Popular US Treasury Bet Risks Being Next Pain Trade, BNP Warns

Economic

Bond

Summary:

BNP Paribas warns that the popular steepener trade—betting long-term U.S. Treasury yields will rise faster—may backfire, as 30-year bonds already reflect fiscal concerns and could rebound with solid demand.

Investors betting that yields on long-dated US Treasuries will keep rising faster than those on shorter notes risk getting burned, according to BNP Paribas SA.

Guneet Dhingra, the New York-based head of US rates strategy at the French bank, said 30-year Treasuries already price in the worsening fiscal picture and could rebound if there’s strong demand for an auction or deficit fears ease. He sees a case for buying the bonds at current levels.

Dhingra’s view goes against that of big investment firms including DoubleLine Capital and Pacific Investment Management, which have been steering away from the longest-dated US government bonds in favor of shorter maturities — a strategy known as steepener trade.

“Steepeners are big, but not as beautiful,” Dhingra said in an interview. That could be “a pain trade in the current market set up.”

BNP Paribas analysis shows market bias to bet on curve steepeners is the highest in at least a decade, signaling the trade is overly crowded.

US long-dated yields have been marching higher since early April amid concerns about the widening budget deficit and simmering trade tensions. Meanwhile, the prospect of Federal Reserve interest-rate cuts as the economy cools has helped to anchor the short-end.

The 30-year US yield hit a peak of 5.15% on May 22, the highest since 2023. While it’s since retreated to around 4.92% on Tuesday, markets remain on edge ahead of a $22 billion 30-year auction scheduled for Thursday.

“Every auction now feels like a risk event,” Dhingra said. “A good auction is probably par for the course, but a weak auction really sets the cat among the pigeons in terms of how are investors going to rethink the US fiscal situation.”

He noted that contrary to perceptions, demand at 10- and 30-year bond auctions since President Donald Trump’s early-April tariff announcements has actually been decent. Foreign demand has been in line with long-term averages, Dhingra said, a fact that counters fears overseas buyers are shunning US debt.

The French bank is recommending a trade, based on options, that will profit if long-dated interest rates outperform amid a broader decline in rates.

“I’m not saying the theme of fiscal concerns has gone away,” he said. But “a lot of the skepticism and concern is in the price.”

source : Bloomberg

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Devin

Economic

The share of global emissions covered by carbon taxes and emissions trading systems reached 28% in 2024, compared to 24% the previous year, the bank's annual State and Trends of Carbon Pricing report showed.

The increase was driven by the expansion of China's ETS to industrial sectors. Economies representing nearly two-thirds of global economic output, including around half of global emissions from the power and industrial sectors, are now covered by a carbon price. Coverage in other sectors is lower, with agricultural emissions not yet priced.

Government revenues from carbon pricing mechanisms such as carbon taxes and emission trading schemes dropped to $102 billion in 2024, down 1.9% compared to $104 billion the previous year, according to the report.

"Carbon pricing remains a powerful tool for advancing multiple policy goals," said Axel van Trotsenburg, World Bank senior managing director. "It helps countries cut emissions, raise domestic revenues in tight fiscal environments, and stimulate green growth and job creation."

The annual revenue drop was largely due to lower prices in large ETSs such as those of the European Union and the United Kingdom.

Over half of this revenue was used towards environment, infrastructure, and development projects, slightly increasing compared to previous years.

Last year's carbon revenues were derived from 80 carbon pricing schemes worldwide. Total carbon instruments in operation increased by five compared to 2023.

The report showed that all large middle-income economies have now either implemented or are considering direct carbon pricing, with ETSs accounting for most of the new and planned instruments.

"We've seen a number of important developments over the past 12 months, including the establishment of new taxes in Israel and subnational Mexican states, new ETSs in subnational US jurisdictions," said Joesph Pryor, senior climate change specialist at the World Bank, during the launch event of the report at the Innovate4Climate conference in Seville, Spain June 10.

"But we've also seen the removal of carbon taxes in various jurisdictions, most importantly, in Canada, the removal of the Canadian Federal fuel charter. We've also seen a number of developments that won't actually appear on the map. The passage of legislation in Brazil that establishes its ETS will commence in the next five years. We've also seen regulations in India that would make way for a rate-based emissions trading system, and legislation in Tokyo has been proposed establishing an overarching climate framework, which would make way for its emissions trading system," said Pryor.

Platts, part of S&P Global Commodity Insights, assessed EU Allowances for December 2025 at Eur74.07/mtCO2e ($84.61/mtCO2e) June 9.

Compliance demand supports credit retirements

Retirements of carbon credits in 2024 increased three times compared to 2023 levels, largely driven by companies looking to meet their multiyear compliance obligations under the California and Quebec ETSs.

Retirements for compliance purposes represented 24% of total credit retirements in 2024, compared to only 9% in 2023.

Meanwhile, growth from voluntary buyers has been negligible. Credit prices continue to vary across credit types, with nature-based removal credits attracting a premium relative to other types of projects, said the World Bank.

Retirements for voluntary purposes represented 76% of the total share in 2024, down from 91% the year before. Demand shifted towards nature-based removals and clean cooking projects, the report showed.

Global credit supply declined slightly, but the pool of unretired carbon credits from independent crediting mechanisms increased to almost 1 billion mt.

Most of these unretired credits are relatively older vintages, issued before 2022, and are from forestry and land use or renewable energy projects.

"We saw that there was an increase in demand for compliance purposes," said Pryor at the Innovate4Climate launch event. "We see an increasing pool of unretired credit globally and, while unclear, a potential reluctance for market participants to use these legacy credits."

Over 10% of total global credit issuance emanated from governmental crediting mechanisms, such as the Australian Carbon Credit Unit Scheme and the Kazakhstan Crediting Mechanism.

While credit prices dropped in 2024, specific project types, such as nature-based removals, carried premiums and high forward prices over other credits available in the market.

A positive correlation is also emerging between prices and carbon credit ratings from proprietary ratings providers, the report further showed.

Furthermore, credits eligible for use in international compliance markets command a price premium compared to credits eligible for use in voluntary markets.

Platts assesses a wide range of voluntary carbon credits that demonstrate additionality, permanence, exclusive claim, and co-benefits.

The value of these credits can vary from nature-based avoidance credits (Platts Nature-Based Avoidance Southeast Asia at $6.45/mtCO2e; Platts Nature-Based Avoidance South America at $5.80) to natural carbon capture (Platts Natural Carbon Capture at $14.90/mtCO2e) and tech carbon capture credits (Biochar US at $140/mtCO2e, Biochar India at $145), Commodity Insights data showed June 9.

Source: S&P Global Platts

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Adam

Stocks

The surging shares of CoreWeave Inc. and Palantir Technologies Inc. are drawing comparisons to meme stocks — whose rapid gains are fueled by retail trader fervor more than financial performance.

CoreWeave has nearly quadrupled since its heavily downsized initial public offering in March. Palantir is up more than 460% over the past year. Investors may hope that the shares will perform like Nvidia Corp., whose stock soared at the start of the artificial intelligence era. The risk is that they act more like retailer GameStop Corp. — now 66% below a 2021 peak.

“Investors are ignoring fundamentals just to jump on the trend, and if you stretch a rubber band, the snapback can be substantial,” said Steve Sosnick, chief strategist at Interactive Brokers Group. “You need fresh money to reinforce the trend, otherwise the moves aren’t sustainable.”

Shares of CoreWeave fell 5.8% on Tuesday while Palantir slipped 0.4%.

Hints of such risks came last week, when cloud-computing provider CoreWeave tumbled 17% out of the blue, its biggest one-day drop on record. The shares since recovered and neared a fresh high on Monday.

CoreWeave and Palantir are among this year’s best-performing stocks amid a resurgence of the AI trade as tech giants continue to spend heavily on computing infrastructure. CoreWeave rents cloud-computing capacity and counts Microsoft Corp. as one of its biggest customers. Palantir makes data analysis software used by governments and commercial customers.

Representatives for CoreWeave and Palantir did not immediately respond to Bloomberg News requests for comment.

In contrast to GameStop, a video-game retailer that faced real challenges during the pandemic, both are clearly benefiting from strong demand for their services. CoreWeave’s revenue is expected to more than double this year, according to the average of analyst estimates compiled by Bloomberg. Palantir’s is projected to increase by 36%, aided by brisk sales of its AI offerings.

The problem is whether investors are over-paying for that growth. Palantir trades at 71 times estimated sales, making it by far the most expensive stock in the S&P 500. CoreWeave, which had a net loss of $315 million in the first quarter, is priced at 10 times projected sales. The average in the S&P 500 is around 3 times.

However, those high-flying valuations have been little deterrence for retail investors, who are piling into the names.

Data from Interactive Brokers show Palantir and CoreWeave are among the most active stocks by client orders, a sign of heavy retail interest. While that list leads with more familiar favorites like Nvidia and Tesla Inc., it is also heavy with riskier plays like leveraged exchange-traded funds and the quantum computing company D-Wave Quantum Inc., which has jumped 161% from a May low.

Vanda Research, which analyzes trends in both retail trading and sentiment, has also observed rising activity from the retail crowd, especially in more speculative stocks.

“Mom-and-pop traders appear increasingly comfortable venturing into higher-beta plays, from small caps to second-derivative AI themes,” wrote Marco Iachini, senior vice president of research, in a note published last week. “Sentiment appears overwhelmingly positive for those with strong recent momentum or AI exposure.”

Of course, bulls have plenty they can point to for the rallies. Nvidia, one of the world’s most influential companies, revealed it had a bigger-than-expected stake in CoreWeave last month. CoreWeave also expanded a deal with OpenAI and entered into two lease agreements with Applied Digital Corp.

Palantir has delivered strong revenue forecasts in recent quarters and is reportedly winning more US government contracts from the Trump administration.

Still, investors have been burned by these kinds of AI trades before. Super Micro Computer Inc. more than quadrupled last year before a selloff that erased more than 80% of its value amid accounting problems. BigBear.ai Holdings Inc. and SoundHound AI Inc. also experienced sharp rallies in recent months on heavy volume that were followed by reversals.

“Clearly meme investing is back, but you’re playing with fire if you try to trade stocks like these,” said Gene Munster, co-founder and managing partner at Deepwater Asset Management. “That’s why we won’t own something like CoreWeave. It is so way, way overvalued that there’s no way we could be comfortable in it.”

Source: Bloomberg

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Daniel Carter

Economic

Political

Indian and US negotiators have made progress in their latest round of talks in New Delhi on Tuesday on a bilateral trade deal, having focused on market access for industrial and some agricultural goods, tariff cuts and non-tariff barriers, Reuters reported citing Indian government sources.

"The negotiations held with the U.S. side were productive and helped in making progress towards crafting a mutually beneficial and balanced agreement including through achievement of early wins," one of the sources said.

The U.S. delegation, led by senior officials from the Office of the U.S. Trade Representative, held closed-door negotiations with Indian trade ministry officials headed by chief negotiator Rajesh Agrawal.

Among the preliminary agreements reached, both sides discussed increasing bilateral digital trade, by improving customs and trade facilitation measures, the sources said, adding that "negotiations will continue" for early conclusion of the initial tranche of the trade pact.

U.S. President Donald Trump and Indian Prime Minister Narendra Modi had agreed in February to conclude a bilateral trade agreement by fall 2025 and to more than double bilateral trade to $500 billion by 2030.

Here are some of the highlights of the preliminary agreement:

● India and US aim to sign first tranche of trade pact by fall 2025, with both sides agreeing to hold more talks on bilateral pact.

● The two sides are expected to sign an interim agreement by the end of the month, before the expiry of Trump's 90-day pause on reciprocal tariffs on major trading partners, including a 26% tariff on India.

● Both sides discussed increasing bilateral digital trade, by improving customs and trade facilitation measures, the sources said.

● Indian and U.S. negotiators made progress in their latest round of talks in New Delhi on Tuesday on a bilateral trade deal, having focused on market access for industrial and some agricultural goods, tariff cuts and non-tariff barriers, Indian government sources said.

● The next phase of negotiations could tackle more complex matters, with the goal of signing the first tranche of the bilateral trade pact by September or October, the officials added.

● India resisted U.S. demands to open its markets to wheat, dairy and corn imports, while offering lower tariffs on high-value U.S. products such as almonds, pistachios and walnuts, one of the sources said.

● India also asked the U.S to revoke its 10% baseline tariff. However, the U.S. side opposed this, noting that even Britain was subject to this under its recent bilateral trade agreement.

● Additionally, India sought an exemption for its steel exports from a 50% tariff.

According to Reuters, the potential 26% tariff on India would be devastating to Indian goods - including rice, shrimp, textiles and footwear, which together comprise nearly one-fifth of India's merchandise exports - and could severely hit exports and dampen foreign investment inflows.

India has pledged to increase purchases of American goods, including energy products like liquefied natural gas, crude oil, coal and defence equipment.

India's exports to the U.S. rose 28% to $37.7 billion in the first four months of 2025, while imports increased to $14.4 billion, widening India's trade surplus, according to U.S. government data.

Source: Zero Hedge

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Adam

Bond

U.S. Treasury auctions of notes and bonds this week are even more in focus than usual as tests of market sentiment on U.S. assets, and while investors look like keen buyers of short and medium-term debt, appetite at the long end is more dicey.

These once-routine auctions have become a focus for investors as a gauge of demand, both foreign and domestic, with the July 9 deadline for the 90-day pause on reciprocal tariffs fast approaching.

Aside from bills, the U.S. Treasury will sell a total of $119 billion in three- and 10-year notes, as well as 30-year bonds. The latter will be closely watched for signs that bond investors are putting their foot down and rejecting countries with huge fiscal deficits and mountains of debt.

"We are now in an environment where investors are looking at...demand that could be dropping at a time when supply seems to be on the precipice of rising further," said Zachary Griffiths, head of investment grade and macro strategy at CreditSights in Charlotte.

Bond vigilantes, seemingly back with a vengeance, have questioned fiscal profligacy around the world amid concerns U.S. President Donald Trump's trade war and tax cuts will fuel inflation, while the tariffs will additionally curb global growth and force governments to spend more.

At the same time, last month's U.S. credit rating downgrade by Moody's is a stark reminder that the world's largest economy is courting disaster with a $36 trillion debt pile.

On Tuesday, the Treasury will sell $58 billion in three-year notes, followed by $39 billion in 10-year debt on Wednesday, and $22 billion in 30-year bonds on Thursday. Overall, analysts expect these auctions to go smoothly.

"The trend in these auctions has been reassuring so far," said Guneet Dhingra, head of U.S. rates strategy at BNP Paribas, in New York. "Largely the auction numbers suggest that there has been no meaningful dent in both foreign and domestic demand."

Last month's three-year note auction showed solid results. Indirect bids, which include foreign central banks, took in 62% of the total issuance, lower than April's numbers, but roughly in line with the average for the last 12 auctions.

Offshore investors, particularly foreign official buyers, typically gravitate toward shorter-term Treasuries, specifically those with maturities of less than five years, according to the latest U.S. Treasury survey.

Jay Barry, head of global rates strategy at J.P. Morgan, wrote in a research note that foreign official institutions' focus on the front end suggested that any rotation away from Treasuries "could be realized through letting holdings run off and not reinvesting, rather than selling securities outright."

US 10-YEAR SUPPLY VS CPI

In the case of the 10-year note auction on Wednesday, the outcome is a little trickier to forecast, analysts said, given that it comes on the same day as the release of the U.S. consumer price index data. However, based on auction statistics, there will be no shortage of buyers for the 10-year, analysts said.

last month's 10-year auction showed a sturdy outcome. Indirect bids took in about 76% of the total issue, higher than the 12-auction average of 72%.

"The primary driver of a buyer's strike was thought to be the trade war and stepping back from the Treasury market," Ben Jeffery, vice president, interest rates trading, at BMO Capital Markets, said in a podcast on Friday.

"Now...the opposite argument might be true, and that is: why would one preemptively pull back from the Treasury market, rather than demonstrate ongoing sponsorship for Treasuries as a negotiating tool? We have yet to see any clear evidence of foreign sponsorship pulling back from Treasuries."

The U.S. 30-year bond auction, meanwhile, could go either way and some analysts said they would not be surprised if it comes out weaker than expected given the spate of poor long-dated sales globally. That has led to the surge in yields on the back end, particularly U.S. 30-year bonds, which hit 5.16% last month, the highest since October 2023.

"The 30-year is the poster child for all the market's fiscal concerns," said BNP's Dhingra. "But if you look at the statistics available until April, you can see that the 30-year bond auction numbers have seen pretty stable demand from dealers."

But last month's 30-year auction was not well-received, picking up a yield that was higher than the expected rate at the bid deadline, suggesting investors demanded a premium to purchase the bond. Indirect bids were marginally lower than the 12-auction average. The 30-year bond also did not fare well at the April auction.

"Demand from foreign investors for 30-year bonds has probably plateaued," said CreditSights' Griffiths.

Reuters : source

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Thomas

Economic

Commodity

Oil prices edged up 1% to a seven-week high on Tuesday on hopes trade talks between the U.S. and China - the world's two biggest economies - will result in a deal that could support global economic growth and boost oil demand.

Brent crude futures rose 81 cents, or 1.2%, to $67.85 a barrel by 11:22 a.m. EDT (1522 GMT), while U.S. West Texas Intermediate crude rose 83 cents, or 1.3%, to $66.12.

Those gains pushed both crude benchmarks into technically overbought territory for the first time since early April and put Brent on track for its highest close since April 17 and WTI on track for its highest close since April 3.

U.S. Commerce Secretary Howard Lutnick said trade talks with China were going well as the two sides met for a second day in London, seeking a breakthrough on export controls that have threatened a fresh rupture between the superpowers.

"There's a sense of optimism around these trade talks; the market is waiting to see what this will produce, and that is supporting prices," said Harry Tchilinguirian, group head of research at Onyx Capital.

On the supply side, allocations to Chinese refiners showed that Saudi Arabia's state oil company Saudi Aramco will ship about 47 million barrels of oil to China in July, 1 million barrels less than June's allotted volume, Reuters reported.

The Saudi allocations could be an early sign that the unwinding of OPEC+ production cuts might not result in much additional supply, Tchilinguirian said.

OPEC+, which pumps about half of the world's oil and includes the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, put forward plans for an output increase of 411,000 barrels per day (bpd) for July as it looks to unwind production cuts for a fourth straight month.

A Reuters survey found that OPEC's May increase to oil output was limited, with Iraq, the second biggest OPEC producer behind Saudi Arabia, pumping below target to compensate for earlier overproduction, and Saudi Arabia and the United Arab Emirates making smaller increases than agreed.

Elsewhere, Iran said it would soon make a counter-proposal for a nuclear deal in response to a U.S. offer that Tehran deems "unacceptable", while U.S. President Donald Trump made clear that the two sides remained at odds over whether Tehran would be allowed to continue enriching uranium on Iranian soil.

Iran is the third-largest OPEC producer and any easing of U.S. sanctions on Tehran should allow Iran to export more oil, which should reduce crude prices.

In Europe, meanwhile, the European Commission proposed an 18th package of sanctions against Russia for its invasion of Ukraine, aimed at Moscow's energy revenues, banks and military industry.

Russia was the world's second biggest crude producer in 2024 behind the U.S., and any increase in sanctions will likely keep more of that oil out of global markets, which could support oil prices.

U.S. OIL INVENTORIES AND EXPORTS

The American Petroleum Institute (API) trade group and the U.S. Energy Information Administration (EIA) are due to release U.S. oil inventory data on Tuesday and Wednesday, respectively. ,

Analysts forecast energy firms added about 0.1 million barrels of oil to U.S. stockpiles during the week ended June 6.

If correct that would be the first storage increase in three weeks and compares with an increase of 3.7 million barrels during the same week last year and an average increase of 2.8 million barrels over the past five years (2020-2024).

Source: Reuters

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Adam

Commodity

Trading at ~$36.72 per troy ounce, silver currently trades at levels last seen in early 2012. Up by over 9% in last week’s trading, global monetary policy expectations, a strong demand outlook, and continued safe-haven demand continue to benefit bullion pricing.

Silver (XAG/USD): Key Takeaways

Consolidating in today’s session, silver continued to rally in yesterday’s session, achieving 13-year highs of around ~$36.90

While most predict rates will remain unchanged in the Federal Reserve’s upcoming decision, monetary easing outside of the United States in the EU and UK is adding to silver upside

While safe-haven demand remains a significant contributing factor to precious metal performance, a strong outlook on demand and a weaker dollar continue to boost precious metal pricing

Silver (XAG/USD): Silver gains on monetary policy expectations

Despite the best efforts of a hawkish Fed, key interest rates are generally trending downward, with the ECB and BoE cutting in their most recent decisions. As a non-yielding asset, lower rates typically favour precious metals like silver, adding rationale to the recent rally.

Undeniably, the burning question remains when the Federal Reserve will join this trend, with fabled interest rate cuts always coming but never seeming to arrive.

Boasting unexpectedly robust jobs data in May, most predict rates will remain unchanged in their upcoming June 18th meeting, which will likely further sour relations between President Trump and Jerome Powell, with Trump recently renewing demands for lower rates, this time by a whole percentage point.

With current US labor market data somewhat vindicating current Fed policy, eyes now turn to upcoming inflation data later this week:

Wednesday June 11th, US Consumer Price Index (CPI), 08:30 EDT

Thursday June 12th, US Produce Price Index (PPI), 08:30 EDT

Any suggestion that inflation is continuing to cool, especially in light of recent tariffs, will increase rate cut bets, paving the way for further silver upside.

Silver (XAG/USD): Supply and demand dynamics bolster silver pricing

Fundamental to a gradual increase in precious metal pricing, global supply and demand dynamics underpin recent silver price performance.

With record industrial demand in 2024, and projected to reach new highs this year, demand for silver is expected to outweigh supply for the fifth consecutive year in 2025.

This dynamic inherently bolsters pricing, especially when considering silver as a hedge against inflation.

Silver (XAGUSD) Technical analysis:

A chart showing the recent price action of XAGUSD

For the first time since October 2024, the 14-day RSI rates current silver price action as ‘overbought’, suggesting a short-term retracement is likely before further upside can be achieved

All major moving averages, including the 10, 21, and 50-day, currently show a bullish directional bias, suggesting price is trending upwards in both the short and long term

If price can stabilise and stage a move higher, bulls will first look to break $37, with some resistance expected around ~$37.10