The bad news for the Japanese Yen might not be over as the focus turns to the BoJ decision

Long-dated German bond yields climbed for a fourth consecutive session on Wednesday as investors grappled with a turbulent global environment. The market is currently processing the aftershocks of a major selloff in Japanese debt while keeping a close eye on an unpredictable geopolitical landscape.

Germany’s 30-year bond yield rose nearly 3 basis points to 3.51%, marking a 10 basis point increase for the week. If this trend holds, it would represent the largest weekly jump since early December. The benchmark 10-year German yield also edged higher, rising almost 2 basis points to 2.88%.

The JGB Shockwave Hits European Markets

A primary catalyst for the market movement was a sharp selloff in Japanese government bonds (JGBs) on Tuesday, which recorded the largest single-day yield spike since 2003. The turbulence quickly spread to international debt markets, pushing eurozone yields higher.

While Japanese markets stabilized on Wednesday, with bond yields there falling sharply, the initial shock continued to influence European sentiment. "I think the market is digesting a little bit what happened in Japan," said Anne Beaudu, a global fixed income portfolio manager at Amundi. Tim Graf, head of macro strategy for EMEA at State Street Markets, noted that the JGB market is "starting to find some equilibrium."

Rising long-term bond yields often signal increased uncertainty or expectations of future government borrowing, as investors demand a higher risk premium to hold the debt. Following significant selloffs, some investors also see an opportunity to purchase bonds they believe will recover in value.

Geopolitical Tensions Add to Market Pressure

Alongside market-specific events, geopolitics has become a dominant theme for investors. "Since the beginning of the year, it's very much about geopolitics," Beaudu explained, referencing the external policies of U.S. President Donald Trump and their implications for Europe.

Headlines from the World Economic Forum in Davos, Switzerland, have fueled this uncertainty. President Trump's wide-ranging speech, which included remarks ruling out the use of force to control Greenland, largely failed to calm eurozone bond markets.

The standoff over Greenland has had tangible consequences. In response to Trump's demands and tariff threats, the European Parliament decided on Wednesday to suspend its work on the European Union's trade deal with the United States. Graf of State Street Markets identified this standoff as a factor that "added to market pressure" triggered by the JGB moves.

Bond Issuance and Market Stability

Despite the volatility in secondary markets, the primary market for new eurozone government bonds has remained robust. A busy period of issuance from several countries has been met with solid demand.

"There has been a lot of issuance since the beginning of the year. It's continuing. It has been very well absorbed by the market and I don't see any sign of stress on this today," Beaudu commented.

This resilience was evident in Germany's latest auction of 30-year bonds on Wednesday. The sale secured an average yield of 3.49%, slightly higher than the 3.45% from an earlier sale this month. However, demand increased, with the bid-to-cover ratio climbing to 2.4 from a previous 2.1.

In other parts of the eurozone, shorter-dated yields were stable, with Germany's two-year yield holding flat at 2.08%. France's 10-year yield also remained steady at 3.53% after concerns over the country's domestic budget eased earlier in the week.

Speaking in Davos, Switzerland, U.S. President Donald Trump announced on Wednesday that a peace deal to end the war in Ukraine could be imminent. He stated that both Ukrainian President Volodymyr Zelenskiy and Russian President Vladimir Putin are now positioned to reach an agreement.

U.S. President Donald Trump and Ukrainian President Volodymyr Zelenskiy are central to renewed discussions on a peace agreement with Russia.

Trump asserted that he is actively dealing with Putin, who he said is keen to make a deal. He added his belief that Zelenskiy is also prepared to finalize an agreement to conclude the conflict, which is approaching its fourth year.

An Agreement in Sight

During a discussion following his formal remarks to global leaders and business executives, Trump expressed confidence that a deal was now "reasonably close," despite previous setbacks where both leaders had backed away from potential agreements.

"I think I can say that we're reasonably close," Trump said, emphasizing the urgency of ending the conflict. "We have to get it stopped."

Trump's comments come as Ukraine prepares to mark the fourth anniversary of Russia's full-scale invasion on February 24.

Planned Meeting with Zelenskiy

President Trump also stated he would meet with President Zelenskiy in Switzerland. He initially mentioned the meeting was scheduled for Wednesday, a detail that was disputed by a source familiar with Zelenskiy's agenda. Trump later clarified that the meeting was planned for Thursday.

This new optimism follows a period of frustration for the U.S. President, who said he had expected to negotiate an end to the war sooner but cited "abnormal hatred" between the two leaders as a major obstacle. Just last week, Trump had told Reuters that he viewed Zelenskiy as the primary impediment to reaching a peace accord.

On Wednesday, however, Trump’s tone shifted, suggesting Washington was making progress in brokering a ceasefire.

"I believe they're at a point now where they can come together and get a deal done," he concluded. "And if they don't, they're stupid."

DAVOS, Switzerland, Jan 21 (Reuters) - U.S. President Donald Trump said he has interviewed several strong candidates for Federal Reserve chair, but complained that nominees tend to change once they take office.

"Everyone that I interviewed is great. Everyone could do, I think, a fantastic job. Problem is they change once they get the job," Trump said at the World Economic Forum in Davos, Switzerland.

The president also renewed his criticism of current Federal Reserve Chair Jerome Powell for not lowering interest rates fast enough and said an announcement on the next Fed chair is coming soon.

"I'll be announcing a new Fed chairman in the not too distant future. I think he'll do a very good job. See, I gave away some of it," Trump said.

The leading four candidates to succeed Powell are Trump economic adviser Kevin Hassett, Fed Governor Christopher Waller, former Fed Governor Kevin Warsh and BlackRock's chief bond investment manager, Rick Rieder. On Tuesday, Treasury Secretary Scott Bessent said the president has whittled down the field to four candidates.

Trump and Bessent have repeatedly taken aim at Powell over his handling of monetary policy and interest rates, as well as his broader leadership of the Federal Reserve.

More recently, the Justice Department has issued a subpoena to Powell tied to the renovation of the Fed's headquarters.

Trump nominated Powell for the position in 2017, and former President Joe Biden reappointed him.

Source: Investing

US President Donald Trump has fired back at Canadian leader Mark Carney, accusing him of ingratitude for American military defense. The sharp rebuke came after Carney used a speech at the World Economic Forum in Davos to call for mid-sized nations to unite against the aggressive tactics of superpowers.

Speaking at the same forum, Trump highlighted that his proposed "Golden Dome" missile shield would also protect Canadian airspace.

"Canada gets a lot of freebies from us, by the way. They should be grateful also, but they're not," Trump said on Wednesday. "I watched your prime minister yesterday. He wasn't so grateful."

He concluded with a direct warning: "Canada lives because of the United States. Remember that, Mark, the next time you make your statements."

Carney's Call to Resist Superpower Coercion

Carney's speech on Tuesday grabbed the attention of the global political and business elites gathered in Davos. He argued that the international rules-based order is effectively over, replaced by an era "where the most powerful pursue their interests using economic integration as coercion."

While he did not mention Trump by name, Carney cited tactics closely associated with the US president, including:

• Tariffs used as leverage

• Financial infrastructure used for coercion

• Supply chains exploited as vulnerabilities

He urged countries to counter these pressures by forming new alliances. "Middle powers must act together because if you are not at the table, you are on the menu," he declared.

The comments were notable given Canada's deep economic reliance on and long-standing military cooperation with the United States. Carney, a former central banker, won office last year pledging to reduce that dependence. He has since inked a limited trade deal with China and initiated billions in new defense spending.

The High-Stakes Cost of Continental Defense

The dispute brings new focus to the "Golden Dome," a proposed missile defense system that the US president estimates will cost $175 billion. A separate analysis by Bloomberg suggests the price tag could be as high as $1.1 trillion. The system, which includes unproven space-based technology, is designed to protect North America from ballistic missiles, hypersonic weapons, and advanced cruise missiles.

The two nations already jointly manage the North American Aerospace Defense Command (NORAD). In 2022, Canada committed C$38.6 billion ($28 billion) to modernize the system. This funding includes a new Australian-developed radar network, announced by Carney in March, designed to detect incoming missile threats.

U.S. President Donald Trump is inviting world leaders to join a new "Board of Peace," an initiative designed to resolve global conflicts. However, diplomats express concern that the new body could interfere with the work of the United Nations.

The proposal has received mixed reactions globally. While some nations, including those with historically strained relationships with Washington, have accepted the invitation, many traditional U.S. allies are responding with caution or have outright rejected the offer.

What is the Board of Peace Initiative?

First proposed in September as part of a plan to end the Gaza war, the Board of Peace's mission has since expanded to address conflicts worldwide.

According to a draft charter, the U.S. president will serve as the board's inaugural chairman, with the stated goal of promoting global peace and resolving conflicts.

Membership and Funding Structure

The terms of participation are unique and financially demanding for those seeking long-term influence:

• Standard Membership: Nations can join for three-year terms.

• Permanent Membership: A payment of $1 billion is required to secure a permanent seat on the board and help fund its activities.

The initiative's founding Executive Board includes U.S. Secretary of State Marco Rubio, Trump's special envoy Steve Witkoff, former British Prime Minister Tony Blair, and Trump's son-in-law, Jared Kushner.

A Divided Response from the International Community

As of Wednesday, special envoy Steve Witkoff confirmed that up to 25 countries have accepted the invitation to join. The list of participants reveals shifting geopolitical alignments.

Nations That Have Accepted

The group of accepting nations includes a mix of U.S. allies and states seeking closer ties with the Trump administration.

• Middle East Allies: Israel, the United Arab Emirates, Bahrain, and Egypt.

• NATO Members: Turkey and Hungary, whose leaders have cultivated strong personal relationships with Trump.

• Recent Peacemakers: Armenia and Azerbaijan, which reached a U.S.-brokered peace agreement in August after meeting with Trump.

• Controversial Members: Belarusian President Alexander Lukashenko has accepted, marking a potential rapprochement between Minsk and Washington despite Belarus's human rights record and support for Russia's war in Ukraine.

Russia and China, both permanent, veto-wielding members of the U.N. Security Council, have not yet announced their decision. As traditional supporters of the United Nations, they are expected to be cautious about any initiative that might undermine the existing global body.

Cautious Allies and Outright Rejections

Several close U.S. allies have expressed reservations, reflecting a transatlantic rift over Trump's "America First" diplomatic style.

• Declined Invitations: Norway and Sweden have refused to join. Italy's Economy Minister, Giancarlo Giorgetti, stated that joining would be problematic, with reports suggesting it could violate the country's constitution.

• France's Refusal: A source close to President Emmanuel Macron indicated that France also plans to decline. In response, Trump threatened to impose 200% tariffs on French wines and champagnes unless Paris reversed its decision.

• Undecided or Non-Committal: Canada has agreed "in principle" but is still working out the details. Other key allies like Britain, Germany, and Japan have not yet taken a clear public stance. A German government spokesperson did confirm Chancellor Friedrich Merz would not attend the board's signing ceremony in Davos.

• Ukraine's Stance: Ukrainian diplomats are reviewing the invitation, but President Volodymyr Zelenskiy has expressed difficulty in imagining joining any board that includes Russia after four years of war.

U.S. President Donald Trump with French President Emmanuel Macron. France has reportedly declined to join the Board of Peace, prompting threats of new tariffs from Washington.

Unclear Powers and a Potential UN Rivalry

A major question surrounding the Board of Peace is what legal authority or enforcement mechanisms it will possess and how it will coexist with the United Nations. Trump, a frequent critic of the UN, recently downplayed concerns that his board is intended to replace it, stating, "I believe you got to let the U.N. continue because the potential is so great."

The board's charter grants its chairman—Trump—extensive executive power, including the ability to veto decisions and remove members, although some constraints apply. It states the board will carry out "peace-building functions in accordance with international law."

Separately, the White House has announced a Gaza Executive Board to oversee a transitional Palestinian administration. With overlapping members, it remains unclear how this body will function alongside the main Board of Peace's Executive Board.

Source: xtb