U.S. Treasury Sell-Off Still Orderly Despite Soaring Yields and Debt Fears

Economic

Summary:

Despite rising yields and investor anxiety over U.S. fiscal policy, the International Monetary Fund (IMF) affirms that the U.S. Treasury market remains functional and liquid...

Treasury Market Remains Resilient

In response to surging long-term bond yields and recent credit rating downgrades, the IMF clarified on Thursday that it does not currently see signs of financial instability in the U.S. bond market. According to Julie Kozack, Director of Communications at the IMF, “market functioning, including in the U.S. Treasury market, has so far been orderly,” despite recent volatility.

Yields on long-term Treasuries surged this week after Moody’s cut the U.S. credit rating and as lawmakers advanced President Donald Trump’s expansive tax-and-spend legislation. The proposed bill, recently passed by a narrow vote in the House of Representatives, is expected to add $3.8 trillion to the current $36.2 trillion U.S. debt over the next decade, according to estimates from the Congressional Budget Office (CBO).

IMF Urges Caution and Awaits Full Fiscal Picture

While the IMF has not yet assessed the full impact of the legislation, Kozack indicated that the Fund will evaluate its economic consequences once the bill clears the Senate and is enacted. The Fund’s concern reflects growing international scrutiny over the sustainability of U.S. debt, especially as higher borrowing costs increasingly burden federal finances.

On a more positive note, Kozack acknowledged that the recent temporary trade breakthrough between the United States and China—marked by a 90-day tariff pause—offers a potential boost to global economic growth. However, she emphasized that the world economy remains mired in uncertainty.

“The reduction in tariffs and the easing of tensions does provide some upside risk to our global growth forecast,” she said. “All of this said, of course, the global outlook in general does remain one of high uncertainty.”

Markets Caught Between Two Fiscal Signals

The IMF’s remarks reflect a delicate balance: affirming U.S. Treasury liquidity while warning that sustained fiscal expansion—if not paired with structural reforms or revenue offsets—could destabilize long-term investor confidence. While bond markets have not yet shown signs of dislocation, the yield curve’s reaction to ongoing debt accumulation signals investor caution.

Should the proposed U.S. tax legislation pass into law unchanged, markets will likely recalibrate their expectations on inflation, interest rates, and fiscal credibility—key variables the IMF will continue to monitor closely.

Source: Reuters

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Adam

Economic

Bond vigilantes continued to stalk global debt markets on Thursday, also keeping the dollar and stocks subdued, as the U.S. House of Representatives passed President Donald Trump's "big beautiful" tax bill by a single vote.

Wall Street looked set to open fractionally higher having tumbled on Wednesday after the previous day's limp U.S. and Japanese long-term debt sales had highlighted the unease about rising government debt burdens.

This reinforced a "Sell America" narrative at the front of investors minds after Moody's last week became the last of the major credit rating agencies to strip the U.S. of its coveted triple-A status.

Long-term 20- and 30-year U.S. Treasury yields were shuffling higher again as were those in Europe, where benchmark German 20-year yields reached their highest in two months as global yield curves steepened.

Britain's government borrowed more than expected in April, figures showed, while euro zone business activity unexpectedly slipped back into contraction territory.

Stock markets in London, Paris, Milan and Frankfurt were all down between 0.75% and 1% EU.. The dollar was at its weakest against the Japanese yen in two weeks, while bitcoin set an all-time high, partly as investors sought out alternatives to U.S. assets. EU.

The non-partisan Committee for a Responsible Federal Budget estimates that the U.S. bill, which will extend Trump's signature 2017 tax cuts as well as boost military and other spending, will increase the U.S.'s $36 trillion debt pile by $3.8 trillion over the next decade.

"It should be good news that fiscal stimulus is coming given that markets have been worried about recession risk, but there is also the concern about fiscal sustainability," State Street Global Markets' Michael Metcalfe said.

"I think the dollar is the bellwether to watch here. If it isn't reacting to higher yields, it shows that confidence in U.S. policymaking has perhaps been dented."

The yields on 30-year Treasury bonds - a proxy for super long-term U.S. government borrowing costs - reached 5.13%, their highest since October 2023 and the 20-year yield hit 5.14%, its highest since November that year.

The bond market in Japan has also been in focus given that it has the highest debt-to-GDP ratio of any major economy. The 30-year JGB yield hovered at 3.169%, not far from the record high of 3.185% hit in the previous session.

Stocks in Asia also fell after Wall Street's Wednesday tumble. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) , opens new tab ended 0.6% lower, while Japan's Nikkei (.N225) , opens new tab fell 0.8% on the stronger yen.

"The view is that, with this bill, Trump is playing with fire with the deficit," said Francesco Pesole, FX strategist at ING.

"It's causing a coordinated sell-off in equities and Treasuries, and the 'Sell America' theme is obviously quite negative for the dollar," Pesole added.

Bond selloff rolls on as US House passes Trump's 'big beautiful' tax bill_1

Analysts are struggling to explain this week's sudden sell-off in long-dated government debt as tariff uncertainty muddles inflation forecasts.

TRADE DEAL PROGRESS

Oil prices were down more than 1.5% following a report that countries in the OPEC+ group are discussing another sharp production increase for July.

Brent futures fell $1, or 1.5%, to $63.98 a barrel in Europe, while U.S. West Texas Intermediate crude dropped 97 cents, or 1.58%, to $60.60.

Modest progress to date on trade deals has also made investors nervous.

Attention was also on a Group of Seven meeting in Canada, where finance ministers had put a positive spin on discussions to try to reach an agreement on a joint communique largely covering non-tariff issues.

Investors have been looking for any hints that currency markets could be part of trade negotiations. But Thai and Japanese officials said currency markets were not part of their discussions.

Bitcoin had no such worries. It climbed as high as $111,862.98, a new record peak and a 3.3% increase from Wednesday's close.

It comes amid hopes that soon-to-be-finalised U.S. stablecoin regulation will continue to bring cryptoassets into the mainstream.

"My official forecasts for Bitcoin are 120k end Q2, 200k end 2025 and 500k end 2028," Standard Chartered's Geoff Kendrick said.

source : reuters

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Daniel Carter

Political

Economic

Carney released a letter spelling out seven major priorities for his new cabinet, one of which is “spending less on government operations” to free up money for other priorities. The prime minister promised during the recent election campaign to rebuild Canada's military and use the financial backing of the government to accelerate home construction, among other spending ideas.

The government won't release a budget until the autumn months; usually it does so in March or April. That will allow more time to assess the economic effects of the trade war and figure out what new defense spending is needed, Carney told reporters Tuesday evening. The last new federal budget was in April 2024.

The Canadian government's total program expenses are expected to reach C$500 billion ($360 billion) this fiscal year, excluding debt charges, up from about C$260 billion in 2016. Carney has said operating expenses are growing too quickly and must be reined in, but has given few details on how he believes AI can be deployed in government operations.

He did, however, appoint Canada's first minister of artificial intelligence — Evan Solomon, a former television broadcaster — as well as a minister of government transformation, Quebec lawmaker Joel Lightbound.

Economists are forecasting a budget deficit of 1.7% of gross domestic product this year, according to data compiled by Bloomberg. But the number is likely to be higher because of sluggish economic growth and the election pledges that Carney made. The Liberal Party's platform projected a deficit of 2% of GDP for the fiscal year that ends next March.

“The delay of the budget is a bit concerning, as it raises questions about transparency and contributes to greater economic and fiscal uncertainty,” Josh Grundleger, a director at Fitch Ratings, said in an emailed statement.

Parliament will reopen next week, with King Charles III set to deliver what's known as the throne speech on Tuesday, laying out the government's priorities.

“It would be helpful for markets to have a clear sense of which aspects of the party platform will be implemented and what the ultimate impact will be on deficits, debt and the taxpayer,” said Fitch's Grundleger.

Canada's debt is rated AAA by S&P Global Ratings and Aaa by Moody's, the highest ratings available from those agencies. Fitch downgraded the country to AA+ in June 2020.

“We hope to get more clarity on near-term priorities when the speech from the throne is introduced,” Travis Shaw, the lead analyst for Canada at Morningstar DBRS, said in an emailed statement.

Jennifer Love, an associate director at S&P Global Ratings, said Canada's economic growth will remain “constrained” because of the tariff war launched by the US, its largest trading partner. However, “we continue to believe that Canada's credit strength will persist even with lower growth and trade uncertainties,” she said.

Source: Bloomberg Europe

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Adam

Cryptocurrency

All crypto boats rose again on Thursday, with bitcoin notching fresh all-time highs as bullish momentum swept through the broader crypto market.

The world’s largest cryptocurrency climbed more than 4% to $111,889 on trading platforms like Coinbase, before easing slightly to $111,400 by publication time, according to The Block's price page.

Altcoins rallied alongside, with the GMCI 30 Index — which tracks the top 30 cryptocurrencies by market capitalization — posting gains as well.

The price momentum has catapulted demand for global crypto options. Bitcoin BTC +1.85% options open interest (OI) reached a new all-time high above $45.8 billion, accounting for nearly 84% of the total digital asset options market, per CoinGlass data. Meanwhile, open interest in ETH options soared to over $8 billion.

Total options OI for bitcoin and ether grew to over $53.8 billion in notional value, its highest point since December 2024.

All drivers in full gear

Geoffrey Kendrick, Standard Chartered's global head of digital assets research, said that previously reported market stimulants moved in unison to fuel BTC's rally.

"With Bitcoin printing in a predicted all-time high, it is time to take stock and see which of our predicted drivers is working. Short answer – everything is working," Kendrick wrote in a May 22 report shared with The Block.

Earlier this week, Kendrick reaffirmed his $500,000 BTC price target expected during President Donald Trump's current tenure. To back the thesis, Standard Chartered's expert highlighted quarterly 13F data from the U.S. Securities and Exchange Commission (SEC), which showed sovereign nations and institutions increasing exposure to bitcoin via proxy assets like Strategy's MSTR. The analyst said this trend has likely continued into the second quarter of 2025.

In addition, capital has rotated from gold funds to bitcoin products since the former's April 22 peak. Gold exchange-traded products shed over $3.6 billion while BTC ETFs attracted over $7.5 billion in those five weeks, Kendrick noted. Hedge fund shorts rose only by $1 billion in that time, suggesting that net long positions comprised the lion's share of BTC ETF flows.

Kendrick also said bitcoin remains closely correlated with the U.S. Treasury term premium. Mounting risks in the Treasury market, both domestic and international, are adding to bitcoin’s appeal, he argued.

"My official forecasts for Bitcoin are 120k end Q2, 200k end 2025, and 500k end 2028. All are well in hand," he said.

Analysts affirm 'buy in May and go away' theme as bitcoin hits $111,889 amid record options demand_1

Caution amid growing euphoria

Despite the bullish sentiment, some analysts warned of potential volatility.

Dr. Kirill Kretov, senior automation expert at CoinPanel, advised caution amid rising open interest and thin market liquidity.

“Think of it like stretching a rubber band: when OI is high and liquidity is low, the market is tightly wound—small catalysts can cause big moves,” Kretov said via Telegram. “Paired with the liquidity withdrawal trend I’ve tracked since November 2024, this surge in OI suggests that we are entering a highly sensitive phase. The question is: how long can this last? In a market this thin and volatile, it could turn at any moment. All it takes is a macro headline, a regulatory comment, or a liquidity hiccup."

Still, others are optimistic. Paul Howard, senior director at Wincent, said he expects bitcoin to trade higher in the weeks ahead.

“The more regulatory-friendly stance from the US and an increasing number of institutions that are coming into the market from both ETF and spot acquisition means we will see prices continue to move higher in the coming months, especially as the macro picture improves,” Howard told The Block. "The sense is it's more likely a case of buy in May and go away than any significant headwinds or selling pressure."

Source: theblock

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Thomas

Economic

Finance ministers and central bank governors from the Group of Seven nations pledged to address "excessive imbalances" in the global economy, Bloomberg News reported on Thursday, citing a draft communique.

The finance leaders, meeting in the Canadian Rocky Mountains, said there was a need for a common understanding of how "non-market policies and practices" undermine international economic security, Bloomberg News reported. It said the draft statement calls for an analysis of "market concentration and international supply chain resilience."

Reuters could not immediately verify the report.

German Finance Minister Lars Klingbeil told reporters on Thursday that a joint statement from G7 finance ministers and central bank governors meeting in Banff, Alberta, was still under negotiation but that he was optimistic there would be agreement.

The leaders said they agreed "on the importance of a level playing field and taking a broadly coordinated approach to address the harm caused by those who do not abide by the same rules and lack transparency," the report said.

The report said the draft did not name China, but references by the U.S. and other G7 economies to "non-market policies and practices" often are targeted at China's state subsidies and export-driven economic model.

The U.S. Treasury said earlier this week that Treasury Secretary Scott Bessent intended to press G7 allies to focus on rebalancing the global economy to protect workers and companies from China's "unfair practices."

A U.S. Treasury spokesperson did not immediately respond to a request for comment on the Bloomberg report.

The report said the draft also recognized an increase in low-value international "de minimis" package shipments that can overwhelm customs and tax collection systems and be used for smuggling drugs and other illicit goods.

The duty-free de minimis exemption for packages valued below $800 has been exploited by Chinese e-commerce companies including Shein and Temu.

The G7 nations also will consider options to increase sanctions on Russia if a ceasefire with Ukraine is not reached, the report said.

Klingbeil said Russia needs to commit to serious peace talks to end the war in Ukraine, or face stronger international sanctions.

Finance leaders from G7 countries — the U.S., Britain, Canada, France, Germany, Italy and Japan — are meeting through Thursday. The remarks reported may be part of a final communique being prepared to summarize three days of meetings among officials from the G7 countries.

Source: TradingView

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Adam

Economic

EIA Storage Build Pressures U.S. Natural Gas Futures as Traders Eye Technical Support Levels

U.S. natural gas futures slipped Thursday morning, with traders reacting to downside momentum following Wednesday’s rejection at the key $3.438 pivot. Market participants are bracing for another larger-than-normal storage build in the weekly EIA report, reinforcing a bearish near-term bias.

Can the 200-Day Moving Average Hold Under Pressure?

Daily Natural Gas

Futures are edging lower with prices threatening the 200-day moving average at $3.170. A decisive break below this level would signal growing seller conviction. However, stronger support lies below at $3.098 and $3.035, both of which have recently attracted aggressive dip-buying. To push through this zone, bears will likely need a significant volume surge—something that has yet to materialize.

If the downside holds, the rebound path is clearly mapped. A break above $3.438 would put the 50-day moving average at $3.700 in play, with further resistance at $3.733. Breaching that level could open the door for a run toward $4.062, making $3.438 the key battleground for both sides in the coming sessions.

EIA Storage Report Forecasted to Beat Seasonal Norms Again

Thursday’s EIA report is widely expected to show a build of +119 Bcf for the week ending May 16, significantly above the five-year average of +87 Bcf. If confirmed, this would follow last week’s +110 Bcf injection, further weighing on sentiment. Inventory levels now sit 2.6% above their five-year average, despite being 14.6% lower year-on-year. These data continue to suggest ample supply heading into summer.

The bearish tone isn’t limited to U.S. markets. European gas storage was at 45% capacity as of May 18, compared to a five-year seasonal average of 55%, further reinforcing global supply adequacy even as the continent prepares for peak summer demand.

Will Seasonal Weather Trends Help Bulls Recover Control?

Short-term demand remains muted. Forecasts for May 21–27 point to a mild pattern across the Midwest and East, with highs in the 50s to 70s and even 40s in some areas. The West and South remain hotter, but not enough to drive significant national demand. Looking forward, some models suggest a warming trend by early June, but confidence in that outlook remains limited given the timeframe.

Market Forecast: Bearish Near-Term Outlook Until Support Break or Weather Shift

Unless bulls can retake the $3.438 pivot, the path of least resistance remains lower. Elevated storage builds and mild weather imply limited upside for now. A break below $3.035 would further cement short-term bearish momentum. Traders should monitor weather shifts and EIA surprises for potential catalysts, but current conditions favor sellers.

Source: fxempire

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Gerik

Economic

Malaysia and the End of Frictionless Globalization

The collapse of the post-Cold War era's "frictionless globalization" is not an abrupt crash but a prolonged recalibration of global systems—fueled by rising tariffs, slowing trade, financial stress, and renewed geopolitical rivalry. For Malaysia, a country with a trade-to-GDP ratio exceeding 130%, this reconfiguration strikes at its economic core. As major trading partners like China, Japan, and Singapore face domestic and structural challenges, Malaysia finds itself squeezed by weakened exports, reduced services demand, and dwindling investment flows.

More critically, the global shift toward protectionism and “reshoring” of production risks marginalizing Malaysia from the global supply chains that once propelled its growth. In this new paradigm, access to markets, capital, and technology is increasingly dictated by geopolitics—not economic efficiency.

Pivot or Perish: Domestic Economic Strategy Under Pressure

According to economist Samirul Ariff Othman, Malaysia must urgently pivot from an outdated export-led model toward resilient domestic foundations. This means a new fiscal stimulus to boost household consumption, strengthen micro and small businesses, and invest in sectors like digital technology, renewable energy, and advanced manufacturing. Such investments must also be tied to industrial localization strategies, strategic supply chain reconfiguration, and targeted FDI through a “China +1” positioning.

Yet fiscal constraints remain. Malaysia’s Fiscal Responsibility Act caps federal debt at 60% of GDP—a ceiling already tested during the pandemic. Rising subsidies, budget deficits, and the politically sensitive PADU subsidy reform program pose immediate policy dilemmas. Delay in addressing these imbalances may deepen the long-term damage.

Recalibrating Foreign Policy in a Divided World

Beyond economics, Malaysia must reposition its foreign policy to thrive in a fragmented world. It cannot rely too heavily on the U.S.-led Indo-Pacific architecture, nor can it afford dependence on China's gravitational pull. Instead, a smart, flexible, multi-vector diplomacy is needed.

This entails deepening trade integration within ASEAN, securing security and tech partnerships with Japan, South Korea, and India, and engaging Europe on green economic cooperation. Malaysia should also become an active architect of new “minilateral” agreements—practical, fast-moving pacts with like-minded countries on trade, innovation, and technology. ASEAN, meanwhile, must evolve from a symbolic bloc to a strategic buffer with real economic and diplomatic muscle.

No Illusions, Only Hard Choices Ahead

The Cold War-era model of open trade, financial convergence, and shared prosperity is being dismantled and rebuilt. Trade routes will be weaponized, currencies contested, and tech standards divided along geopolitical lines. Middle powers like Malaysia will be forced to choose, hedge, or shape outcomes. But time is short, and old certainties have vanished.

Malaysia’s future hinges not on returning to what was, but on adapting to what is coming. The country must lead its own transformation—or be led by the currents of powers far stronger and less forgiving.

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