Trading Archives

Confidence in U.S. Government Bonds Can No Longer be Taken for Granted

Written by IntaCapital Swiss on April 16, 2025. Posted in News & Reports. Leave a Comment

Amongst the financial carnage inflicted on the global markets by the introduction of punitive tariffs by President Donald Trump, global investors have been fleeing to safe haven assets, which for the first time in living memory does not include Treasuries or U.S. Government Bonds. Treasury bonds have had a tradition of being first in line for investors during adverse conditions which was true during the Global Financial Crisis, on 9/11, and even when the United States’ credit rating was cut, where Treasuries were seen to rally.

However, in today’s markets, and as Donald Trump has declared war on global trade, US Treasuries are now being questioned as the world’s best safe haven as can be seen in their surging yields*. Many experts and analysts agree that US Government Bonds and the US Dollar (which has in recent days plunged), rely on the world’s confidence in the financial and political systems of the United States in order to get their strength.

*Treasury Yields – Yields and Treasury prices have an inverse relationship as when Treasury prices rise yields fall and vice versa. Therefore when investors sell treasuries the yield rises and when they buy the yield falls.

The faith in the systems of the United States is now being tested as Thursday saw foreign investors en masse retreating for US assets with equities, treasuries, and the USD Dollar all falling together. The US Dollar fell against the Swiss Franc and the Euro by the most in 10 years, whilst 30-year Treasury yields headed north to 4.87% surging by 13 basis points. The point here is that when investors in the United States and from global markets sell off stocks, they usually find safety in U.S. Government bonds, so following the stock market route yields on treasuries rose, which is totally the opposite of trends in the near and distant past.

Economists have noted that the problems in the U.S. Government Bond market will have deep implications for the global financial system, because as Treasuries are (or were) regarded as “Risk Free Asset” they are utilised as a benchmark determining the price of stocks, mortgage rates, sovereign bonds, nearly everything including collateral for intra-day lending in the amount of trillions of US Dollars. US assets in general now appear to be being repriced as sentiment towards the U.S. as a safe haven diminishes.

There are however some dissenting voices who have concluded not everyone is losing faith in the United States’ political and financial systems. Indeed, some experts expound that long-end Treasury sell-offs are due to technical factors such as hedge funds unwinding leverage trades, with Treasury Secretary Scott Bessent backing these views. There was even an auction of USD 22 Billion 30-year bonds on Thursday with investors, despite tariff driven volatility, showing solid demand as they did for the sale of 10-year bonds on Wednesday.

However, whatever views are held it is generally believed by experts that a message has been delivered to The White House that confidence in U.S. Government bonds can no longer be taken for granted. The lack of clarity in this administration’s policies together with their President antagonising allies and enemies alike, including their largest creditors, through his determination to rewrite the financial and trading global rules, will in the eyes of many see the rest of the world in the long run look elsewhere for safe haven assets.

China Retaliate with the Imposition of 125% Tariffs on all U.S. Imports

Written by IntaCapital Swiss on April 16, 2025. Posted in News & Reports. Leave a Comment

So the all-out trade war escalates between the United States and China as Beijing announces retaliatory tariffs of 125% (up from 84%) as Donald Trump confirmed that tariffs on China are now effectively 145%. Officials in China confirmed that the 125% tariff will remain no matter if the White House decides to increase tariffs as the levies are now so high there is no longer a market for goods in China imported from the United States.

Chinese experts in this arena have advised that there is no sign from officials from either the United States or China that their respective governments would start negotiations which would avoid a negative impact on global supply chains. However, one official from China’s Commerce Ministry was quoted as saying, “Beijing is open to negotiate with the United States on an equal footing”.

Once again Treasury Secretary Scott Bessent was on the offensive saying, “It’s unfortunate that the Chinese actually don’t want to come and negotiate, because they are the worst offenders in the international trading system”. He went on to say, “They have the most imbalanced economy in the history of the modern world, and I can tell you this escalation is a loser for them”.

Analysts suggest that due to the drag from U.S. trade tensions and slower global growth, China’s GDP (Gross Domestic Product) for this year will be 4%. They further advised that exports from China to the United States only accounted for circa 3% of GDP, however there is a possible negative impact on employment with circa 10–20 million Chinese workers involved with exports to America.

Elsewhere the previous U.S. Treasury Secretary under President Biden has unleashed nothing less than a massive broadside against President Trump and his economic policies, saying, “President Trump has taken a wrecking ball to the U.S. economy”. She commented that Trump and his officials have declared that they had inherited an economy in a “state of calamity and catastrophe”. However, Yellen noted the Economist back in October 2024 said the U.S. economy was the envy of the world.

As already advised previously on this website, U.S. tariffs may well drive other countries including those in the western world further into the arms of China. China is already Europe’s largest trading partner and at a meeting today between Chinese President Xi Jinping and Spanish Prime Minister Pedro Sanchez, Xi said that China and the EU (European Union) must join together in defending globalisation and oppose unilateral acts of bullying. Already the Spanish Agricultural Minister has said, “Spain will pursue closer trade ties with China in the interest of its citizens”.

As Democrats and some Republicans, along with leaders and officials of trading partners with the U.S,. a timely reminder is that the U.S. trading deficit with other countries amounted to USD 130.7 Billion in January 2025 and USD 122.7 Billion in February 2025, and many economists have voiced their wonder about how previous administrations and congress were so happy with this situation.

Obviously Donald Trump is not and has the bit between his teeth but perhaps there was a better way of rebalancing the deficit away from using tariffs. Only time will tell, but the U-turn on tariffs (10% across the board apart from China) giving a 90-day pause, is perhaps part of his intended policy (as confirmed by U.S. Commerce Secretary Howard Lutnick) bringing trading counties to the negotiating table.

Trump 90-Day Suspension U-Turn on Tariffs Except China Sees Equities Rebound

Written by IntaCapital Swiss on April 10, 2025. Posted in News & Reports. Leave a Comment

In line with his election promises, President Trump has marched forward imposing global tariffs on all America’s trading partners, with some countries seeing a 10% tariff, others such as the EU (European Union) being hit with 25% tariffs, and Cambodia topping the list with a whopping 49%. Tariffs have now been returned to 10% across the board apart from China, where tariffs have been increased to 125%, as the announcement of the U-turn came 13 hours after the new tariffs came into effect. However, due to the unpredictability of the Trump2 administration, what happens in 90 days is anybody’s guess.

President Trump has suggested that the pause on tariffs is to give America’s trading partners (except China) time to reassess by making trade deals (or other deals) in order to avoid punitive tariffs. The White House has announced that they want their trading partners to reduce their own tariffs and remove barriers to trade* as such barriers have resulted in the U.S. deficit and should be eliminated. Both Canada and Mexico were not subject to these reciprocal tariffs as they were subject to a 25% tariff regarding illegal immigrants and drugs. However, imports covered by NAFTA (North American Free Trade Agreement) are exempt.

*Barriers to Trade – These barriers are non-tariff and include:

Regulation – Any rules which dictate how a product can be manufactured, handled, or advertised.

Rules of origin – Rules which require proof of which country goods were produced in.

Quotas – Rules that limit the amount of a certain product that can be sold in a market.

Equities

Global markets saw an upward swing not seen for many decades thanks to the 90-day tariff pause, with stocks climbing across the globe. From an equities standpoint the market saw its best rally since 2008 with the tech-heavy Nasdaq 100 rebounding 12%, the S&P 500 Index gaining 9.5%, and the Dow Jones jumping nearly 2,500 points. Europe saw Germany’s DAX rise 7%, Spain’s IBEX 35 up 7.2%, France’s CAC 40 up 6.4%, the pan continental STOXX 600 up 5.3% and the UK’s FTSE 100 up by 6.2%.

Elsewhere in the Far East and Asia, and in response to the 90-day moratorium on tariffs, Japan’s benchmark NIKKEY 225 led the way soaring upwards by 8.8% (gaining over 2,000 points), Hong Kong’s was up 2.69%, Thailand’s SET index surged 4.5% and the Shanghai Composite Index gained 1.29% despite the increase in tariffs on China.

Interestingly, on President Trump’s social media, he announced a buy tip BEFORE announcing the pause on tariffs, making money for all those investors who took his advice. This has caused outrage and concern among ethics experts and opposition politicians who feel that such an announcement is tantamount to giving inside information and is a violation of securities laws.

However, a spokesperson from the White House fired back that the President has every right to reassure the markets, no doubt political opponents will not let this one go, especially as U.S. Senator Elizabeth Warren said, “I am calling for an investigation into whether President Trump manipulated the market to benefit his wall street donors – all while working people and businesses paid the price”.

The US Government bond market (treasuries) has recently seen massive sell offs despite the fact that this market has always been seen as a safe haven in times of volatility and globally there have been massive falls in stock exchanges and bourses throughout the world. This suggests that after the announcement of the fresh wave of tariffs, the U.S. usually viewed as a cornerstone of the global economy has lost the confidence of many investors.

As the price of US government bonds fall, the yield or interest rate rises, which also means that the cost of financing the United States’ debt also rises, and on Wednesday, 10th April, the benchmark 10-year treasury moved to 4.516% and at one stage the 30-year bond hit 5%, being the highest since late 2023. The moves in the treasury markets had, apparently according to experts, caught the President’s eye and may have been one of the reasons he chose to pause tariffs.

China

Whilst the rest of the trading world with the United States enjoyed a 90-day pause on tariffs, President Trump hiked tariffs on China by a massive 125%, saying on a social media post, “based on the lack of respect that China has shown to the world’s markets, I am hereby raising the tariff charged to China”. The decision by President Trump to escalate the tariff war on China came after Beijing announced retaliatory tariffs of 84% on imports of all American goods, but Trump expects China to come to the negotiating table despite their hard line approach to tariffs.

Experts suggest that this is just not simple retaliation by President Trump but more like unfinished business from the Trump1 administration and he was quoted as saying with regards to China, “We didn’t have time to do the right thing”. Furthermore, when Trump was campaigning as an outsider for his first successful stint in the White House, one of his oft repeated themes was that China is responsible for hollowing out the American economy, driven rustbelt decline, and cost blue collar workers their livelihood and dignity.

Unless these two economic powerhouses back down, the the whole scenario will devolve into a full scale trade war hurting a bilateral trade worth circa USD 585 Billion, and this is the crux of the matter, of that USD 585 Billion America’s imports from China accounted for USD 440 Billion. Figures released by the IMF (International Monetary Fund) show the U.S.A. and China account for circa 43% of the global economy and if an all-out trade war ensued this would slow down growth in both countries, (experts suggest perhaps recession) and harm growth in other countries and slowing down global investment.

Conclusion

Sadly, there is at this time no real conclusion as there is so much uncertainty surrounding White House decision making, there is only a rolling commentary on on-going proceedings. President Trump announced a reason for the U-turn on tariffs is that people were getting yippy and nervous, but experts suggest it goes a lot deep than that with Scott Bessent (U.S. Treasury Secretary) asserting that the U-turn had been the plan all along to get the countries to the bargaining table. Now that the 90-day moratorium on tariffs has been announced, the world will hold their collective breath and wait to see how the United States v China tariff war plays out.

No one wins from an outright trade war between these two giants of the global economy, but Donald Trump has, according to experts, had it in for China since he first took over the oval office. It has also been reported that the EU and China are working together against Trump’s tariffs with Chinese Premier Quang (2nd in command in China) receiving a call from EU President Ursula von der Leyen. The White House is treading a fine line with tariffs, and they may yet push the EU and China even closer together (China is the EU’s largest trading partner) and this would totally upset the world order.

Tariffs, Tariffs and More Tariffs as Donald Trump Risks Global Trade War

Written by IntaCapital Swiss on April 9, 2025. Posted in News & Reports. Leave a Comment

Wednesday, 2nd April 2025 (or liberation day as per President Trump), is a day that will stand out in history, as Donald Trump announced a sweeping across the board 10% tariff on all imports of goods into the United States. He further announced reciprocal tariffs of 20% and rising on countries he feels has cheated America, by which he means those countries with massive trade surpluses with the U.S. and also those who already add big tariffs to American imports. President Trump had already separately announced a tariff of 25% on all global car, truck and auto accessories starting on 3rd May 2025, and a 25% tariff on all aluminium and steel products. Experts advise that these levies/tariffs/taxes are the biggest increases since 1968.

Global markets from tech to banking have been left reeling as President Trump through his tariffs attempts to rearrange global trading and the current economic order. However, thanks to tariffs, U.S. equities have taken a beating with the three major stock indexes plunging in excess of 5%, the biggest of which was the S&P 500, which crashed by almost 6%. This was the steepest fall since 2020, and elsewhere in the United Kingdom the FTSE 100 fell by just under 5%, marking its steepest fall since 2020, with similar falls being recorded in France and Germany. The global stock market has, since Trump announced an across the board tariff of 10% on every country, lost literally trillions of dollars in value, however China, the EU (European Union) and Vietnam are all facing higher tariffs on their exports to the U.S..

On Friday, 4th April 2025, China announced a 34% tariff on products from the U.S. whilst at the same time lowering exports of essential minerals plus adding a number of American companies to their blacklist and accusing Donald Trump of violating international trade rules. The EU announced through their trade commissioner that they are still looking for meaningful discussions in the hope of reducing their across the board 20% tariff, though he promised if talks failed the EU would defend themselves. The largest EU economy is Germany and with a separate tariff of 25% on the imports of cars into the U.S. and a 20% across the board tariff on all imports into the U.S., the German economy will, according to experts, take a hit in a drop in GDP of 1.5% equivalent to a loss of Euros 200 Billion over the tenure of President Trump.

The President of the EU, Ursula von der Leyen, has vowed to retaliate and condemned President Trump and went on to say that tariffs will have dire consequences for all consumer and businesses on a global basis that have enjoyed trading with the U.S. since World War II and added, “We are already finalising a first package of countermeasures in response to tariffs on steel”. The EU is of course still open to negotiations, but Ursula von der Leyen is in no mood to lie down and be trodden on. She has already announced that the EU has everything it needs to survive and survive it will. Tough talk from a tough President who will meet Donald Trump head on, so unless negotiations are successful, a full-out trade war between the U.S. is certainly on the cards and could go global.

In the United States, many experts and analysts agree that the new tariffs will push the American economy into recession, an economy which is currently losing momentum, with the result of increasing prices due to tariffs being passed on to the consumer. Analysts further advised that the tariffs could well push the American economy into a recession and have a negative effect on inflation, reversing the current downward trend. Indeed, the US Dollar shortly after the tariff announcements fell by 1.7% against a basket of European trading partners’ currencies which according to market experts reflect concern regarding growth in the economy. Some experts have warned that core inflation (excludes food and energy prices) could go as high as 4% (3.1% as of end of February 2025), unemployment to rise (despite current hiring figures showing an increase) and real GDP to decline.

In the long run, experts suggest that Trump may get his financial rewards from tariffs but his “allies” who he has hit with punitive tariffs may well look elsewhere for new trading partners, with China being the ultimate beneficiary which may well benefit BRICS* as well. Indeed, BRICS is now a major political force looking to be a counterweight to western influence with its current members accounting for just over 25% of the global economy and almost half the world’s population. There has been a lot of internal division within the BRICS organisation, with Russia leading the way over their unlawful invasion of Ukraine, however tariffs may bring them together in such a way that the allies who Trump has hit with punitive tariffs may well look to increase trade with these countries. Whilst the America First slogan is banged consistently by the U.S. administration, some of the poorest nations in Africa have been hit with punitive tariffs, with Lesotho being a prime example at a massive 50% tariff. It is no secret that BRICS want what they call the southern nations to come under their umbrella (Africa and South America) and again these tariffs could drive these nations into the arms of BRICS. Geopolitically, tariffs may be the current U.S. administration’s biggest mistake.

*BRICS – is an intergovernmental organisation consisting of ten countries, Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran, and the United Arab Emirates. The founding countries were Brazil, Russia, Indonesia, and China forming BRIC with South Africa joining at a later date to form BRICS. There are a slew of countries waiting approval of membership from BRICS including Saudi Arabia who have been approved but have delayed joining.

In the United Kingdom, experts advise tariffs will hit key manufacturing sectors and will undermine the positive growth, albeit fragile, predictions of the Labour government. Many businesses are already facing rising costs due to the Chancellors’ budget and tariffs will, according to some analysts, place negative pressure on demand and weaken supply chains. The Director of the British Chamber of Commerce was heard to say that “Orders will drop, prices will rise, and global economic demand will be weaker as a result”. Prime Minister, Keir Starmer, advised he is still hopeful that negotiations will reduce the 10% tariff, however he has begun the process of consultation with regard to retaliatory tariffs should negotiations fail. Across the Irish Sea, Northern Ireland ministers announced they feel trapped as despite the 10% tariff on the United Kingdom, if the EU announces retaliatory tariffs N. Ireland could face the higher EU tariff on any U.S. imports entering from Britain under the post-Brexit deal* between the United Kingdom and the EU.

*The Northern Ireland Protocol – is intended to protect the EU single market while avoiding the imposition of a “Harder Border” that might incite the recurrence of conflict and destabilise the relative peace that has held since the end of the troubles.

In Asia, the APAC* region was hit with tariffs between 10% and 49% with the higher rates being targeted at those countries’ lower value-added items such as textiles, garments, furniture, and footwear. Vietnam (apart from China) is currently enjoying the largest trade deficit with the U.S. (USD 123.5 Billion), got hit with 46% tariff, whilst Cambodia got hit with a 49% tariff (trade deficit USD 12.13 Billion) Sri Lanka saw a 44% tariff (trade deficit USD 2.65 Billion), Bangladesh was given a 37% tariff (trade deficit USD 2.6 Billion) with larger economies in the region slightly better off with Singapore being hit with the minimum of 10% tariffs. Experts suggest that Asian currencies may face depreciation pressure as financial markets could turn risk averse affecting FII (Foreign Institutional Investor) inflow.

*APAC – stands for Asia Pacific Region and is a broad geographical region encompassing countries and territories in or near the Western Pacific Ocean. This region typically includes East Asia, South Asia, South East Asia, and Oceania (Australia, New Zealand, and surrounding islands).

In typical Trump fashion, in one fell swoop global trading has been turned on its head, geopolitics may never be the same again and markets will remain volatile for some time to come. Experts suggest it may take weeks or in some cases months to assess the fall-out from President Trump’s tariffs. President Trump may well have destroyed smaller more vulnerable economies, destroying the lives of that country’s population at the same time. However, in breaking news the White House advises that 50 countries have contacted the administration looking to do trade deals and avoid duties. Meanwhile voices in the U.S. from the CEO down to the smallest consumer are already getting louder voicing their antipathy towards tariffs with anti-tariff rallies taking place in a number of cities throughout the world. He may think he is putting “America First” but who’s to say in the long run it may well be “America Second”.

New Lenders in the Crypto World for those Crypto Companies Seeking Debt

Written by IntaCapital Swiss on March 26, 2025. Posted in News & Reports. Leave a Comment

The crypto lending arena was nearly wiped out during the last major bear market, but is staging a huge comeback, and Cantor Fitzgerald (Cantors)* is trying to satisfy the crypto industry’s hunger for debt. Such lenders range from crypto native firms* to traditional banks and have been putting in place, or are putting in place, the means of providing capital to a whole smorgasbord of crypto market activities.

*Cantor Fitzgerald – is an American financial services firm that was founded in 1945. It specialises in institutional equity, fixed-income sales, trading, and serving the middle market with investment banking services, prime brokerage, and commercial real-estate financing. On March 11th 2025, Cantors announced that Anchorage Digital and Copper.co (“Copper”) will serve as collateral managers and custodians for the firm’s Global Bitcoin Financing.

**Crypto Native Firms – founded with the sole purpose of investing in digital assets and providing investment products in a market previously underserved by traditional asset managers. Native crypto managers have, of course, experience with digital assets and operational nuances.

After the debacle of 2002 and 2003, quite a number of crypto lending companies went bankrupt due to some very dodgy loans, and whilst crypto lending had its heyday in 2021, volume today is still well-short of that mark. Through Q1, Q2, and Q3 of 2024 Bitcoin lending went up by circa 300%, and with speculation in Bitcoin that propelled it above USD 100,000, fervour is spilling over and continuing to fortify the crypto lending sector, and leading the way are the decentralised finance applications.

In March 2025, Cantors started its global Bitcoin financing with an initial capital of US Dollars 2 Million. Elsewhere crypto wealth manager Xapo Bank began offering loans of up to USD 1 Million backed by Bitcoin, and securing a multi-billion US Dollar investment in its crypto lending funds is Blockstream Corp. the Bitcoin software firm. Loans against Bitcoin have been increasing by the month, with investors in the coin looking to utilise this asset as collateral for other investments.

The crypto market has always been heavily reliant on lenders who have provided critical liquidity to trading and other areas over the years, especially in times of volatility. However, the more traditional banks have avoided this market and, due to the uncertainties that surround the regulatory arena, have not lent to market participants. This decision led to the explosion of crypto lenders during the bull market in 2021. Analysts and some industry participants say, since the election of Donald Trump, crypto lending is poised to grow exponentially due to support of regulations that are favourable to the sector.

Indeed, the sector is now seeing increased interest from traditional lenders as they are becoming more comfortable with the current Trump administration and their favourable leanings toward crypto regulation and legislation. Experts suggest that this will lead to loans backed by Bitcoin that will be supported by more sophisticated risk-management and larger balance sheets at the more traditional lending institutions. However, analysts suggest that

crypto lending has returned with a more conservative approach with LTV ratios (Loan To Value) being lower, which translates into lenders reducing their risks requesting borrowers to make larger down payments. Experts advise that crypto natives can reinvent a couple of centuries of lending risks, and if crypto lending is to properly take off, the arena will need experts from outside the crypto industry.

Trump Takes Aim at Chinese Ships with Docking Levies at U.S. Ports

Written by IntaCapital Swiss on March 26, 2025. Posted in News & Reports. Leave a Comment

The new U.S. administration has suggested imposing multi-million U.S. Dollar levies on Chinese ships wishing to dock in ports in the United States. Experts in this arena say that this will disrupt global trade and suggest the fall-out could be more disruptive to global trade than tariffs. An immediate example of this fall-out can be located in Germany where port workers should be loading a first round 16,000 MT of steel piping, bound for a huge Louisiana energy project. However due to the proposed levies, the cargo is now sitting gathering dust in a German warehouse.

This is a nightmare scenario for exporters, importers, and ship owners alike – especially as on this particular Atlantic shipping route, 80% of these ships were all built in China. The owners of the ships are not necessarily Chinese, it is just the ships that were built in China, which are being targeted. In this instance, the shipment of 16,000 MT of steel pipes are looking at a potential levy/surcharge of USD 1–3 Million which means the overall transportation cost could increase by 200%–300%.

Current data from the USTR (Office of the US Trade Representative), reveals that China now produces in excess of 50% of the world’s cargo ships by tonnage, (5% in 1999), with Korea and Japan accounting for most of the remaining cargo ship building. In 2024, shipyards in this arena accounted for 0.01% of cargo ships built, thus experts have surmised that this levy madness on Chinese-built ships can only help the long-held aim of the USTR in reviving the US merchant shipbuilding industry, a sleeping giant if there ever was one.

On Monday, 24th March 2025, a hearing begins in Washington D.C. into the ramifications of this trade levy, with representatives from industries from all corners of the world. They will explain to the hearing that these proposals are more damaging than Trump tariffs because of the severe threat to supply chains and, as a result, would severely disrupt global trade, dwarfing the results of any trade tariffs. Furthermore, some carriers have announced that not only will the increase in costs be passed on, but will pull out of docking at smaller ports which, of course, will suffer from the downturn in business.

Analysts suggest that, in theory, these levies could generate between USD 40–52 Billion for the United States. However many U.S. companies are worried as there are escalating tariffs on Chinese goods, aluminium, and steel, plus there are reciprocal tariffs due on 2nd April 2025. However, analysts point to the obvious downside, where U.S. businesses (especially the farming industry) and ultimately the U.S. consumer will come under pressure, raising prices throughout the United States, and threatening jobs across the board.

However, the revival of the U.S. shipping industry is definitely in the sights of President Donald Trump and has now been cast as part of National Security as per the issue of the draft document “Make Shipbuilding Great Again”. Once again, it is felt that President Trump will put pressure on allies to do the same or they will face penalties as well. It is feared the allies are currently not happy being treated like second-rate citizens, so this outcome will be interesting to see. Everyone involved in the United States appears to agree that U.S. shipbuilders cannot compete on an even playing field due to unfair production and market practices by the Chinese.

However some major U.S. carriers have advised if the full implementation of this draft document is achieved, it could put them out of business. There is hope that some of the proposals will be watered down, but if not one veteran in the maritime transportation industry advised that these proposals will be like an “Apocalypse for the trade”. Furthermore, due to lack of domestic production, the “Louisiana Energy Gateway” project (slated to deliver the next generation of LNG – Liquid Natural Gas a Trump favourite), still needs 16,000 MT of steel piping.

Major US Investment Banks are Recalibrating and Pulling Back from China

Written by IntaCapital Swiss on February 27, 2025. Posted in Industry, News & Reports. Leave a Comment

Once upon a time China was regarded as one of the major centres for the expansion of investment banking, with many of these banks viewing China as one of the crown jewels within their portfolios. Today, with the United States applying more tariffs and restrictions on the country, the China economy is reeling from huge losses in the property sector; the economy which conservatively speaking has been sluggish, has put the brakes on deal flows. As a result, many global investment banks are rethinking their “China Strategy” and pulling back from the USD67 Trillion financial services market.

A number of analysts confirm that back in December 2024 a number of US Investment Banks conferred with the US Treasury regarding the rules and regulations as to how their clients may comply with investing in China. It is understood that many of these executives left the meeting with less understanding of the situation and many with more questions than answers. Experts suggest the bankers needed to understand the rules and guidelines concerning investing in those Chinese companies by their clients, which pose potential national security risks. Furthermore, which reporting requirements were needed and which deals would now qualify under the new rules.

So as these institutions pull back from China, the recipients of their largesse seem to be according to experts, Japan and India who are not filling the large investment hole that leaving China has produced. Indeed, many of these international investment houses and banks have reduced staff or as some analysts put it “pared to the bone” to levels that just meet the minimum staffing requirements by the Chinese financial regulators allowing these companies to operate in their jurisdiction. Despite numerous financial stimuli, many bank bosses are sceptical that there will be any decent improvement in China’s economic prospects.

Some experts point to November 2020 as the point where global confidence in China began to decrease. In that month, the Ant Group controlled by Jack Ma were just about to issue their IPO (Initial Public Offering), which at the time would have been the world’s largest, in the amount of USD35 Billion in Shanghai and Hong Kong. However, instead of marking what would have been a high point in China’s booming business sector, the Chinese authorities pulled the IPO at the last minute. Experts confirmed this action by the Chinese authorities marked the start of China’s war on private companies/enterprise, and the beginning of declining global confidence in China which also sabotaged Hong Kong’s standing as a major funding centre for Chinese companies.

Interestingly, analysts advise that some Wall Street banks consider China a long-term bet with one senior banker suggesting that there could be double digit growth in 2025, but experts suggest that his peers disagree, and China may take years to achieve this figure. However, let’s not forget Hong Kong where many US banks have successfully made significant profits from Greater China, which has historically accounted for a significant share of any earnings. Last week February 10^th – 14^th 2025 bankers were encouraged by a rebound in Chinese Stocks in Hong Kong (they hit a three year high), this on the back of China participating and maybe becoming a major player in the AI artificial intelligence sector.

However, all eyes are on the US administration and whether or not they will increase tariffs on imports from China having already levied a 10% charge and what will be China’s reaction and the overspill into their already problematic economy. Elsewhere on the tariff front, the recent bombshell of more tariffs announced on Tuesday 18^th February 2025 by Donald Trump where he intends to impose levies of 25% on the importation of auto parts, semiconductors, and pharmaceuticals as early as 2^nd April 2025. President Trump did not specify what countries he had in mind, but currently Germany seems to be on the cards.

The big question is will the president hold true to his pre-election promises or will he, like Canada and Mexico, use tariffs as a club to beat countries into agreeing to other demands. However, he has promised tariffs to put “America First” so whatever happens, 2025 may see an all-out trade war with the world and especially consumers are in for a fairly bumpy ride.

European Union Looking to Avoid a Trade War with the United States

Written by IntaCapital Swiss on February 5, 2025. Posted in News & Reports. Leave a Comment

Ever since Donald Trump was re-elected to the White House on Monday 20^th January 2025, the European Union has been preparing counter measures to the new president’s tariffs, which would mark the beginning of a trade war with the United States. However, with President Trump pulling his tariffs at the last minute with both Canada and Mexico*, the EU has become emboldened and feel that they can come to a negotiated agreement with the Trump administration regarding tariffs.

*Canada and Mexico – Tariffs of 25% on goods from both counties were due to begin on Tuesday 4^th February 2025, but after conversations between Donald Trump and the President of Mexico Claudia Sheinbaum followed by a conversation with the Prime Minister of Canada Justin Trudeau, President Trump delayed tariffs for one month. Both the leaders of Canada and Mexico agreed to up the ante in fighting migration and the flow of fentanyl into the United States, key demands by the US administration to avoid tariffs.

However, there is, according to person(s) close to the EU’s executive arm in charge of trading, a major stumbling block with the EU’s strategy as they have been unable to establish decent contacts within the new administration, with some key posts still awaiting senate confirmation. Furthermore in March, the exports of steel and aluminium will be discussed, and the EU will look to avoid conflict on this matter which has been brewing for some time. The Eu will also wish to get agreements with the new administration and avoid tariffs, especially as recent increased rhetoric from President Trump aimed directly at the European Union said that due to large trade deficits with the eurozone means that tariffs are definitely on their way.

In view of President Trump’s remarks the President of the European Union Ursula von der Leyen said” When targeted unfairly and arbitrarily, the European Union will respond firmly”. However, what the EU has to take into account is that the angst that President Trump has towards the bloc goes back a long way, so getting agreements on tariffs may prove a lot more difficult.

Furthermore, Germany’s Chancellor Olaf Scholz is currently making a habit of dissing President Trump, plus his pre-election remarks making it quite clear he was voting for Kamala Harris for the White House, will not exactly endear himself to the new president. Germany will also be in President Trump’s crosshairs as they have a massive trade surplus with the USA of in excess of USD 63.3 Billion as of close of business 2023.

Experts are suggesting that if indeed President Trump announces tariffs on the European Union the response may initially be muted along the lines of the Chinese who announced retaliatory tariffs on imports of US oil and Energy among other levies, but which amounted to less than USD 5 Billion. The word on the street is that the EU may feel that President Trump is using tariffs as a diplomatic club or hammer to get his own way on his policies (e.g. Canada and Mexico).

The EU may well have to increase their Defence/NATO spending, an ongoing demand from President Trump, and make concessions regarding the Russia/Ukraine war. No doubt policymakers are well aware of these demands and only time will tell if indeed the USA and the European Union can come to an agreement on tariffs, but with the bloc suffering from a deepening economic and political malaise, President Trump may well hold the winning hand. It must be remembered that at the recent World Economic Forum in Davos the President of the United States was quoted as saying “the EU treats us very very unfairly, very badly”, so Europe has been forewarned.

Trade Tariffs 2025 – Trump Lives up to his Election Promises, However…….

Written by IntaCapital Swiss on February 4, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

On Saturday February 1^st, 2025, President Donald Trump announced sweeping tariffs on imports of goods from China, Mexico, and Canada, with China being hit with 10% above current tariffs and Mexico and Canada being hit with 25% tariffs. Some experts warned that such moves by the US administration could see the start of a trade war that could reignite inflation and negatively impact global growth. The president of the NFTC (National Foreign Trade Council) said that this move “threatened to raise the cost of everything from avocado’s to automobiles” and he hoped a resolution between America, Canada, and Mexico, could be quickly found.

Donald Trump signed three executive orders imposing said tariffs with a starting date of Tuesday 4^th February 2025. The announcement and subsequent executive orders made good on President Trump’s promises during the election campaign despite repeated warnings from renown economists and analysts who advised that a trade war with Mexico and Canada (USA’s top trade partners) would erode growth both globally and in the United States with the result being increased prices for both companies and consumers.

However, before Monday the 3^rdof February ticked round President Trump had already dialled back his plans for tariffs to start on Tuesday 4^th February 2025, having announced a month’s respite for Mexico. President Trump confirmed that during a telephone call with the President of Mexico Claudia Sheinbaum, she confirmed that she would send 10,000 troops to the border to help combat illegal immigration and the flow on fentanyl, which is a key Trump demand to avoid tariffs.

Similarly, on Monday 3^rd February 2025, the Prime Minister of Canada Justin Trudeau announced that President Trump had abandoned the February 4th deadline for tariffs, and like Mexico had agreed to a one month delay providing he took tougher measures to combat drug trafficking and illegal migration across their shared border. The concessions President Trump received from Prime minister Trudeau is the appointment of a new Fentanyl Czar, listing cartels as terrorists and in a joint venture with the United States, create a new strike force that will combat money laundering, organised crime, and drug trafficking.

In the meantime, China’s response to President Trump’s imposition of tariffs, has been to introduce their own tariffs on a number of US goods and targeting a small number of US companies. On Tuesday 4^th February 2025, China announced an imposition of a 15% levy (under USD5 Billion) on imports of US energy and a 10% levy on US oil and agricultural equipment. The Chinese government also targeted PVH Corp (owner of Tommy Hilfiger, Calvin Klein, Olga and True) and Illumina Inc (a gene sequencing company) putting them on a blacklist.

The Chinese government also imposed stricter controls on the exports of critical metals such as tungsten, used in defence, aviation, and electronic industries. Experts suggest that this is a muted response designed to avoid an all out trade war, but enough to show President Trump that China can hit America where it hurts. The American President wishes to speak to President Xi before their tariffs and export controls take effect on 10^th February 2025, perhaps another reason why China held back on an all-out response.

Elsewhere, President Trump suggested that the eurozone (European Union) could be next in line for tariffs and could happen “pretty soon”. He went on to say that “they don’t take our farm products, they don’t take our cars, they take almost nothing, and we take everything from them. Millions of cars, tremendous amounts of food and farm products”. The European Union initially condemned President Trump for initiating tariffs and advised they will respond in kind if they become a target.

Conclusion

Throughout President Trump’s election campaign the slogan has been “America First”, “Tariffs”, he even said tariffs is his favourite word. Before Donald Trump became President and after he became President he trumpeted tariffs, tariffs, tariffs. We shall bring factories back to America, create more jobs, lower taxes for everyone are the words that have been put forth to the American people. However, is President Trump using tariffs as a diplomatic club to get his way in other areas such as with Mexico and Canada. We shall see what will happen with the United Kingdom and the European Union, but for those American voters waiting on tariffs, they could be sorely disappointed.

What is Basis Trading and How Does it Affect the Treasury Bond Market?

Written by IntaCapital Swiss on March 12, 2024. Posted in Blog Article, News & Reports. Leave a Comment

Basis trading is a financial trading strategy regarding the purchase of a particular financial instrument or security (in this case Treasury Bonds) or commodity, and the sale of its related derivative. In this example, it is the purchase of a Treasury Bond and the sale of its related futures contract. In the treasury market, the trade is centred on the price differential between treasury bonds and their associated futures contracts.

From time to time, due to heavy purchasing of Treasury bond futures by insurance companies, institutional investors and pension funds*, the bond futures price rises above the price of the underlying bond. Once this price differential is in place hedge funds take advantage of this price differential and will buy Treasury bonds and at the same time sell corresponding Treasury futures. The upshot of this trade is that by selling the higher priced bonds in one market and buying the cheaper priced bonds in another market, the hedge funds can profit from the price differential.

*Purchasing Treasury Bond Futures – Asset managers instead of buying actual Treasury bonds quite often prefer to buy futures because there is less upfront cash to pay.

However, the profits from these trades are very small, and therefore heavy borrowing is required in order to make them more lucrative. Sometimes when there are unexpected episodes or events, this can quite often lead to market volatility leading to potential tragic consequences for the trade leaving the trader no option but to straight away unload all their holdings. This form of arbitrage*, as mentioned previously, requires heavy borrowing, and hedge funds usually borrow from the Repo Market**. It is normal for hedge funds to offer their Treasury bonds as collateral, as the normal practice is to roll-over these loans on a daily basis. Experts advise that these trades can be quite risky due to the amount of leverage involved (on average USD50 for every USD1 invested so 50 times leverage), plus a big reliance on short-term borrowings.

*Arbitrage – the simultaneous buying and selling of currencies, commodities or securities in different markets or in derivative forms in order to take advantage of the differing prices of the same asset.

**Repo (Repurchase Agreement) Market – In this market money market funds, banks and others lend short-term capital against government securities, in this case US Treasury Bonds. Basically, in this transaction a borrower temporarily lends a security to a lender for cash with an agreement to buy it back in the future at a predetermined price. Ownership of the security does not change hands in a repo transaction.

When the Treasuries market experiences volatility, it can increase the cost of the trade thereby negating profitability, so hedge funds must very quickly unwind their trades in order to repay their loans thereby increasing volatility in an already volatile market. Such fluctuations can see liquidity drying up and a decrease in the availability of buyers. In such instances* the Treasuries market can literally seize up, and with Treasury bonds being so fundamental to the credit market (and they are risk-free), the US Federal Reserve has had to intervene when the normal functioning of the market has become impaired.

*Onset of the CoronaVirus – Back in 2020 when the Covid-19 appeared the huge volatility in the markets prompted margin calls in Treasury bond futures, amplifying funding problems in the repo market. Simultaneously, Treasury bond holdings were being dumped by foreign central banks in order to prop their own currencies with US Dollars. This prompted cash bonds to underperform their futures counterparts which is the opposite of the conditions needed for the basis trade to make a profit. It was never fully understood how much basis trading contributed to the turmoil in the market, but the rapid unwinding of positions by hedge funds certainly increased volatility. The upshot was the Federal Reserve promised to buy trillions of dollars of Treasury Bonds to keep markets running smoothly whilst providing the repo market with emergency funding.

Basis trading subsided after the 2020 debacle but returned in early 2023 due the Federal Reserve monetary tightening policies by raising interest rates a record eleven times in eighteen months, which pushed up yields on 10 year Treasury bonds to circa 5%. On the demand side, this yield (highest since 2007) once again attracted large institutional buyers to buy futures, and on the supply side the Federal Reserve has increased sales of bonds to fund the US Government deficits, which has put downward price pressure on cash bonds. Therefore there is now a sufficient gap between the price of cash bonds and futures to have basis traders up and running again.

Financial watchdogs and authorities are unhappy over these trades, specifically because they are highly leveraged, and the fact that they are direct from one party to another. This means regulation is difficult, plus hedge funds themselves have much less regulation than banks. To this end, the Bank for International Settlements (BIS), the Bank of England and the Federal Reserve have called for closer monitoring of basis trades. Indeed the US Securities and Exchange Commission (SEC) finalised a rule in May of this year (starting June 2024)requiring all private funds to report sudden large losses, margin increases and any other significant changes.

Tag: Trading