Latest news with #debtcrisis
South China Morning Post
12 hours ago
- Business
- South China Morning Post
How to save the world economy (and make Trump think it was his doing)
US President Donald Trump is an enigma. He has correctly identified the two most unsustainable elements of the global economic order, but his attempts to bring about their creative destruction threaten disaster. Has he perhaps revealed a paradoxical truth that such destruction is the only practical way to go? Advertisement It was never going to be possible for the United States to remain the 'consumer of last resort' indefinitely, thereby allowing other economies to pursue unsustainable export-led growth . It was also never going to be possible for the US to finance its level of consumption indefinitely by accumulating debt. The two matters are intimately connected. The ability of the US government to take on debt – now at a record US$36.2 trillion, according to US Treasury data – depended upon trust among creditors or bondholders, and Trump himself has largely destroyed that with his punitive tariffs. But it also depended upon the continuance of record low interest rates globally, a situation which has now ended . This means a potentially crippling debt service burden for the US government, whose interest payments account for 16 per cent of total federal spending and are rising. Whether consciously or not, Trump has uncovered these inconvenient truths which few, if any, in Washington were prepared to countenance, at least publicly. However, he has approached the issue with all the delicacy and finesse of the proverbial bull in a china shop , raising the question of whether he is an anarchist or the ultimate realist. Advertisement The Biden administration that predated Trump's second term could not have been unaware that the US debt situation was unsustainable in a changing, tightening international financial environment, and that it would soon create a crisis of debt service and impact America's ability to import both goods and capital.
Bloomberg
a day ago
- Business
- Bloomberg
Jamie Dimon Says Crack in the Bond Market Is ‘Going to Happen'
Jamie Dimon warned that a crack in the bond market is 'going to happen' after the the US government and Federal Reserve 'massively overdid' spending and quantitative easing. 'I just don't know if it's going to be a crisis in six months or six years, and I'm hoping that we change both the trajectory of the debt and the ability of market makers to make markets,' the JPMorgan Chase & Co. chief executive officer said Friday at the Reagan National Economic Forum. 'Unfortunately, it may be that we need that to wake us up.'
Zawya
a day ago
- Business
- Zawya
The World Debt Situation Has Become More Unstable, Octa Broker warns
KUALA LUMPUR, MALAYSIA - Media OutReach Newswire - 30 May 2025 - Traders and investors alike are unnerved by the recent turbulence in the bond markets. After Moody's—a major rating agency—downgraded U.S. government debt on 16 May, and Japanese long-term bond yields soared to multi-decade highs, some market participants started to fear that the world may be on the verge of a major debt crisis. Meanwhile, the yield on 20-year UK government bonds neared 5.5%, a level not seen in 27 years, as investors grew more worried about the extent of Chancellor Rachel Reeves' borrowing plans. Octa Brokers looks at the potential implications of these developments for global markets. Ticking Fiscal Bomb The U.S. mounting national debt has long been the subject of intense debate and concern among economists, policymakers, and the public. Apocalyptic predictions of a U.S. default and dollar collapse are nothing new. They first appeared decades ago and have been surfacing here and there regularly, attracting plenty of followers. However, these predictions have never materialised, while the doomsayers have been dismissed as amateur conspiracy theorists at best and irresponsible alarmists at worst. Still, while we are not inclined to take a grand stance on this issue, we cannot afford to ignore the latest market developments regarding the U.S. debt. Often called a 'ticking fiscal bomb', it has recently started raising fears about the nation's long-term economic stability and potential impact on global markets. 'On current trends, U.S. national debt is projected to reach $37 trillion in two weeks and may reach $40 trillion by the end of the year. This trend cannot continue forever. The Fed's [Federal Reserve] printing press may have no limit, but market patience does have its limit', says Kar Yong Ang, a financial market analyst at Octa broker. Indeed, the market's perception of risk regarding U.S. government debt has clearly risen. This is evident in the noticeable increase in the cost of insuring exposure to U.S. government debt over the past month. The spreads on U.S. credit default swaps (CDS)—a key measure of default risk—have reached their widest levels since the 2023 debt ceiling crisis in recent weeks (see chart below). Market stress intensified even more following Moody's downgrade and the passage of the U.S. President Donald Trump's 'One Big Beautiful Bill Act' in the House of Representatives. The bill features $3.8 trillion in tax cuts and is widely expected to worsen the federal budget deficit outlook. As a result, investors started to demand higher returns for holding long-term U.S. government bonds, pushing the yields on 20-year notes above the important 5% level on 21 May. 5-Year Credit Default Swaps Kar Yong Ang comments: 'Policy uncertainty is all over the place. Tariffs, tax bill, debt ceiling. No wonder investors charge a premium for holding the debt of a country, which is not in a 'triple-A club' anymore. Investors want higher yield in order to provide long-term lending in the current uncertain climate'. Indeed, the U.S. government actually hit its legal borrowing limit back in January and has been using special procedures to avoid exceeding it and potentially defaulting. However, these measures are expected to run out around late August or early September, at which point the government might be unable to meet all its financial commitments. Yields of government bonds with the longest maturities have been rising sharply not just in the United States but also in Japan and the United Kingdom (UK) (see chart below). On 20 May, Japan's 20-year government bond (JGB) auction had its worst results since 2012. The demand was weak, with the bid-to-cover ratio dropping to 2.50, while the lowest accepted price was just ¥98.15, some 2% below the expected price. Yields on 20-Year Government Bonds 'Japan's auction signals poor liquidity and weak interest in new long-term securities as investors are concerned about excessive profligacy. It seems to me that the BoJ wants to stop buying bonds at the worst possible moment. Who is going to replace it?', rhetorically asks Kar Yong Ang, referring to BoJ plans to taper its massive bond purchase programme. Indeed, although yields on long-term JGBs have been rising since the COVID pandemic, the trend accelerated after the Bank of Japan (BoJ) moved toward monetary policy normalisation amid rising wage growth and inflation. Policy normalisation implied higher short-term rates and fewer bond purchases. Thus far, BoJ has ended its yield curve control (YCC), raised its benchmark interest rate from -0.1% to 0.5% and even embarked on quantitative tightening (QT). These factors contributed to the consistent increase in Japanese government bond yields. Today, however, the situation is complicated by additional fiscal stimulus, which could result in more government borrowing just as the BoJ prepares to slowly exit the debt markets. The Cabinet already approved a massive ¥21.9 trillion ($142 billion) economic stimulus package back in November 2024. Most recently, it approved an emergency plan to allocate ¥388 billion ($2.7 billion) from reserve funds to assist businesses and households affected by U.S. tariffs. 'Investors are sending a very clear message: if we are the only ones left to finance these spending plans, then we demand higher returns', concludes Kar Yong Ang. The recent movements in the U.S., Japanese, and UK government bond markets paint a concerning picture of increasing investor unease regarding sovereign debt. From the rising cost of insuring U.S. debt and the poor reception of Japan's long-term bond auction to the near 27-year high in the UK gilt yields, a common thread of heightened risk perception is evident. As Kar Yong Ang of Octa Broker points out, factors like policy uncertainty, fiscal profligacy, and the prospect of central banks reducing their bond purchases are prompting investors to demand greater compensation for lending to governments. 'The problem is not just that governments have an enormous mountain of debt. The real problem is that the market is intricately interconnected. A small trouble in one place can morph into a major crisis elsewhere. What if higher JGB yields lure Japanese capital back home? If they decide to increase their JGB holdings, they may have to sell the U.S. Treasuries and that could be catastrophic given that Japan is a major holder of U.S. debt', says Kar Yong Ang. Investors should watch the upcoming BoJ meeting scheduled for 17 June. The BoJ will issue its regular policy rate decision and will likely announce its balance sheet reduction plan. According to MacroMicro, markets currently expect a gradual pace—around 6–7% reduction over two years. However, if the BoJ opts to speed up the process, it could put pressure on global markets ___ Disclaimer: This content is for general informational purposes only and does not constitute investment advice, a recommendation, or an offer to engage in any investment activity. It does not take into account your investment objectives, financial situation, or individual needs. Any action you take based on this content is at your sole discretion and risk. Octa and its affiliates accept no liability for any losses or consequences resulting from reliance on this material. Trading involves risks and may not be suitable for all investors. Use your expertise wisely and evaluate all associated risks before making an investment decision. Past performance is not a reliable indicator of future results. Availability of products and services may vary by jurisdiction. Please ensure compliance with your local laws before accessing them. Hashtag: #Octa The issuer is solely responsible for the content of this announcement. Octa Octa is an international CFD broker that has been providing online trading services worldwide since 2011. It offers commission-free access to financial markets and various services used by clients from 180 countries who have opened more than 52 million trading accounts. To help its clients reach their investment goals, Octa offers free educational webinars, articles, and analytical tools. The company is involved in a comprehensive network of charitable and humanitarian initiatives, including improving educational infrastructure and funding short-notice relief projects to support local communities. In Southeast Asia, Octa received the 'Best Trading Platform Malaysia 2024' and the 'Most Reliable Broker Asia 2023' awards from Brands and Business Magazine and International Global Forex Awards, respectively. Octa
Malay Mail
a day ago
- Business
- Malay Mail
The World Debt Situation Has Become More Unstable, Octa Broker warns
5-Year Credit Default Swaps Source: LSEG Yields on 20-Year Government Bonds Source: LSEG KUALA LUMPUR, MALAYSIA - Media OutReach Newswire - 30 May 2025 - Traders and investors alike are unnerved by the recent turbulence in the bond markets. After Moody's—a major rating agency—downgraded U.S. government debt on 16 May, and Japanese long-term bond yields soared to multi-decade highs, some market participants started to fear that the world may be on the verge of a major debt crisis. Meanwhile, the yield on 20-year UK government bonds neared 5.5%, a level not seen in 27 years, as investors grew more worried about the extent of Chancellor Rachel Reeves' borrowing plans. Octa Brokers looks at the potential implications of these developments for global U.S. mounting national debt has long been the subject of intense debate and concern among economists, policymakers, and the public. Apocalyptic predictions of a U.S. default and dollar collapse are nothing new. They first appeared decades ago and have been surfacing here and there regularly, attracting plenty of followers. However, these predictions have never materialised, while the doomsayers have been dismissed as amateur conspiracy theorists at best and irresponsible alarmists at worst. Still, while we are not inclined to take a grand stance on this issue, we cannot afford to ignore the latest market developments regarding the U.S. debt. Often called a 'ticking fiscal bomb', it has recently started raising fears about the nation's long-term economic stability and potential impact on global markets., says Kar Yong Ang, a financial market analyst at Octa the market's perception of risk regarding U.S. government debt has clearly risen. This is evident in the noticeable increase in the cost of insuring exposure to U.S. government debt over the past month. The spreads on U.S. credit default swaps (CDS)—a key measure of default risk—have reached their widest levels since the 2023 debt ceiling crisis in recent weeks (see chart below).Market stress intensified even more following Moody's downgrade and the passage of the U.S. President Donald Trump's 'One Big Beautiful Bill Act' in the House of Representatives. The bill features $3.8 trillion in tax cuts and is widely expected to worsen the federal budget deficit outlook. As a result, investors started to demand higher returns for holding long-term U.S. government bonds, pushing the yields on 20-year notes above the important 5% level on 21 Yong Ang comments:Indeed, the U.S. government actually hit its legal borrowing limit back in January and has been using special procedures to avoid exceeding it and potentially defaulting. However, these measures are expected to run out around late August or early September, at which point the government might be unable to meet all its financial of government bonds with the longest maturities have been rising sharply not just in the United States but also in Japan and the United Kingdom (UK) (see chart below). On 20 May, Japan's 20-year government bond (JGB) auction had its worst results since 2012. The demand was weak, with the bid-to-cover ratio dropping to 2.50, while the lowest accepted price was just ¥98.15, some 2% below the expected asks Kar Yong Ang, referring to BoJ plans to taper its massive bond purchase although yields on long-term JGBs have been rising since the COVID pandemic, the trend accelerated after the Bank of Japan (BoJ) moved toward monetary policy normalisation amid rising wage growth and inflation. Policy normalisation implied higher short-term rates and fewer bond purchases. Thus far, BoJ has ended its yield curve control (YCC), raised its benchmark interest rate from -0.1% to 0.5% and even embarked on quantitative tightening (QT). These factors contributed to the consistent increase in Japanese government bond yields. Today, however, the situation is complicated by additional fiscal stimulus, which could result in more government borrowing just as the BoJ prepares to slowly exit the debt markets. The Cabinet already approved a massive ¥21.9 trillion ($142 billion) economic stimulus package back in November 2024. Most recently, it approved an emergency plan to allocate ¥388 billion ($2.7 billion) from reserve funds to assist businesses and households affected by U.S. Kar Yong recent movements in the U.S., Japanese, and UK government bond markets paint a concerning picture of increasing investor unease regarding sovereign debt. From the rising cost of insuring U.S. debt and the poor reception of Japan's long-term bond auction to the near 27-year high in the UK gilt yields, a common thread of heightened risk perception is evident. As Kar Yong Ang of Octa Broker points out, factors like policy uncertainty, fiscal profligacy, and the prospect of central banks reducing their bond purchases are prompting investors to demand greater compensation for lending to Kar Yong should watch the upcoming BoJ meeting scheduled for 17 June. The BoJ will issue its regular policy rate decision and will likely announce its balance sheet reduction plan. According to MacroMicro, markets currently expect a gradual pace—around 6–7% reduction over two years. However, if the BoJ opts to speed up the process, it could put pressure on global markets___Hashtag: #Octa The issuer is solely responsible for the content of this announcement. Octa Octa is an international CFD broker that has been providing online trading services worldwide since 2011. It offers commission-free access to financial markets and various services used by clients from 180 countries who have opened more than 52 million trading accounts. To help its clients reach their investment goals, Octa offers free educational webinars, articles, and analytical tools. The company is involved in a comprehensive network of charitable and humanitarian initiatives, including improving educational infrastructure and funding short-notice relief projects to support local communities. In Southeast Asia, Octa received the 'Best Trading Platform Malaysia 2024' and the 'Most Reliable Broker Asia 2023' awards from Brands and Business Magazine and International Global Forex Awards, respectively.
Japan Times
3 days ago
- Automotive
- Japan Times
Factory that symbolised Nissan's rise may become victim of its decline
When Nissan's Oppama plant opened in 1961, it was one of Japan's first large-scale auto factories and a symbol of the company's global ambitions. Sixty-four years and millions of cars later, the storied plant now faces possible closure as Nissan sinks deeper into crisis. New Chief Executive Ivan Espinosa unveiled sweeping cost cuts this month that included plans to shed 15% of the global workforce and close seven factories worldwide. Battered by declining sales in the United States and China, Nissan faces a mountain of debt repayment and is scrambling to upgrade its aging lineup of vehicles. The Japanese automaker hasn't said which of its 17 plants will be closed. Oppama, in the port city of Yokosuka south of Tokyo, is being considered, as is another smaller plant in Japan. Factories in South Africa, India, Argentina and Mexico could also be closed.
