" feedback loop. At the time, UK pension funds held around 28% of the gilt market. The ensuing chaos, occurring in a modest $1.5 trillion market, was so severe that it required the Bank of England to step in with emergency gilt purchases to halt the downward spiral. A Chicago Fed Letter analyzing the crisis later identified excessive leverage, asset pooling, and the limited depth of the gilt market as key structural weaknesses—particularly in contrast to the much larger $9.9 trillion U.S. Treasury market. Sign in to access your portfolio
