Latest news with #TDSecurities
Yahoo
8 hours ago
- Business
- Yahoo
Trump will be hit with $60bn bill if he sacks Powell
Donald Trump will be hit with a $60bn (£44bn) bill if he follows through on his threats to sack Federal Reserve chairman Jerome Powell, analysts have warned. Ousting Mr Powell, the head of the US central bank, would send Treasury yields soaring, adding crippling costs to the government's debt interest bill as investors bet on the prospect of higher inflation and political instability. Gennadiy Goldberg, the head of US rates strategy at TD Securities, said that if Mr Trump did oust the Fed Chair, it would add around $58bn to the government's interest bills. The president suggested this week that he could sack Mr Powell over escalating costs in the $2.5bn renovation of the central bank. After a flurry of reports warned that Mr Trump was preparing to oust the Fed chairman imminently on Wednesday, the president told reporters: 'I don't rule out anything but I think it's highly unlikely unless he has to leave for fraud.' Mr Trump has been deeply critical of Mr Powell, who he has called a 'numbskull' for not cutting interest rates as the president wants. If Mr Trump were to remove the Fed chairman, analysts warned bond investors would demand far higher rates to compensate for fears that the Fed would no longer operate free from government interference and would be less able to keep inflation under control. Mr Goldberg said this would drive up yields on American debt repayable in 20 years and 30 years by between 20 and 50 percentage points, potentially pushing interest rates on these bonds to around 5.5pc. In turn, this would add $58bn to the interest bill on the $276bn in 30-year Treasuries and $168bn in 20-year Treasuries that the US issues in a typical fiscal year, Mr Goldberg estimated. This calculation assumes that yields stay at these levels and that government debt issuance patterns remain the same. 'If interest rates jump, the debt burden could very quickly become unsustainable,' said Mr Goldberg. Alex Everett, a fund manager at Aberdeen, said that over the course of two or three months, the shock could add as much as a whole percentage point to 30-year Treasury yields, pushing the interest rate on these bonds to 6pc. This would be the steepest rise in US Treasury yields since the 'Volcker shock' in the early 1980s when Paul Volcker, the then-Fed chairman, made large increases in interest rates to tame runaway inflation. Mr Everett said: 'The difference then was that yields moved higher to reflect a Fed combating inflation. This time they'd likely be moving higher to reflect a Fed not combating inflation effectively. '[Markets will think] inflation will not be kept under control by an institution that exists to moderate the economy.' Sacking a Fed chairman would also push markets to make bets on more political instability and unchecked borrowing. 'It would be a very key progression point in Trump's agenda, you'd assume the next logical step is that he can push harder on other things,' Mr Everett said. The surge in Treasury yields would be accompanied with a significant drop in the dollar that would hit investors hard, he added. Higher borrowing costs would hit at a time when the government's debt interest bill was already forecast to soar from 3.2pc to 6.1pc by 2054, assuming the measures in Mr Trump's spending bill come to pass, according to analysis by the Committee for a Responsible Federal Budget. Higher Treasury yields would also drive up mortgage rates, which are currently close to 7pc, further slowing housing market activity, at a time when sales are already at a 30-year low. 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.
Yahoo
9 hours ago
- Business
- Yahoo
Trump will be hit with $60bn bill if he sacks Powell
Donald Trump will be hit with a $60bn (£44bn) bill if he follows through on his threats to sack Federal Reserve chairman Jerome Powell, analysts have warned. Ousting Mr Powell, the head of the US central bank, would send Treasury yields soaring, adding crippling costs to the government's debt interest bill as investors bet on the prospect of higher inflation and political instability. Gennadiy Goldberg, the head of US rates strategy at TD Securities, said that if Mr Trump did oust the Fed Chair, it would add around $58bn to the government's interest bills. The president suggested this week that he could sack Mr Powell over escalating costs in the $2.5bn renovation of the central bank. After a flurry of reports warned that Mr Trump was preparing to oust the Fed chairman imminently on Wednesday, the president told reporters: 'I don't rule out anything but I think it's highly unlikely unless he has to leave for fraud.' Mr Trump has been deeply critical of Mr Powell, who he has called a 'numbskull' for not cutting interest rates as the president wants. If Mr Trump were to remove the Fed chairman, analysts warned bond investors would demand far higher rates to compensate for fears that the Fed would no longer operate free from government interference and would be less able to keep inflation under control. Mr Goldberg said this would drive up yields on American debt repayable in 20 years and 30 years by between 20 and 50 percentage points, potentially pushing interest rates on these bonds to around 5.5pc. In turn, this would add $58bn to the interest bill on the $276bn in 30-year Treasuries and $168bn in 20-year Treasuries that the US issues in a typical fiscal year, Mr Goldberg estimated. This calculation assumes that yields stay at these levels and that government debt issuance patterns remain the same. 'If interest rates jump, the debt burden could very quickly become unsustainable,' said Mr Goldberg. Alex Everett, a fund manager at Aberdeen, said that over the course of two or three months, the shock could add as much as a whole percentage point to 30-year Treasury yields, pushing the interest rate on these bonds to 6pc. This would be the steepest rise in US Treasury yields since the 'Volcker shock' in the early 1980s when Paul Volcker, the then-Fed chairman, made large increases in interest rates to tame runaway inflation. Mr Everett said: 'The difference then was that yields moved higher to reflect a Fed combating inflation. This time they'd likely be moving higher to reflect a Fed not combating inflation effectively. '[Markets will think] inflation will not be kept under control by an institution that exists to moderate the economy.' Sacking a Fed chairman would also push markets to make bets on more political instability and unchecked borrowing. 'It would be a very key progression point in Trump's agenda, you'd assume the next logical step is that he can push harder on other things,' Mr Everett said. The surge in Treasury yields would be accompanied with a significant drop in the dollar that would hit investors hard, he added. Higher borrowing costs would hit at a time when the government's debt interest bill was already forecast to soar from 3.2pc to 6.1pc by 2054, assuming the measures in Mr Trump's spending bill come to pass, according to analysis by the Committee for a Responsible Federal Budget. Higher Treasury yields would also drive up mortgage rates, which are currently close to 7pc, further slowing housing market activity, at a time when sales are already at a 30-year low. 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. Sign in to access your portfolio
Telegraph
20 hours ago
- Business
- Telegraph
Trump will be hit with $60bn bill if he sacks Powell
Donald Trump will be hit with a $60bn (£44bn) bill if he follows through on his threats to sack Federal Reserve chairman Jerome Powell, analysts have warned. Ousting Mr Powell, the head of the US central bank, would send Treasury yields soaring, adding crippling costs to the government's debt interest bill as investors bet on the prospect of higher inflation and political instability. Gennadiy Goldberg, the head of US rates strategy at TD Securities, said that if Mr Trump did oust the Fed Chair, it would add around $58bn to the government's interest bills. The president suggested this week that he could sack Mr Powell over escalating costs in the $2.5bn renovation of the central bank. After a flurry of reports warned that Mr Trump was preparing to oust the Fed chairman imminently on Wednesday, the president told reporters: 'I don't rule out anything but I think it's highly unlikely unless he has to leave for fraud.' Mr Trump has been deeply critical of Mr Powell, who he has called a 'numbskull' for not cutting interest rates as the president wants. If Mr Trump were to remove the Fed chairman, analysts warned bond investors would demand far higher rates to compensate for fears that the Fed would no longer operate free from government interference and would be less able to keep inflation under control. Mr Goldberg said this would drive up yields on American debt repayable in 20 years and 30 years by between 20 and 50 percentage points, potentially pushing interest rates on these bonds to around 5.5pc. In turn, this would add $58bn to the interest bill on the $276bn in 30-year Treasuries and $168bn in 20-year Treasuries that the US issues in a typical fiscal year, Mr Goldberg estimated. This calculation assumes that yields stay at these levels and that government debt issuance patterns remain the same. 'If interest rates jump, the debt burden could very quickly become unsustainable,' said Mr Goldberg. Alex Everett, a fund manager at Aberdeen, said that over the course of two or three months, the shock could add as much as a whole percentage point to 30-year Treasury yields, pushing the interest rate on these bonds to 6pc. This would be the steepest rise in US Treasury yields since the 'Volcker shock' in the early 1980s when Paul Volcker, the then-Fed chairman, made large increases in interest rates to tame runaway inflation. Mr Everett said: 'The difference then was that yields moved higher to reflect a Fed combating inflation. This time they'd likely be moving higher to reflect a Fed not combating inflation effectively. '[Markets will think] inflation will not be kept under control by an institution that exists to moderate the economy.' Sacking a Fed chairman would also push markets to make bets on more political instability and unchecked borrowing. 'It would be a very key progression point in Trump's agenda, you'd assume the next logical step is that he can push harder on other things,' Mr Everett said. The surge in Treasury yields would be accompanied with a significant drop in the dollar that would hit investors hard, he added. Higher borrowing costs would hit at a time when the government's debt interest bill was already forecast to soar from 3.2pc to 6.1pc by 2054, assuming the measures in Mr Trump's spending bill come to pass, according to analysis by the Committee for a Responsible Federal Budget. Higher Treasury yields would also drive up mortgage rates, which are currently close to 7pc, further slowing housing market activity, at a time when sales are already at a 30-year low.
AU Financial Review
3 days ago
- Business
- AU Financial Review
ASX to rise, Wall St higher after Trump denies plan to fire Powell
Australian shares are set to rebound after Wednesday's retreat. Shares were higher in New York, recovering from an earlier swoon, after President Donald Trump denied he was poised to fire Jerome Powell. The S&P 500 slumped early on reports the president was likely to seek the Fed chairman's ouster soon. Trump told reporters attending a White House event that he is 'not planning on doing anything' to remove Powell. 'Powell's removal is viewed by markets as a low-probability but high-impact event,' TD Securities said in a note. 'We would expect markets to price in higher long-run inflation, higher term premium, more near-term Fed rate cuts (and hence lower front-end rates), increased market volatility, and a steeper yield curve.' TD also said a shadow Fed chairman could be the next big worry for the US dollar, especially given the financing risks of the widening fiscal deficit. Market highlights ASX futures are pointing up 53 points or 0.6 per cent to 8588. All US prices as of 4.20pm New York time. Today's agenda The key focus is the June labour force report at 11.30am AEST. NAB said it expects employment growth of +20k and for the unemployment rate to remain at 4.1 per cent. TD Securities said a negative May jobs report didn't faze the RBA much as the bank chose to surprise with an on-hold decision as the Board placed more emphasis on inflation. 'However, another weak jobs report should nudge the bank to go ahead with a cut in August. We expect jobs to print at +15k which should push the unemployment rate to 4.2 per cent, assuming the participation rate remain at 67 per cent. Quarterly reports are expected on Thursday from Santos, Yancoal Australia as well as Alcoa, Gold Road Resources and Genesis Minerals. Later in the day, at 10.30pm, the US will release weekly initial jobless claims and June retail sales. Top stories Chanticleer: Why there's so much at stake for NAB and its CEO Andrew Irvine | Institutional investors are overweight NAB and nervous about what they're seeing in four key areas: leadership, competition, asset quality and costs. The 10 wealthiest executives in the ASX 300 revealed | Healthcare and tech company bosses, including the co-founders of the ASX's newest $30 billion company Pro Medicus, dominate the Rich Bosses list. From farmer to miner, Rio's new CEO is a breath of fresh air | When Simon Trott's parents installed air conditioning in their shearing sheds, their son learnt how to get the best out of staff. Now he has 60,000 of them. Will equity analysts be replaced by AI? That's a billion-dollar question | With disruption upon them, fund managers and investment banks, including Macquarie, are trying to get ahead of the trend, writes Joyce Moullakis. Is that 1 or 7? What the judge will have to decide in Bradfield | Liberal Gisele Kapterian alleges 'illegal practices' in her 26-vote loss in the election, and wants a judge to rule on the squiggles on 151 questionable ballots.
CTV News
4 days ago
- Business
- CTV News
TD strategist says ‘we are inching closer to a wartime economy' as nations stockpile resources
Sorry, we're having trouble with this video. Please try again later. [5006/404] The global flow of metals and minerals is being significantly impacted by geopolitical tensions and a growing deglobalization trend, according to one expert, who says commodity trading is becoming less efficient and more costly. 'When I zoom out, what we're starting to see and what's really important for our clients is that every day, we're inching closer to wartime economy,' Daniel Ghali, senior commodity strategist at TD Securities, told BNN Bloomberg in an interview Tuesday afternoon. 'Critical minerals strategy for the west is a national security strategy that is facing an increasing sense of urgency since China issues export controls on rare earth elements, and that strategy is now fuelling competition to secure resource access.' Amid China's ongoing trade war with the U.S., Beijing announced in April that it was suspending a wide range of critical mineral and magnet exports – materials that are a crucial part of global automotive, aerospace and semiconductor supply chains. The move raised alarms in economies across the world, from India to the U.S., and was a stark reminder of China's dominance in the critical minerals industry. With their trading relationships in flux, the world's two largest economies are racing to secure their own minerals and metals, squeezing physical markets, Ghali said. 'We've seen significant signs of stockpiling behaviour, both in the U.S. as traders are incentivized to rush metal in ahead of a tariffs announcement, and within China with stock piling that has strategic hues,' he explained. 'Both of these systems are draining global inventory balances, and for many of these metals, those inventory balances have already drained below levels that are critical for the market structure. Metals markets in many instances are in a really precarious position.' The metal that's been top of mind for most commodity traders in recent weeks and months is copper, which has a range of uses from electrical wiring to construction materials and electric vehicle components, including batteries. U.S. President Donald Trump, in an effort to boost domestic copper production, announced last week that imports of the metal will face a 50 per cent tariff beginning Aug. 1. Copper prices surged to record highs on the news. 'Ultimately, this is the end stage of the deglobalization narrative. Trade becomes less efficient, it becomes more costly, and raw material prices have to reflect that,' Ghali said. 'The conclusion that we're coming to is that a world in which the trade of raw materials is fragmented, and perhaps a function of geopolitical allegiance more so than market efficiency, is a world where raw material prices have to be higher and perhaps significantly so.'
