ALERT: US regulators seize troubled lender Republic First, sell it to Fulton Bank [Reuters]

ALERT: US passes bill to steal Russian assets

The package of bills passed included the REPO Act, which gives the president the authority to transfer frozen Russian state assets in the United States to Ukraine to compensate for the estimated $500 billion in damage Kremlin aggression has caused there.

Thank Republicans — even Donald Trump — for Putin’s very bad week [NY Post]

Breaking: Switzerland says UBS may need more cash. The bank is fuming[CNN]

North Korea issues nuclear 'warning signal' to US, South Korea [Fox News]

Chad Asks US to Cease Operations at Strategic Army Base [Bloomberg]

CURRENCIES ON THE MOVE

USD / YEN Daily

Yen reaches it's lowest level for 30 years as Bank of Japan leaves interest rates unchanged [Bank of Japan]

It's probably the shortest monetary policy statement ever.

We didn't see the Ministry of Finance intervening in FX.

Despite the Reuters report from last week, the exchange rate seems to have been abandoned for now, but the market will continue to push higher until we see a reaction.

Tokyo CPI on Friday was much weaker than expected

Tokyo CPI April 2024

So why didn't we see even any of the usual "MoF checking rates" kind of story?

The BoJ / MoF is, like the FED, in a super difficult position 

• Debt to GDP is 250 % currently
• Rates are extremely low
• A recent uptick in CPI (desired) seems to have fallen off rapidly
• A rapidly ageing population

Some solutions might be

• Hiking rates might support the currency but would increase national debt payments
• Japan is the biggest owner of US Treasuries but selling them might create a global debt crisis

The problem is that with the problems above, letting the currency slide might get out of control and they might be forced to hike rates aggressively to defend the currency pushing the economy back into the stupor of the last 40 years.
And that might not work. A currency weakening further on hiking rates results in a hyper-inflationary debt spiral.

Elsewhere the Offshore Chinese Yuan continued a slow depreciation following China Loosens Grip on Yuan by Weakening Fix Amid Dollar Strength [Bloomberg]

US Economy in Stagflation

A very surprising 50% cut in US GDP shocked markets used to the economy's resilience for so long

US GDP / PCE Prices Q1 2024

Along with higher initial PCEs prices which were supported by the core PCE numbers on Friday

US Core PCE March 2024

In The Background

CRE

Tax

US

Biden's capital gains tax proposal could crush the economy, experts say [Fox News]

Canada

‘It’s chaos:’ Cottage owners rush to sell ahead of capital gains tax changes, realtors say[Globe & Mail]

Australia

Australia CPI Q1 2024

Like most western countries CPI just won't go lower and tax cuts, yes you heard that right, are just about to hit.

What's Next

The US Treasury Quarterly Refunding Announcement is the market moving event this week. You can see the update on May 1 here [ US Treasury]. 

The mix of bills and coupons is key, and the timing couldn't be more critical. With US 10 year yields at 4.7% and USD / YEN gaining 3% on Friday the pressure is really on. A bad auction could have catastrophic consequences.

Two quarters ago Treasury had to postpone the coupons issuance as 10 year yields hit 5% and the market went illiquid.

Of less consequence is the FED meeting Tuesday and Wednesday. Actually of no consequence as we're in extreme fiscal dominance.

At on Friday Nonfarm Payroll. The market now doesn't believe the BLS data after continuous revisions.

Chinese holidays too.

This Week's Important Economic Indicators [London time]