As an important aside, proposed changes to the Supplementary Leverage Ratio (SLR) for big US banks can add to bank demand for Treasuries and Repo. That said, banks won’t rush to buy. A skew on balance sheets is more likely to be gradual. Banks are lenders first, and credit hasn’t been notably constrained, especially with high reserves.
Is this impactful for Treasuries? For sure, if up-front inflows dominate. But a more gradual application would be less impactful. Still, it’s a positive impulse. Just as the backing of stablecoins with Treasury bills is a positive for bills demand in the medium term, it also has a potential multi-trillion-dollar demand effect. Again, a positive. But this will only have a meaningful impact if accelerated, as supply is increasing significantly too.
It can also impact the weighting between bank cash reserves and their holdings of Treasuries. We’ll continue to monitor this important space.
The largest creditor to struggling water company Thames Water has said it is confident that it will not lose money, joking that the UK was comparable to Puerto Rico, which paid lenders to its water company despite a crippling debt crisis.
Dominic Frederico, the chief executive of US insurer Assured Guaranty, suggested that the UK government would not impose losses on creditors. The company – which has an exposure of $2.4bn (£1.8bn) to Thames Water’s bonds – was “well protected in terms of the legal structure” from losing money, he told investors on a call on 8 August.
“The joke I make internally, and I’ll put it out here over some criticism, is that even in Puerto Rico’s case, they paid the water bill,” he said. “So I’m assuming the UK government will do the same.”
Puerto Rico, a US territory, went through the biggest municipal default in modern history, beginning in 2014. However, its water company debts were not hit, preserving returns for investors.
The comments underline the scale of Thames Water’s crisis, as well as the expectation of some its senior creditors that they will not lose their money. Thames Water has been under the effective control of its senior creditors, which hold the bulk of its £17.7bn debt pile since shareholders walked away from the company last year.
The creditors have proposed a £5.3bn injection of equity and debt to take formal control of Thames Water and try to turn it around. However, the creditors insist that no recovery is possible without leniency on pollution fines from Ofwat, the water regulator for England and Wales.
That proposal is deeply controversial and has led to a standoff, with the environment secretary, Steve Reed, insisting that Thames Water must continue to meet the same environmental standards as rivals. The government has faced calls for it to place Thames Water into special administration, effectively a temporary nationalisation that would probably impose significant losses on creditors.
However, Assured Guaranty has said that it is confident it will not lose money, and that Thames Water will stay out of government control. Frederico said that he was “very comfortable” that the creditor plan would be approved.
Assured Guaranty’s exposure to UK water companies has risen to more than $16bn in June, up from $10.6bn in March 2022, according to quarterly filings. Its biggest exposure was $2.8bn on Southern Water, another British water company that has faced financial difficulties.
The insurer has said that it feels “pretty good” about its exposure to Britain’s privatised water companies. Its chief financial officer, Benjamin Rosenblum, said in February: “The UK government has stated that they really don’t plan to nationalise the water utilities and frankly, they don’t really seem to have the room in their budget to do so, and they would like to see additional investment. So I think the macroeconomic background for the UK water sector looks pretty good.”
Dieter Helm, an Oxford University professor who has advised previous Labour and Conservative governments on energy and water policy, said this week that the creditor offer was “a plan designed to protect their debt” and that it did not appear to address Thames Water’s long-term problems.
Helm said that “Thames is, in principle, a very viable asset” because of rising bills that guarantee revenues but added that creditors are not likely to back debt write-offs that would impose losses on themselves. Several of the creditors bought the debt at a discount from the original lenders, meaning they could still make large profits even with a large cut in the amount Thames owes.
A Thames Water spokesperson said: “A special administration regime doesn’t fix Thames Water’s problems. It will delay the delivery of improvement for our customers and the environment. It will be disruptive, add risk and uncertainty, increase costs, hinder our operational turnaround, destabilise our stakeholders and colleagues, and will not fix the balance sheet.
“A market-led recapitalisation is the quickest and most effective route to financial stability, sustainable investment and better outcomes for customers and the environment.”
Assured Guaranty and the Thames Water senior creditor group were approached for comment.
We recently published 10 Stocks Shine Brighter Than Wall Street. Terawulf Inc. (NASDAQ:WULF) is one of Monday’s top performers.
Terawulf extended its winning streak to a fourth straight day on Monday to break past a new all-time high as investors cheered an expanded partnership with Google and Fluidstack that could potentially generate the company $16 billion in revenues.
At intra-day trading, Terawulf Inc. (NASDAQ:WULF) soared to as high as $10.71, marking a 19.4-percent increase from its previous close, before paring gains to end the day just up by 4.57 percent at $9.38 apiece.
This followed updated announcements that Fluidstack was expanding its data center at the Lake Mariner campus in Western New York, which was expected to require another 160 MW of critical IT load supply from Terawulf Inc. (NASDAQ:WULF), on top of the 200 MW initially signed.
Assuming Fluidstack exercises two lease extensions, the contract would help generate $16 billion in total revenues for Terawulf Inc. (NASDAQ:WULF).
In connection with the increased capacity, technology giant Google also announced intentions to invest $3.2 billion in Terawulf Inc. (NASDAQ:WULF) to support the project, in exchange for warrants to acquire 32.5 million WULF common shares, or a 14-percent pro-forma equity.
“This expansion underscores the unmatched scale and capabilities of the Lake Mariner campus,” said Terawulf CEO Paul Prager.
Terawulf (WULF) Cracks Past New All-Time High on Expanded Fluidstack Deal, Higher Google Financial Backing
Image by Лечение Наркомании from Pixabay
“We are not only increasing our contracted capacity with Fluidstack, but also further deepening our strategic alignment with Google as a critical financial partner in delivering the next generation of AI infrastructure,” he added.
While we acknowledge the potential of WULF as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.
(Bloomberg) — A slide in the world’s largest technology companies weighed on stocks, while big-box retailers got a boost from Home Depot Inc.’s results. Bond yields fell ahead of Jerome Powell’s speech later this week as traders continued to price in high chances of a September rate cut.
The Nasdaq 100 fell 1%, with Nvidia Corp. leading losses in megacaps. Intel Corp. rallied as Commerce Secretary Howard Lutnick told CNBC the US is seeking a stake without governance rights and SoftBank Group Corp. agreed to buy $2 billion of the chipmaker shares. Transportation firms climbed as Lutnick said he’d support consolidation to make freight rail more efficient.
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Treasuries rose, driving 10-year yields down two basis points to 4.31%. The Bloomberg Dollar Spot Index was little changed.
Positioning across US equity markets remains at elevated levels following a strong second-quarter reporting season, according to Citigroup Inc. strategists including Chris Montagu.
“It is always easier when the markets are going up,” said Nicholas Bohnsack at Strategas. “It is difficult to poke holes in the bull case; the path of least resistance is likely higher, but we find ourselves increasingly worried that traditional risk assets (stocks and bonds) appear priced to perfection.”
The technology sector reclaimed its spot as the S&P 500’s top performer last quarter, helping indexes rise to all-time highs, noted Bret Kenwell at eToro. While valuations appear stretched, elevated growth expectations help justify prices, while AI enthusiasm and momentum can help keep tech in the driver seat, he said.
“Whether money continues to flow into the ‘Magnificent Seven’ leaders or rotate within the group, investors will likely look for tech’s continued leadership in the second half of 2025,” he noted.
Traders are gearing up for Powell’s speech on Friday in Jackson Hole, Wyoming, with the Treasury market seeing a quarter-point rate cut next month as virtually a lock and at least one more by year-end.
“As the market readies for Powell’s speech at Jackson Hole, we’ll argue that the biggest risk for Treasuries is if the Fed chief chooses to throw cold water on the widely anticipated September rate cut,” said Ian Lyngen at BMO Capital Markets.
While this is not Lyngen’s base-case scenario, he says the front-end of the curve is vulnerable to a correction if Powell doesn’t deliver on the degree of dovishness currently anticipated.
Investors are waiting to see if Powell affirms the market pricing — or pushes back with a reminder that new data arriving before the next policy gathering could change the picture. They’re also looking for clues about the longer-run trajectory of Fed cuts into next year.
“The market is all but pricing in a certainty for rate cuts in September and we agree with the market’s expectations,” said Stephen Schwartz at Pioneer Financial. “Rate cuts are warranted as financial conditions are too tight right now given the softening of the inflation data and the cracks we are starting to see in the labor market.”
A couple of weeks ago, when the latest jobs report revealed a slump in hiring, the case for lower rates appeared all but closed. Then came the sharpest spike in US wholesale prices in three years – fuel for the concern about tariff-led inflation that’s kept Fed officials on hold so far this year.
While the recent inflation data has been volatile with some conflicting signals, Schwartz says there’s a market perception that the inflation surge from 2022 is behind us.
“While we expect some near-term volatility, we believe markets will continue to move past the inflation situation, and that the economy and the US consumer are strong enough to continue growing,” he said.
At Bank of America Corp., strategists including Mark Cabana and Meghan Swiber say they don’t think Powell will sound as dovish as the market expects.
“Powell’s reaction function to recent stagflationary data will be key,” they noted. “Will he be spooked by jobs revisions or lean into the labor supply slowdown?
In an interview with Bloomberg Television, Fed Governor Michelle Bowman deflected when asked if she would be interested in leading the central bank as chair.
Meantime, S&P Global Ratings said revenues from tariffs will help soften the blow to the US’s fiscal health from the tax cuts, enabling it to maintain its current credit grade. S&P affirmed its AA+ rating for the US — a score it’s given since 2011.
Tariff revenue reached a fresh monthly record in July, with customs duties climbing to $28 billion.
On the geopolitical front, President Donald Trump urged Russia’s Vladimir Putin and Ukraine’s Volodymyr Zelenskiy to show some “flexibility” as the US president accelerates his efforts to end the war in Ukraine and encourages the two leaders to hold a bilateral summit.
“While there’s a sense that the path to peace is at least slightly clearer, traders remain wary,” said Fawad Razaqzada at City Index and Forex.com. “And rightly so – the toughest conversations, namely over territory, still lie ahead.”
Corporate Highlights:
Palo Alto Networks Inc. gave a stronger-than-expected annual forecast, as the company seeks to provide customers with a bundle of AI-enabled cybersecurity products to fend off attacks. Apple Inc. is expanding iPhone production in India at five factories, including a pair of recently opened plants, as it seeks to lessen its reliance on China for US-bound models. Tesla Inc. priced its new six-seat Model Y sport utility vehicle in the same range as local rival Li Auto Inc.’s extended-range L8 model to win over middle-class families in China’s hyper-competitive market. Ford Motor Co. and South Korea’s SK On are seeking buyers for excess battery supply produced at their new joint-venture Kentucky factory, underscoring the waning demand for electric vehicles in the US. Viking Therapeutics Inc.’s experimental obesity pill disappointed in a mid-stage study, marking another weaker-than-expected result for an oral alternative to popular weight-loss injections. Starbucks Corp. will give all salaried employees in North America a 2% raise this year as the coffee chain looks to pull off a high-stakes turnaround and manage expenses. Anglo American Plc suffered a major setback to its restructuring plans after Peabody Energy Corp. decided to walk away from a $3.8 billion deal to buy its steelmaking coal business following a fire at an Australian mine. US power and natural gas utilities Black Hills Corp. and NorthWestern Energy Group agreed to merge in a $3.6 billion deal that underscores the boom for electricity demand that’s being unleashed by data centers. Nexstar Media Group Inc. has agreed to buy TV station operator Tegna Inc. for $3.5 billion in a cash deal that stands to dramatically expand Nexstar’s reach to 80% of US households and test the Trump administration’s appetite for consolidation. Medtronic Plc will expand its board after Elliott Investment Management became one of its biggest investors. The medical devices maker also reported profit that beat estimates and lifted full-year earnings guidance. Air Canada will restart flights Tuesday evening after reaching a deal with flight attendants to end a three-day walkout that led to mass cancellations during the busy summer season and upended the carrier’s financial outlook. BHP Group’s full-year underlying profit fell by more than a quarter to its lowest level since the pandemic, broadly in line with market expectations, as prices of its key earners — iron ore and coking coal — came under pressure from softer Chinese demand. Shein Group Ltd. has considered moving its base back to China in the hopes that it would help sway Beijing authorities to sign off on the fast-fashion retailer’s plans to go public in Hong Kong, according to people familiar with the matter. What Bloomberg Strategists say…
“The Fed’s current stance of remaining open to rate cuts because of benign inflation data is the Goldilocks scenario that’s both keeping the Treasury curve from steepening, and allowing the Magnificent Seven earnings and wider S&P 500 margin story to reign supreme.”
— Edward Harrison, Macro Strategist, Markets Live.
For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.5% as of 12:30 p.m. New York time The Nasdaq 100 fell 1.1% The Dow Jones Industrial Average was little changed The MSCI World Index fell 0.3% Bloomberg Magnificent 7 Total Return Index fell 1.3% The Russell 2000 Index fell 0.6% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1656 The British pound fell 0.1% to $1.3486 The Japanese yen rose 0.2% to 147.63 per dollar Cryptocurrencies
Bitcoin fell 2.4% to $113,674.39 Ether fell 3.5% to $4,181.64 Bonds
The yield on 10-year Treasuries declined two basis points to 4.31% Germany’s 10-year yield declined one basis point to 2.75% Britain’s 10-year yield was little changed at 4.74% The yield on 2-year Treasuries declined one basis point to 3.75% The yield on 30-year Treasuries declined two basis points to 4.91% Commodities
Officials in US President Donald Trump’s administration made comments saying the equity stake was not to run the firm.
United States Commerce Secretary Howard Lutnick has said the US government wants an equity stake in Intel in exchange for cash grants approved during the administration of former President Joe Biden.
Separately, also on Tuesday, Treasury Secretary Scott Bessent said any US investment in Intel would be aimed at helping the troubled chipmaker stabilise.
Asked about reports that the US was considering taking a 10 percent stake in Intel, Bessent told CNBC’s “Squawk Box” programme: “The stake would be a conversion of the grants and maybe increase the investment into Intel to help stabilise the company for chip production here in the US.”
Bessent gave no details about the size or timing of any US stake in Intel, but said any investment would not be aimed at forcing US companies to buy chips from Intel.
Bessent’s comments were the first official response from the Trump administration after Bloomberg News reported on Monday that the US government is in talks to take a 10 percent Intel stake in exchange for $7.9bn in grants that were approved for the US chip company during the Biden administration.
‘Not governance’
“We should get an equity stake for our money,” Lutnick told CNBC. “We’ll get equity in return for that … instead of just giving grants away.”
Lutnick said the US does not want control of the company.
“It’s not governance, we are just converting what was a grant under Biden into equity for the Trump administration for the American people.” He suggested any stake would be “non-voting,” meaning it would not enable the US government to tell the company how to run its business.
He made his comments a day after SoftBank Group agreed to invest $2bn into the chipmaker, which has struggled to compete after years of management blunders.
“The Biden administration literally was giving Intel money for free and giving TSMC money for free, and all these companies just giving the money for free, and Donald Trump turned it into saying, ‘Hey, we want equity for the money. If we’re going to give you the money, we want a piece of the action for the American taxpayer,’” Lutnick said.
Intel and TSMC, a Taiwan-based chipmaker, did not immediately comment.
Intel helped launch Silicon Valley, but has fallen behind rivals like Nvidia Corp and Advanced Micro Devices Inc and is shedding thousands of workers and slashing costs under its new CEO, Lip-Bu Tan. It recorded an annual loss of $18.8bn in 2024, its first such loss since 1986.
Intel plans to end the year with 75,000 “core” workers, excluding subsidiaries, through layoffs and attrition, down from 99,500 core employees at the end of 2024. The company previously announced a 15 percent workforce reduction.
Trump recently said Tan, who was made CEO in March, should resign. But after meeting with him last week, Trump relented, saying Tan had an “amazing story”.
Markets are waiting to see if Trump’s meeting with Zelensky and European leaders will lead to peace talks with Russia (ANDREW CABALLERO-REYNOLDS)
European stock markets rose while Wall Street mostly retreated Tuesday as investors warily eyed signs of progress in talks to end Russia’s war in Ukraine.
Markets were also waiting for a key speech by the US Federal Reserve chief this week for clues on interest rate cuts that could bolster the world’s biggest economy.
Hopes for a Ukraine breakthrough rose after US President Donald Trump said he spoke by phone with Russian counterpart Vladimir Putin, following a meeting with Ukrainian President Volodymyr Zelensky and European leaders at the White House.
Zelensky said he was ready for what would be his first face-to-face talks with Putin since Russia’s invasion nearly three and a half years ago.
Wall Street mostly pulled back, with the Nasdaq tumbling 1.5 percent and S&P 500 losing 0.6 percent. The Dow closed flat.
London, Paris and Frankfurt stocks all closed higher following a lackluster session for Asian stock markets.
Defense stocks fell sharply as chances grew for a breakthrough in Ukraine peace talks, with Germany’s Rheinmetall dropping 4.7 percent and France’s Thales down 4.1 percent.
Investors were also eagerly awaiting a speech on Friday by Fed Chair Jerome Powell at the annual retreat of global central bankers in Jackson Hole, Wyoming.
Traders hope Powell will provide more clues about a widely expected interest rate cut at the Fed’s next policy meeting in September, after data last week provided a mixed picture about inflation.
“Markets seem to be exercising some caution ahead of the Jackson Hole meeting later this week and as talks over a peace agreement between Russia and Ukraine remain inconclusive,” said AJ Bell’s head of financial analysis Danni Hewson.
Oil prices, which have been volatile for several days — Russia is a major crude producer — retreated after gains on Monday.
“Oil prices have dropped a little as a deal edges closer, given that it’s likely to lead to an easing of sanctions on Russia energy imports, increasing supplies on global markets,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Japan’s Nikkei briefly hit a record before retreating to close down 0.4 percent.
Shanghai ended flat while Hong Kong, Sydney and Seoul fell, and Singapore, Bangkok and Mumbai edged up.
Among individual companies, Intel shares advanced around 7.0 percent in New York after Japan-based tech investment giant SoftBank said it would invest $2 billion in the troubled US chip giant.
White House Press Secretary Karoline Leavitt confirmed Tuesday that the US Commerce Department was “ironing out the details” on a deal with the company, as the government seeks a stake in Intel in exchange for grants.
– Key figures at around 2155 GMT –
New York – Dow: FLAT at 44,922.27 points (close)
New York – S&P 500: DOWN 0.6 percent at 6,411.37 (close)
New York – Nasdaq: DOWN 1.5 percent at 21,314.95 (close)
London – FTSE 100: UP 0.3 percent at 9,189.22 (close)
Paris – CAC 40: UP 1.2 percent at 7,979.08 (close)
Frankfurt – DAX: UP 0.5 percent at 24,423.07 (close)
Tokyo – Nikkei 225: DOWN 0.4 percent at 43,546.29 (close)
Hong Kong – Hang Seng Index: DOWN 0.2 percent at 25,122.90 (close)
Shanghai – Composite: FLAT at 3,727.29 (close)
Euro/dollar: DOWN at $1.1646 from $1.1666 on Monday
Pound/dollar: DOWN at $1.3489 from $1.3503
Dollar/yen: DOWN at 147.64 yen from 147.89 yen
Euro/pound: DOWN at 86.33 pence from 86.40 pence
West Texas Intermediate: DOWN 1.7 percent at $62.35 per barrel
Brent North Sea Crude: DOWN 1.2 percent at $65.79 per barrel
