L'intérêt à découvert pour iShares U.S. Treasury Bond ETF donne aux investisseurs une idée du degré auquel les investisseurs parient sur la baisse de l'action de iShares U.S. Treasury Bond ETF. Les données sur l'intérêt à découvert sont mises à jour toutes les deux semaines.

iShares U.S. Treasury Bond ETF (BATS:GOVT), Rapport sur les intérêts à découvert

iShares U.S. Treasury Bond ETF

The fund generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index, but which the advisor believes will help the fund track the index. The underlying index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity greater than one year and less than or equal to thirty years.

iShares US Treasury Bond ETF

ISH ICE US TRCRB ETF

BlackRock has submitted filings to introduce two new money market funds in ETF form on Thursday. These new offerings, named iShares Prime Money Market and iShares Government Money Market ETFs, will comply with the Securities and Exchange Commission's Rule 2a-7, ensuring high-quality ratings and minimal credit risk.
The move follows Texas Capital Bancshares Inc&#8216;s (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TCBI#NASDAQ">TCBI</a>) launch of the <a href="https://www.benzinga.com/etfs/new-etfs/24/09/41051634/theres-an-etf-that-pays-you-like-a-money-market-fund-it-just-started-trading">first 2a-7 ETF</a> in September. Financial Times<a href="https://www.ft.com/content/144ea1bc-b7b6-43e1-a8d3-c7f7df674c3e"> reported</a> on Thursday that both BlackRock funds will focus on securities with maturities of 397 days or less, maintaining a dollar-weighted average maturity of 60 days or fewer and a dollar-weighted average life of 120 days or fewer.
Details on the proposed ETFs' fees were not disclosed in the filings. Texas Capital's ETF charges a fee of 0.20%, while BlackRock's similar existing ETFs have lower fees, such as the iShares US Treasury Bond ETF (BATS:<a class="ticker" href="https://www.benzinga.com/stock/GOVT#BATS">GOVT</a>) at 0.05% and the 0-3 Month Treasury Bond ETF at 0.09%.
See Also: <a href="https://www.benzinga.com/markets/cryptocurrency/24/11/41931993/dogecoin-tumbles-despite-elon-musk-vivek-ramaswamys-doge-appointment-this-is-what-indicators-tell-about-its-next-moves?itm_source=parsely-api" target="_blank" rel="noreferrer noopener">Dogecoin Tumbles Despite Elon Musk, Vivek Ramaswamy&#8217;s &#8216;DOGE&#8217; Appointment: This Is What Indicators Tell About Its Next Moves</a>
In September, BlackRock liquidated two open-end money market funds in response to upcoming SEC rule changes requiring liquidity fees for prime institutional funds.
The introduction of these ETFs by BlackRock comes amid a significant shift in the money-market industry. Recently, the $6.3 trillion money-market sector saw the launch of its first ETF, the Texas Capital Government Money Market ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MMKT#NYSE">MMKT</a>), which capitalizes on the surge in money-market funds driven by high short-term yields. This ETF offers investors a safe haven with competitive returns, providing intraday liquidity and the stability of traditional money-market funds.
Here&#8217;s how some of the existing money market fund ETFs have performed in the past year:
<ul>
<li>NEOS Enhanced Income 1-3 Month T-Bill ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CSHI#NYSE">CSHI</a>): The fund is managed by Neos Funds and holds $465 million worth of net assets. Its yearly return has been 5.72% compared to the category average of 6.51%.</li>
<li>Invesco Ultra Short Duration ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GSY#NYSE">GSY</a>): With net assets close to $2.23 billion, the ETF launched by Invesco seeks to provide returns in excess of cash equivalents and provide preservation of capital and daily liquidity. The average duration of maturity is less than a year. The yearly returns of the fund have been 6.76% while the category average is 6.51% and its three-year returns have been 3.62% against the category average of 3.49%. </li>
<li>PGIM Ultra Short Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PULS#NYSE">PULS</a>): This ETF is issued by PGIM Investments and has net assets close to $8.56 billion. It normally maintains a weighted average portfolio duration of one year or less and a weighted average maturity of three years or less. The fund&#8217;s returns in the past year have been 6.53% against the category average of 6.51% while its three-year return has been 4.33% against the category average of 3.49%.</li>
</ul>
Read Next: 
<ul>
<li><a href="https://www.benzinga.com/markets/cryptocurrency/24/11/41891221/peter-schiff-says-he-would-have-loaded-up-on-bitcoin-had-he-known-that-the-btc-bubble-would-get-this-big?itm_source=parsely-api" target="_blank" rel="noreferrer noopener">Peter Schiff Says He Would Have &#8216;Loaded Up&#8217; On Bitcoin Had He Known That The BTC Bubble Would &#8216;Get This Big&#8217;</a></li>
</ul>
Disclaimer: This content was partially produced with the help of&nbsp;<a href="https://www.benzinga.com/author/benzinga-neuro" target="_blank" rel="noreferrer noopener">Benzinga Neuro</a>&nbsp;and was reviewed and published by Benzinga editors.
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After Texas Capital, BlackRock Files For Two New ETFs With Low Risk. Here's How Their Peers Fared In The Past Year

Investors looking to bonds and bond ETFs for stability may face heightened volatility due to President-elect Donald Trump's approach to tariffs could put <a href="https://www.benzinga.com/topic/treasury-yields">upward pressure on yields</a>.
What Happened: Bond yields continue to climb after the Fed's 25-basis-point rate cut on Thursday. With the 10-year Treasury yield reached 4.34% in response to market speculation around Trump's fiscal agenda.
This shift complicates the Federal Reserve's efforts to ease borrowing costs, a concern for individual bondholders and bond ETFs investors. The backdrop of tax cuts and anticipated tariffs could limit the Fed's <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/11/41814589/why-trumps-boost-to-treasury-yields-inflation-expectations-may-weaken-feds-efforts-">ability to cut rates deeply</a>.
Also Read: <a href="https://www.benzinga.com/24/11/41886697/two-ideas-famed-stock-market-forecasters-agree-on-for-2025">Why Trump&#8217;s Win Has 2 Market Experts Betting On Small Caps, Financials</a>
Since mid-September, Treasury yields have surged by over 70 basis points, putting additional pressure on bond prices and impacting major bond ETFs. BofA Global Research has adjusted its outlook, with Treasury yields now projected in the 4.25%-4.75% range, Reuters reports. This rising yield environment creates challenges for bonds, as higher yields correspond to declining bond prices, which could erode returns for investors in bond ETFs.
Why It Matters: According to Reuters, the Committee for a Responsible Federal Budget estimates that Trump's proposed fiscal policies will add approximately $7.75 trillion to the national debt in a decade. Economists, banks and analysts have all warned that the <a href="https://www.benzinga.com/personal-finance/24/09/40961812/economists-warn-trumps-plans-for-tax-cuts-tariffs-and-deportation-could-trigger-skyrocketing-inf">plans will worsen inflation</a> and make debt unsustainable.
Bond ETFs, which offer exposure across various segments of the bond market, are likely to feel the impact of these fiscal pressures as bond yields trend higher.
Increased yields may lead to more appealing income for bond ETF investors but could also heighten risks related to price declines as yields continue to rise.
On Monday, 10 prominent bond ETFs were mainly trading lower:
<ul>
<li>Vanguard Total Bond Market ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BND#NASDAQ">BND</a>): $72.93, down 0.22%.</li>
<li>iShares Core U.S. Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>): $98.26, 0.25% lower.</li>
<li>SPDR Portfolio Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPAB#NYSE">SPAB</a>): $25.34, down 0.3%.</li>
<li>iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/LQD#NYSE">LQD</a>): $109.60, 0.23% lower.</li>
<li>Vanguard Short-Term Corporate Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VCSH#NASDAQ">VCSH</a>): $78.30, down 0.09%.</li>
<li>iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>): $91.93, down 0.6%.</li>
<li>Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VCIT#NASDAQ">VCIT</a>): $81.47, 0.22% lower.</li>
<li>iShares U.S. Treasury Bond ETF (BATS:<a class="ticker" href="https://www.benzinga.com/stock/GOVT#BATS">GOVT</a>): $22.72, down 0.24%.</li>
<li>SPDR Bloomberg High Yield Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/JNK#NYSE">JNK</a>): $97.02, down 0.05%.</li>
<li>Vanguard Total International Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BNDX#NASDAQ">BNDX</a>): $49.94, up 0.09%</li>
</ul>
With rising bond yields and fiscal expansion under Trump, bond ETFs could continue to see volatility. 
Bond investors may need to weigh the attraction of higher yields against potential declines in bond prices, particularly in high-yield and long-term Treasury segments, where market shifts are expected to be most pronounced.
Read Next:
<ul>
<li><a href="https://www.benzinga.com/government/regulations/24/11/41885777/how-trumps-tax-cuts-tariffs-animal-spirits-could-shape-sp-500-earnings">How Trump&#8217;s Tax Cuts, Tariffs, &#8216;Animal Spirits&#8217; Could Shape S&amp;P 500 Earnings</a></li>
</ul>
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Bond ETFs Slide As Fed Cuts Clash With Trump's Fiscal Agenda

The U.S. debt reached a new record high and breached the $35 trillion mark, and economist Peter Schiff on Monday rued the political apathy <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/02/37324835/ticking-time-bomb-over-85-of-americans-fear-national-debt-crisis-impact-on-their-fu">toward this ticking timebomb.</a>
What Happened: The U.S. national debt now stood at $35.01 trillion and has ballooned by over $7.2 trillion since President Joe Biden took office, said Schiff in a post on X, formerly Twitter. To put things in perspective and to emphasize the recent surge, the gold bull noted that it took 43 presidents, 215 years, to add the $7.2 trillion debt. Biden did it in just 3.5 years, he said.
The previous administration headed by former President Donald Trump did not do any worse, statistics shared by the economist showed. He noted that Trump added $7.8 trillion in debt during his term, a record debt pile for a single term. 
&#8220;Biden is on track to break the record,&#8221; Schiff said. 
<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"> 
<div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">The U.S. <a href="https://twitter.com/hashtag/NationalDebt?src=hash&amp;ref_src=twsrc%5Etfw">#NationalDebt</a> just broke $35 trillion, up over $7.2 trillion since <a href="https://twitter.com/hashtag/Biden?src=hash&amp;ref_src=twsrc%5Etfw">#Biden</a> took office. It took 43 presidents 215 years to add the first $7.2 trillion. Biden did it in just 3.5 years. <a href="https://twitter.com/hashtag/Trump?src=hash&amp;ref_src=twsrc%5Etfw">#Trump</a> added a single-term record $7.8 trilion. Biden is on track to break that record.
&mdash; Peter Schiff (@PeterSchiff) <a href="https://twitter.com/PeterSchiff/status/1817871910862008388?ref_src=twsrc%5Etfw">July 29, 2024</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></div>
<figcaption class="wp-element-caption"> See Also: <a href="https://www.benzinga.com/money/best-inflation-stocks">Best Inflation Stocks</a> Why It&#8217;s Important: Commenting on the debt breaching the $35 trillion mark for the first time ever, House Budget Committee Chairman Jodey Arrington (R-Texas) said this equates to $104,497 per person, $266,275 per household and $483,889 per child. He quoted former President Ronald Reagan&#8217;s statement which said, &#8220;We don&#8217;t have a trillion-dollar debt because we haven&#8217;t taxed enough; we have a trillion-dollar debt because we spend too much.&#8221; The Republicans and the Democrats are at loggerheads over the means to steer the economy out of the fiscal mess, with the former clamoring for spending cuts, while the latter bet more on raising additional revenue sources through taxation of the rich, among other things. Another undesirable offshoot of the higher debt is the interest-rate burden the country is left to shoulder. Every day, the U.S. spends $2.4 billion on interest, <a href="https://www.pgpf.org/national-debt-clock">according</a> to the policy think tank Peter G. Peterson Foundation. &#8220;Rapidly growing interest payments are a burden that hinders our future economy,&#8221; it said.</figcaption></figure>
In an update to the budget and economic outlook in mid-June, the Congressional Budget Office said the federal <a href="https://www.benzinga.com/government/24/06/39400726/us-budget-crunch-cbo-warns-federal-interest-costs-now-higher-than-defense-spending-deficits-to-remai">budget deficit in fiscal year 2024</a> is estimated to be $1.9 trillion, equating to 7% of the GDP. The agency expects the larger deficits to push federal debt held by the public to 122% of GDP in 2034.
The iShares U.S. Treasury Bond ETF (CBOE: GOVT) ended Monday&#8217;s session up 0.13% at $22.84, according to Benzinga Pro data.
Read Next: 
<ul>
<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/01/36464390/us-national-debt-soars-past-34-trillion-gold-bull-peter-schiff-has-just-one-questio">US National Debt Soars Past $34 Trillion: Gold Bull Peter Schiff Warns Of Crisis Before Year End, Analyst Raises Alarm Over Social Programs</a></li>
</ul>
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Analyst Color

Biden On Track To Break Trump's Record, Says Peter Schiff, As US Debt Tops $35 Trillion And Counting

The opening quarter of the year ended with U.S. equity indices marking the fifth consecutive month of gains, gold prices soaring to all-time highs and Bitcoin&#8216;s (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>) market cap surging by over $500 billion in <a href="https://www.benzinga.com/topic/bitcoin">the past three months.</a>
The exchange-traded fund (ETF) market witnessed significant activity, with certain funds capturing substantial inflows, reflecting shifting investor sentiment.
A review of March&#8217;s ETF inflows uncovers a notable trend: two Bitcoin-related ETFs, launched just at the start of the year, have swiftly made their way into the top 10 for inflows. This rapid ascent highlighted a significant shift toward embracing cryptocurrency within mainstream investment strategies.
According to Canaccord Genuity, this &#8220;tailwind should persist&#8221; in the quarters to come as retail investors increasingly seek to incorporate Bitcoin ETFs into IRAs and other tax-favored accounts. 
&#8220;The anticipation is that spot ETFs will play a more pivotal role in influencing Bitcoin&#8217;s price dynamics in the future,&#8221; analysts said in a note. 
A Bank of America&#8217;s recent analysis revealed a shift in investor behavior, with ETF inflows surpassing single stock inflows for the first time in five weeks.
Here&#8217;s an in-depth look at the top 10 ETFs by inflows for March, providing a clear view of where investors are placing their bets.
<h1 class="wp-block-heading">March&#8217;s Top 10 ETF By Inflows: A Surprising Entry of Two Bitcoin Funds</h1>
<figure class="wp-block-table is-style-stripes"> 
<table>
<thead>
<tr>
<th>Rank</th>
<th>ETF Name</th>
<th>Inflows (USD)</th>
</tr>
</thead>
<tbody>
<tr>
<td>1</td>
<td>SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>)</td>
<td>21.288 B</td>
</tr>
<tr>
<td>2</td>
<td>Vanguard S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VOO#NYSE">VOO</a>)</td>
<td>8.294 B</td>
</tr>
<tr>
<td>3</td>
<td>iShares Bitcoin Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IBIT#NASDAQ">IBIT</a>)</td>
<td>7.322 B</td>
</tr>
<tr>
<td>4</td>
<td>iShares S&amp;P 500 Growth ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IVW#NYSE">IVW</a>) </td>
<td>4.808 B</td>
</tr>
<tr>
<td>5</td>
<td>iShares MSCI USA Quality Factor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/QUAL#NYSE">QUAL</a>)</td>
<td>3.931 B</td>
</tr>
<tr>
<td>6</td>
<td>BlackRock U.S. Equity Factor Rotation (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DYNF#NYSE">DYNF</a>)</td>
<td>3.597 B</td>
</tr>
<tr>
<td>7</td>
<td>Fidelity Wise Origin Bitcoin Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FBTC#NYSE">FBTC</a>)</td>
<td>3.018 B</td>
</tr>
<tr>
<td>8</td>
<td>iShares U.S. Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GOVT#NYSE">GOVT</a>)</td>
<td>2.783 B</td>
</tr>
<tr>
<td>9</td>
<td>Vanguard Total Stock Market ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VTI#NYSE">VTI</a>) </td>
<td>2.693 B</td>
</tr>
<tr>
<td>10</td>
<td>Invesco QQQ Trust, Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>)</td>
<td>2.682 B</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Data: Tradingview</figcaption></figure>
Read Now: <a href="https://www.benzinga.com/markets/equities/24/04/38026629/alarming-rise-in-home-insurance-costs-expected-to-continue-into-2024-insurance-stock-etf-soars-t">Alarming Rise In Home Insurance Costs Expected To Continue Into 2024: Insurance Stock ETF Soars To All-Time Highs</a>
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Two Bitcoin-Related ETFs Shine In March's Top 10 Inflow Rankings: 'This Tailwind Should Persist,' Analysts Say

Cash purchases of residential real estate in the U.S. are on the rise and the Treasury Department on Wednesday proposed new measures aimed at detecting illicit funds flowing through <a href="https://www.benzinga.com/news/earnings/24/01/36853591/mortgage-rates-soar-cash-buyers-score-the-new-homebuying-playbook">non-financed purchases in the property sector</a>.
In a far-reaching <a href="https://home.treasury.gov/system/files/136/2024-National-Money-Laundering-Risk-Assessment.pdf">paper</a> on money laundering, terrorist financing and other illegal financial activities, the Treasury Department said that the relative stability of the U.S. real estate market and its historic reputation as a reliable store of long-term value has traditionally attracted both legitimate interest and those looking to find a reliable mechanism to launder money.
It added: &#8220;Money laundering through real estate can negatively affect home prices, particularly since illicit actors seeking to integrate illicit funds may be willing to over or under pay for a property.&#8221;
Proposals to curb such activity would require real estate professionals to alert authorities to any suspicious activity in cash purchases of residential property — especially when the buyer anonymizes their identity or the source of funds through a legal entity or trust.
The Treasury Department&#8217;s Financial Crimes Enforcement Network (FinCEN) would require parties involved in non-financed deals — including lawyers, insurance companies and realtors — to file reports on the entity&#8217;s ownership.
Also Read: <a href="https://www.benzinga.com/news/earnings/24/01/36853591/mortgage-rates-soar-cash-buyers-score-the-new-homebuying-playbook">Mortgage Rates Soar, Cash Buyers Score: The New Homebuying Playbook</a>
<h2 class="wp-block-heading">Cash Sales Growth</h2>
Benzinga <a href="https://www.benzinga.com/news/earnings/24/01/36853591/mortgage-rates-soar-cash-buyers-score-the-new-homebuying-playbook">recently reported</a> that cash sales of residential property were on the increase. Property data provider ATTOM said that the national average share for cash sales rose to 38% in 2023, up from 36.1% in 2022 and 33.5% in 2021.
The Treasury Department report mentioned several examples, including the case in April 2023 when a New York-based attorney helped a sanctioned Russian oligarch maintain his ownership of six U.S. properties through a series of shell companies and 90 wire payments totaling $18.5 million.
And, in November 2022 a Delaware man was sentenced to 45 years in prison after he and his wife laundered more than $1 million in drug trafficking proceeds through the purchase of real estate using their company as a front.
&#8220;Illicit actors often make non-financed purchases using legal vehicles or arrangements designed to obfuscate the purchaser's identity and source of funds to integrate ill-gotten proceeds into the formal economy,&#8221; the report said.
The Department has estimated that around $2.3 billion was laundered through non-financed real estate sales between 2015 and 2020.
If legitimate investors want to invest in real estate, but don&#8217;t want to buy a home, there are plenty of ways to go about it. The iShares U.S. Home Construction ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ITB#NYSE">ITB</a>) is an exchange trade fund whose assets include the main U.S. home builders such as D.R. Horton (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DHI#NYSE">DHI</a>) and Lennar (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/LEN#NYSE">LEN</a>). 
Or, there&#8217;s the iShares U.S. Real Estate ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IYR#NYSE">IYR</a>) which holds real estate investment trusts such as Prologis Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PLD#NYSE">PLD</a>).
Now Read: <a href="https://www.benzinga.com/markets/equities/24/02/36981523/hedge-fund-investors-pull-100b-from-market-as-stock-pickers-underperform">Hedge Fund Investors Pull $100B From Market As Stock Pickers Underperform</a>
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Cash Homebuyers Beware: The Anti-Money Laundering Feds Are Watching You

More than $100 billion was withdrawn from hedge funds in 2023, following similar outflows in 2022 as investors tired of strategies that have been <a href="https://www.benzinga.com/general/hedge-funds">underperforming the market for several years</a>.
What Happened: Data, provided by Nasdaq eVestment showed that among the worst-performing strategies was the equity long-short fund — where hedge fund managers buy stocks they think will perform well and bet against stocks they believe are likely to fall.
Indeed, investors have pulled more than $150 billion from this type of fund over the past five years as they have underperformed the market in nine of the past 10 years.
The equity long-short fund has been around for decades and was generally successful during periods of broadly calm market conditions as so-called &#8220;star stock pickers&#8221; were able to capitalize strongly on market fluctuations by buying long and selling short.
When more turbulent conditions persist, it becomes much more difficult for stock pickers to predict. One of the chief problems for pickers last year, however, was the expectation that several mega-cap stocks had become so overvalued that they had become ripe for shorting.
Why It Matters: <a href="https://www.benzinga.com/markets/equities/24/01/36510120/short-sellers-nightmare-195b-evaporates-in-2023s-market-surge">Short selling is tougher to do</a> nowadays. Market gains gathered pace and data from S3 Partners, published last month, showed that short sellers in the U.S. and Canada lost a total of $194.4 billion over the year.
According to S3 Partners, the three most shorted stocks during the last couple of months of 2023 were Apple Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AAPL#NASDAQ">AAPL</a>) Microsoft Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MSFT#NASDAQ">MSFT</a>) and Tesla Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TSLA#NASDAQ">TSLA</a>), whose shares had reached record levels during the fourth-quarter rally.
The most unprofitable shorts in 2023 were Tesla, with mark-to-market losses of $12.2 billion; Nvidia Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>) with losses of $11.2 billion; and Apple, with $7.3 billion of losses.
<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="750" height="650" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/07091045/newplot-70.png" alt="" class="wp-image-207652" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/07091045/newplot-70.png 750w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/07091045/newplot-70-300x260.png 300w" sizes="(max-width: 750px) 100vw, 750px" /></figure>
Also Read: <a href="https://www.benzinga.com/markets/equities/24/01/36510120/short-sellers-nightmare-195b-evaporates-in-2023s-market-surge">Short Sellers&#8217; Nightmare: $195B Evaporates In 2023&#8217;s Market Surge</a>
Morningstar data <a href="https://www.morningstar.co.uk/uk/tools/categoryoverview.aspx">shows</a> that global long-short equity funds made an average annual return of 1.98% in 2023, and only 4.18% over a three-year timescale. Investing during 2023 in a fund backing the S&amp;P 500 index, such as the exchange-traded fund SPDR S&amp;P 500 (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), would have netted investors a tidy 24.3%.
Among the star stock pickers, Terry Smith — who is not a long-short fund manager, but an equity value investor — performed shy of the market. His Fundsmith equity fund rose by 12.4% in 2023 after losing 13.8% in 2022.
Smith has also seen investors withdraw funds and has urged them to take a longer-term view of the market.
<h3 class="wp-block-heading">U.S. Treasury Funds</h3>
Among the poorest-performing strategies were funds linked to U.S. government bonds, whose yields saw some turbulence during the second half of 2023. USD Government Bond funds fell by an average 4% over the year.
By comparison, the iShares US Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GOVT#NYSE">GOVT</a>), an ETF that holds Treasuries over a spread of maturities, climbed 1.5% over 2023.
What&#8217;s Next: U.S. government bond fund strategies could be coming under threat from <a href="https://www.sec.gov/news/press-release/2024-14">new rules</a> introduced by the Securities and Exchange Commission (SEC) this week. The rule will require hedge funds and other traders that manage more than $50 million in assets to register as dealers with the SEC.
Managers say the new rules bring greater compliance risk and costs, as well as closer scrutiny of their activities. Many firms have lobbied against the ruling since it was first proposed last year.
Now Read: <a href="https://www.benzinga.com/government/24/02/36914512/biden-the-master-oil-trader-part-iii-president-refills-emergency-stash-as-crude-price-slides">Biden The Master Oil Trader Part III? President Refills Emergency Stash As Crude Price Slides</a>
Image: Shutterstock

Short Sellers

Hedge Funds

MSFT

NVDA

TSLA

Hedge Fund Investors Pull $100B From Market As Stock Pickers Underperform

The U.S. Treasury is expected to confirm next Wednesday, Jan. 31, further increases in government bond supply in its first quarterly refunding announcement of 2024. But is demand sufficient for the government to auction the debt at top prices and comfortable yields?
Treasury <a href="https://www.benzinga.com/government/23/12/36206812/treasury-market-stress-primary-dealers-taking-up-slack-as-foreign-demand-fades">demand dropped off sharply</a> at the beginning of the final quarter in 2023 as top foreign buyers such as China and Japan focused their energies on their own debt in support of their capital markets and currencies.
At this point yields began to move higher, peaking in mid-October at above 5%. The benchmark 10-year yield peaked at 5.021% on Oct. 23.
Subsequently, as markets became aware that the Federal Reserve&#8217;s rate hike cycle had peaked, bond yields fell sharply. Demand for Treasuries began to return as hopes improved that an economic slowdown wouldn&#8217;t deteriorate into recession.
&#8220;Last fall, the U.S. Treasury market was dominated by one question: who will buy the bonds?,&#8221; said Mark Cabana, rates analyst at Bank of America. &#8220;At that time U.S. data was hot, Fed hikes were in play, term premium measures were rising, Treasury demand was tepid.&#8221;
<h2 class="wp-block-heading">Treasury Demand Returns</h2>
But what a difference a season makes. As fall turned into winter, demand for Treasuries improved.
&#8220;The shift in Treasury demand is fundamentally rooted in improved macro confidence and growing Fed rate cut expectations,&#8221; said Cabana. &#8220;And the January Treasury refunding announcement will not rock this boat.&#8221;
Treasury refunding is an important part of government financing. As Treasury bonds mature to their duration — whether that be two, five, 10 years etc. — the government must pay the bondholder the current market price value of the bond.
Billions of dollars worth of government debt expires like this every year and the government must issue more debt to pay it down.
Also Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/01/36711044/time-to-buy-the-bond-dip-morgan-stanley-jpm-urge-investors-to-capitalize-on-treasur">Time To Buy The Bond Dip? Morgan Stanley, JPM Urge Investors To Capitalize On Treasury Notes Amid Recent Slump</a>
<h2 class="wp-block-heading">January Refunding</h2>
Cabana&#8217;s team at BofA believes the Treasury will deliver a repeat of the increase in auction sizes announced in November.
This saw increases in the two- and five-year Treasuries of $3 billion per month; the three-year by $2 billion per month and the seven-year by $1 billion a month.
It also increased both the new issue and the reopening auction size of the 10-year note by $2 billion and the 30-year bond by $1 billion. It maintained the 20-year bond new issue and reopening auction size.
Investors can track bond price movements through exchange-traded funds (ETFs). Prices move inversely to yields, so as Treasury yields have ticked a little higher at the start of the year, prices have eased.
The iShares U.S. Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GOVT#NYSE">GOVT</a>), an ETF that tracks U.S. government bonds through the entire range of maturities, is down 1.5% so far this year.
<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="750" height="650" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/25092042/newplot-47.png" alt="" class="wp-image-194095" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/25092042/newplot-47.png 750w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/25092042/newplot-47-300x260.png 300w" sizes="(max-width: 750px) 100vw, 750px" /></figure>
Meanwhile, the Schwab Short-Term U.S. Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHO#NYSE">SCHO</a>), tracks U.S. government bonds between one and three-year maturities, and the Schwab Intermediate-Term U.S. Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHR#NYSE">SCHR</a>), tracks U.S. government bonds with durations of around five years.
Thus, with higher supply, can demand keep pace? So far it has, said Cabana.
&#8220;Overall, elevated Treasury supply concerns have not resulted in a consistent deterioration of auction performance,&#8221; he said, adding: &#8220;Improved Treasury demand can be observed across a wide range of investors, ranging from banks to pensions to foreign investors. Japanese banks have increased foreign bond buying, likely as more tactical trades.&#8221;
Treasury supply will remain a powerful consideration in the Treasury market for some time to come, as investors must also take into account twin deficits.
US deficits are still large and growing, which means that UST supply will remain heavy.
&#8220;We expect reduced macro uncertainty and Fed cuts will be supportive of Treasury demand in the near term. However, Treasury supply concerns are likely to resurface over time,&#8221; concluded Cabana.
Now Read: <a href="https://www.benzinga.com/government/23/12/36206812/treasury-market-stress-primary-dealers-taking-up-slack-as-foreign-demand-fades">Treasury Market Stress: Primary Dealers Taking Up Slack As Foreign Demand Fades</a>
Image: Shutterstock

Macro Economic Events

Federal Reserve

SCHO

SCHR

Treasury Glut: Can Investor Demand For US Bonds Keep Pace With Supply Increases?

The Federal Reserve delivered what the markets wanted on Wednesday — its cycle of rate hikes is likely over and <a href="https://www.benzinga.com/economics/macro-economic-events/23/12/36225016/powell-signals-peak-interest-rates-foresees-cuts-in-2024-markets-rally-traders-ex">rate cuts can be expected in 2024</a>. Market reaction on Thursday continued to express investors&#8217; delight that the six-week rally in equities can now be extended.
Effectively pivoting to a dovish bias, the Fed remained a little cautious on inflation, but its so-called &#8220;dot-plot&#8221; forecast pointed to the likelihood of 75 basis points of rate cuts next year.
&#8220;Chair [Jerome] Powell says the Fed is done — probably — but still doesn't want to talk about when they'll ease. But we're sticking to our forecast of 150 basis points in rate cuts next year, starting in March or May,&#8221; said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
<h2 class="wp-block-heading">Market Reaction On Thursday</h2>
Interest rate-sensitive assets outperformed, with small-cap stocks soaring and Treasury yields dropping.
Overnight, the Russell 2000 index of small-caps jumped 3.5% compared with a 1.4% gain on the S&amp;P 500. The iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>) ended Wednesday up 3.4% and was 1.2% higher in pre-market trading on Thursday.
<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="750" height="650" src="https://editorial-assets.benzinga.com/wp-content/uploads/2023/12/14084603/newplot-12.png" alt="" class="wp-image-161625" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2023/12/14084603/newplot-12.png 750w,https://editorial-assets.benzinga.com/wp-content/uploads/2023/12/14084603/newplot-12-300x260.png 300w" sizes="(max-width: 750px) 100vw, 750px" /></figure>
On Thursday morning, the yield on the benchmark 10-year Treasury fell below 4% for the first time since August, pushing prices higher. The iShares U.S. Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GOVT#NYSE">GOVT</a>) rose 1.2%.
European equity markets shared in the joy. In London, the FTSE 100 was up 1.8% at midday local time after the Bank of England held its main interest rate at 5.25%. The nine-member monetary policy committee voted 6-3 to hold the rate, with three members voting for a quarter point hike.
The Euro Stoxx 50 index gained 0.8%. The largest European equity exchange traded fund, the Vanguard FTSE Europe ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VGK#NYSE">VGK</a>) was up 1.4% on Wednesday and added 1.1% in pre-market trading.
Also Read: <a href="https://www.benzinga.com/news/earnings/23/12/36233906/s-p-500-nasdaq-futures-rise-on-euphoria-over-feds-dovish-pivot-small-caps-set-for-another-cheery-se">S&amp;P 500, Nasdaq Futures Rise On Euphoria Over Fed&#8217;s Dovish Pivot</a>
<h2 class="wp-block-heading">Dollar In The Dumps</h2>
Where there are winners, there have to be losers, and the U.S. dollar lost any of the support it had seen in recent days from investors expecting the Fed to push back on rate cut hopes. 
The dollar index (DXY) fell 1% on Wednesday and was down a further 0.5% on Thursday. The exchange traded fund that tracks the dollar, the Invesco US Dollar Index Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), fell 0.9% on Wednesday and was down 0.2% pre-market.
<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="750" height="650" src="https://editorial-assets.benzinga.com/wp-content/uploads/2023/12/14085051/newplot-13.png" alt="" class="wp-image-161626" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2023/12/14085051/newplot-13.png 750w,https://editorial-assets.benzinga.com/wp-content/uploads/2023/12/14085051/newplot-13-300x260.png 300w" sizes="(max-width: 750px) 100vw, 750px" /></figure>
Commodities markets got a boost, however, with gold reacting to the dollar&#8217;s woes by jumping 2.7% to $2,052 an ounce. The SPDR Gold Shares ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>), which tracks the price of bullion, gained 2.3% on Wednesday and was up a further 0.6% in pre-market trading.
Oil prices also rallied as hopes that lower interest rates in the coming months will spur consumer demand. Both Nymex WTI and Brent Crude gained 2%. The United State Oil Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>) was up 1.7% on Wednesday and up 1.3% in the pre-market.
Now Read: <a href="https://www.benzinga.com/economics/macro-economic-events/23/12/36225016/powell-signals-peak-interest-rates-foresees-cuts-in-2024-markets-rally-traders-ex">Powell Signals Peak Interest Rates, Foresees Cuts In 2024</a>
Photo: Courtesy of <a href="https://www.flickr.com/photos/imfphoto/" target="_blank" rel="noreferrer noopener">International Monetary Fund</a> on Flickr and Shutterstock

Eurozone

Commodities

Currency ETFs

Forex

PowerShares DB US Dollar Index Bullish Fund

With Fed Rate Cuts On The Horizon, Equity Markets Soar, Dollar Weakens, 10-Year Treasury Yield Falls Below 4%

A large percentage of Americans appear to be wrong about the state <a href="https://www.benzinga.com/topic/us-economy">of the economy.</a>
While most people share a gloomy sentiment about unemployment, poverty, purchasing power and consumer spending, hard data shows that the U.S. economy is actually thriving.
A recent <a href="https://www.ft.com/content/9c7931aa-4973-475e-9841-d7ebd54b0f47">survey</a> by FocalData and Financial Times sheds a worrying and bewildering light on perceptions of economic well-being versus real data markers.
More than 2200 U.S. adults were asked to rate their opinion on several economic indicators, and their answers were incorrect in most cases when compared to the numbers.
<h3 class="wp-block-heading">Are Wages Losing To Inflation?</h3>
Inflation has been a major concern for Americans — and most of the industrialized world — since the impact of the <a href="https://www.benzinga.com/news/23/11/36036187/anthony-fauci-to-mark-first-appearance-before-gop-controlled-house-urged-to-confront-the-facts">COVID-19 pandemic</a> and the <a href="https://www.benzinga.com/etfs/sector-etfs/23/12/36121317/janet-yellen-says-us-will-be-responsible-if-ukraine-loses-as-100b-aid-stuck-in-congress">Russian invasion of Ukraine</a> shot prices through the roof.
Although, with prices <a href="https://www.benzinga.com/economics/macro-economic-events/23/11/35775608/us-inflation-eases-more-than-expected-in-october-cements-expectations-for-end-of-">decelerating to a 3.2% rise in October versus the previous year</a>, the worst part of the inflation storm seems to have passed.
<a href="https://www.benzinga.com/news/23/11/35872246/fomc-minutes-could-provide-markets-with-a-sobering-reminder-of-higher-for-longer">Inflation has been consistently dropping since peaking in June 2022</a>, and recent decisions on interest rates by the FOMC indicate that the Fed is getting comfortable with the rate of disinflation. The agency chose to pause interest rate hikes twice in a row in the most recent meetings.
This week, a report by ING even predicted that the Fed <a href="https://www.benzinga.com/news/23/12/36058438/federal-reserve-to-implement-six-rate-cuts-in-2024-amid-economic-slowdown-says-ing">is ready to implement a series of rate cuts in 2024</a>.
Yet of those surveyed, 73% of respondents believed that the rate of inflation had actually risen in the past year, while only 9% acknowledged that the rate of inflation was actually dropping.
While inflation is being tempered, the people surveyed continue to rate it among the most concerning issues impacting Americans today. When asked to compare prices and wages between today and one year ago, 90% of respondents incorrectly answered that prices have risen faster than wages.
Data from the U.S. Bureau of Labor Statistics, compiled by the St. Louis Fed, shows that median salaries have been rising consistently since mid-2022 while inflation has dropped.
<h3 class="wp-block-heading">Are Americans Worse Off Today Than Before COVID?</h3>
The survey also revealed skewed perceptions regarding net worth, living standards, and purchasing power.
Sixty-seven percent of those surveyed indicated they believe the median American household was wealthier before the pandemic, while 63% thought that the median income could afford a better lifestyle a year ago.
Yet Fed data from the Survey of Consumer Finances shows that American households have become consistently wealthier in the period spanning from 2019 to 2022, with the median net worth jumping from $144,000 to $192,000.
<a href="https://www.benzinga.com/federal-reserve/23/10/35448776/what-is-the-average-net-worth-by-age">Net worth is up across the entire income ladder</a>, as well as wages, that have risen for lower-income families since before the pandemic.
<h3 class="wp-block-heading">So, What's Going On?</h3>
Perceptions of economic well-being are relative and don't necessarily follow hard data markers.&nbsp;
Google Trends data reveals that the frequency of searches for &#8220;inflation&#8221; remained consistent in November, the same month the survey was conducted, as it was in January, a period when annual price increases were recorded at 6.4%.
Although the inflation rate halved, public interest in the topic remained high. This sustained attention is partly fueled by media reports that rely on search trends to determine their focus. This creates a feedback loop where certain topics are amplified and stay in the public consciousness, even when actual data suggests they are no longer a significant threat to the economy.
Political factors may also play a role in this phenomenon. As the presidential election approaches, candidates, particularly from the Republican side, are likely to craft narratives that resonate with their voter base, which can include emphasizing certain economic issues.
In recent debates, including the <a href="http://benzinga.com/news/23/12/36126019/trump-absent-tensions-high-highlights-from-the-last-gop-debate-of-2023-featuring-desantis-haley-chri">fourth Republican candidate debate</a> this week, there has been a trend among Republican candidates to critique the current state of the economy.
In the second Republican debate from September, former candidate Mike Pence said that "Bidenomics has failed. Wages are not keeping up with inflation," which has been contrasted by actual data. The former vice president has since dropped out of the race.
Candidate Vivek Ramaswamy said in the third debate from November, that "prices are going up, but wages have remained flat," while South Carolina Senator and presidential candidate Tim Scott said that gas prices are "40% higher right now than they were just a little over two years ago."&nbsp;
According to data from the Energy Information Administration, retail gas prices nationwide have decreased since June 2022 and, as of November, are comparable to the rates seen two years earlier.
Yet, according to analyst John Burn-Murdoch, who authored the survey, poll respondents sometimes answer surveys with wrong information in an effort to adhere to the narrative of their party, rather than to reflect their own opinions, in a phenomenon referred to as "expressive responding."
Lastly, people's perceptions of the economy can take time to adapt. While it's true that the last year has been favorable in raw economic terms, the effects of decades-high inflation and interest rates on people's lives can leave emotional scars that don't disappear as quickly as data points turn around.
For investors looking for ways to capitalized on the shifting inflation outlook, here are five ETFs to consider:
<ul>
<li>iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>): This ETF tracks the performance of U.S. Treasury Inflation-Protected Securities (TIPS), providing exposure to inflation-adjusted bonds.</li>
<li>SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>): While not directly linked to inflation, gold is often considered a hedge against inflation, and this ETF tracks the price of gold bullion.</li>
<li>Shares U.S. Treasury Bond ETF (BATS:<a class="ticker" href="https://www.benzinga.com/stock/GOVT#BATS">GOVT</a>): This ETF invests in U.S. Treasury bonds of various maturities, which can be influenced by inflation expectations.</li>
<li>ProShares UltraShort 20+ Year Treasury (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TBT#NYSE">TBT</a>): This ETF seeks to provide twice the inverse daily performance of long-term U.S. Treasury bonds, making it potentially attractive during periods of rising inflation.</li>
<li>iShares U.S. Treasury Inflation-Protected Securities ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/STIP#NYSE">STIP</a>): Similar to TIP, this ETF offers exposure to TIPS, which are designed to protect against inflation.</li>
</ul>
Photo: Shutterstock

Personal Finance

STIP

ProShares UltraShort Lehman 20+ Year Treasury

Chances Are You're Wrong On Bidenomics: Survey Finds Wildly Concerning Views About Wealth, Income And Jobs

U.S. Treasury Secretary Janet Yellen highlighted &#8220;considerable progress&#8221; made in curbing inflation during an interview with CNBC on Monday. Yellen emphasized the simultaneous achievement of inflation control and economic strength, framing it as <a href="https://www.benzinga.com/topic/inflation">good news for Americans.</a>
Reflecting on the Biden administration&#8217;s economic strategies, Yellen said: &#8220;our job is to explain to Americans what President Biden has done to improve the economy.&#8221;
She expressed confidence that as inflation eases and the labor market stays strong, the public will recognize the progress that has been made. 
Yellen highlighted recent legislation, including the Infrastructure bill, Chips and Science Act and Inflation Reduction Act. 
These initiatives, she said, are catalysts for economic growth, especially in the heartland of America, which is poised to benefit from new job opportunities and technological advancements.
 &#8220;We&#8217;ve had over $500 billion in manufacturing investments announced &#8230; in places that really need good jobs.&#8221;
Read also: <a href="https://www.benzinga.com/news/23/11/35872246/fomc-minutes-could-provide-markets-with-a-sobering-reminder-of-higher-for-longer">FOMC Minutes Could Provide Markets With Sobering Reminder Of &#8216;Higher For Longer&#8217;</a>
<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"> 
<div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">Treasury Secretary Janet Yellen discusses the effort to bring inflation down and how that could translate at the polls for President Biden. <a href="https://t.co/ycTdNa4xMt">pic.twitter.com/ycTdNa4xMt</a>
&mdash; CNBC (@CNBC) <a href="https://twitter.com/CNBC/status/1726597951856812415?ref_src=twsrc%5Etfw">November 20, 2023</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></div>
<figcaption class="wp-element-caption">Israel, Ukraine, Taiwan At Forefront Of Foreign Policy</figcaption></figure>
&#8220;It&#8217;s a critical priority for the president and critical to the national security of our country,&#8221; Yellen said of support for Ukraine and Israel. 
She warned of the broader implications of the conflict in Ukraine.
&#8220;If Putin were to win this brutal war&#8230; next, we might see him attacking a NATO ally of ours.&#8221;
Reaffirming the U.S. position on China and Taiwan, Yellen said: &#8220;President Biden made clear that our China policy or Taiwan policy has not changed at all and that we want to see peaceful relations continue.&#8221;
U.S. Treasury yields were little moved following Yellen&#8217;s remarks, with the 10-year benchmark trading at a 4.46% yield. Both the iShares 20+ Year Treasury Bond ETF and the iShares U.S. Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GOVT#NYSE">GOVT</a>) were 0.1% lower at 10:15 a.m. in New York. 
Read now: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/35874017/mileis-election-win-fuels-major-gains-in-argentine-adrs-etfs-there-is-no-free-lunch">Milei&#8217;s Election Win Fuels Major Gains in Argentine ADRs, ETFs: &#8216;There Is No Free Lunch,&#8217; Analysts Say</a>
Illustration made using Shutterstock and Flickr images.

Yellen Says Progress Made On Inflation Battle, Urges 'Critical' Aid For Ukraine, Israel

Billionaire investor and former hedge fund manager Ray Dalio expressed significant enthusiasm about the potential of artificial intelligence Friday while also cautioning about <a href="https://www.benzinga.com/topic/artificial-intelligence">its broader socioeconomic implications.</a>
In an interview on CNBC&#8217;s &#8220;Squawk On The Street,&#8221; Dalio highlighted the extraordinary capabilities of AI, particularly its superiority over human cognition in specific tasks and its lack of emotional bias. 
Yet he didn&#8217;t shy away from the darker aspects of AI, such as its potential use in warfare and the risk of job displacement. 
&#8220;I&#8217;m very excited about AI,&#8221; Dalio said, adding: &#8220;but it&#8217;s a double-edge sword.&#8221;
<h2 class="wp-block-heading">Widening Wealth Gap: A Social, Economic Concern</h2>
The investor expressed concerns about the societal impacts of these technological shifts. 
With AI possibly leading to increased job automation, larger segments of the population might become reliant on state subsidies, further widening income inequalities, he said. 
Dalio&#8217;s commentary aligns with a growing consensus that while AI can drive innovation, it also poses significant challenges to traditional job markets, potentially exacerbating the wealth gap.
Read also: <a href="https://www.benzinga.com/markets/equities/23/11/35846742/why-warren-buffett-ray-dalios-hedge-funds-are-selling-top-ranking-dividend-king">Warren Buffett, Ray Dalio&#8217;s Hedge Funds Are Selling Top-Ranking Dividend King</a>
<h2 class="wp-block-heading">The Washington Outlook: Dalio&#8217;s Perspective</h2>
Turning to the fiscal and political landscape of the United States, Dalio remarked, &#8220;As we look forward, we have a debt problem.&#8221; 
This statement underscores the challenges facing the U.S. economy, particularly in managing national debt levels. Moreover, he noted that internal political issues are influencing the demand for U.S. bonds, hinting at a complex interplay between domestic politics and financial markets.
Regarding the future actions of the Federal Reserve, Dalio said he anticipates no significant shifts, expecting a relatively flat rate structure.
The iShares U.S. Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GOVT#NYSE">GOVT</a>), a key market gauge tracking the performance of U.S. Treasuries across all maturities, is down nearly 3% year-to-date. It&#8217;s showing positive performance in November following six straight months of losses. 
Read now: <a href="https://www.benzinga.com/news/earnings/23/11/35846046/us-stocks-on-track-to-finish-week-on-a-high-as-positive-earnings-rate-pause-hopes-lend-support">US Stocks On Track To Finish Week On A High As Positive Earnings, Rate Pause Hopes Lend Support</a>
Ray Dalio photo courtesy of the World Economic Forum.

Billionaire Investor Ray Dalio Spotlights AI's Transformative Impact, Warns Of US Debt Problems

Retail investing is catching on as products as diverse as low-risk Treasuries and speculative offerings based on film scores are becoming increasingly popular.
<h2 class="wp-block-heading">Royalty-based products begin with Shrek score</h2>
Toward the other end of the risk spectrum, Public.com is also increasing its offerings of less tangible assets. One the first it offered was investment in art. This has led to its first royalty-based product.
&#8220;Our first asset was based on the score of the Shrek movies and it was a high-yielding, uncorrelated asset that our customers oversubscribed to in a very short period of time,&#8221; Stephen Sikes, COO at retail investing app Public.com, said at <a href="https://www.youtube.com/watch?v=z8eg1fKoPpI">Benzinga&#8217;s Fintech Deal Day and Awards</a>.
Sikes added that retail investing has changed since the pandemic, as clients are becoming more cautious amid an economic backdrop of higher inflation and interest rates &#8211; with less disposable income.
&#8220;Retail investing is like an after-tax investment account,&#8221; he said.
&#8220;The industry has seen a shift from the 2020-2021 speculative go-go years, towards a more broad-based and conservative income-focused allocation of capital.&#8221;
<h2 class="wp-block-heading">Public.com introduces direct Treasury investing</h2>
When Public.com was launched in 2019, like most of its rivals it was mainly focused on equities and ETFs that followed other asset classes such as commodities (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/CMDY#NYSE">CMDY</a>). But as interest rates began to move higher, the company found its clients asking how they could gain exposure to Treasury markets, without having to go with an ETF (BATS:<a class="ticker" href="https://www.benzinga.com/stock/GOVT#BATS">GOVT</a>).
Within the last year Public.com has used the same type of fractionalization techniques used in its equity offerings, which mean clients don&#8217;t have to buy whole stocks, to introduce Treasury products as investors have demanded lower-risk yield on the US government bond market.
&#8220;Traditionally investing in T-bills involved high minimum investment and going through costly, old-school brokers,&#8221; said Sikes. So we have introduced Treasury investing, making it almost as easy for investors to gain access to fixed income investments as it is to invest in a savings account.&#8221;
As retail investors become more financially literate, they are becoming more cautious of the speculative boom that powered shares in platforms such as RobinHood (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/HOOD#NASDAQ">HOOD</a>). Their demands are changing and the platforms are changing with them to meet demands for new products.
Now Read: <a href="https://www.benzinga.com/markets/cryptocurrency/23/11/35809209/ark-invests-cathie-wood-says-the-price-of-one-bitcoin-could-rise-to-1-5m">Ark Invest&#8217;s Cathie Wood Says The Price Of One Bitcoin Could Rise To $1.5M</a>

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Shrek Royalties To T-Bills: Disruptive Diversification Of New Breed Of Retail Platforms

Investors are eagerly anticipating the release of the non-farm payrolls, unemployment rate&nbsp;and salary growth figures this Friday, which are expected to be the key&nbsp;<a href="https://www.benzinga.com/calendars/economic?date_from=2023-05-31&amp;date_to=2023-05-31" target="_blank">economic readings of the week.</a>
Rate-sensitive assets are expected to exhibit heightened volatility in response to any unexpected outcomes.
The data serves as the final key indicator before the June 14 release of inflation data and the concurrent Federal Open Market Committee meeting.
The Consensus:&nbsp;According to market expectations, the upcoming non-farm payrolls report for May is projected to show an increase of 190,000 jobs, down&nbsp;from the 253,000 jobs added in April. The unemployment rate is anticipated to tick up slightly from 3.4% to 3.5%, while average hourly earnings are forecasted to rise by 0.3% on a monthly basis, following a 0.5% increase in the previous month.
See Also:&nbsp;<a href="https://www.benzinga.com/news/23/05/32648058/ai-frenzy-helps-nasdaq-100-outshine-russell-2-000-and-soar-to-dot-com-bubble-highs" target="_blank">AI Frenzy Helps Nasdaq 100 Outshine Russell 2,000 And Soar To Dot-Com Bubble Highs</a>
<ul>
</ul>
Arora Report CEO Nigam Arora provided&nbsp;insights on the U.S. job market and made some market predictions in a chat with Benzinga:
<ul>
<li>There will be a 50% likelihood of non-farm payrolls in May exceeding expectations, taking into account the ongoing momentum.</li>
<li>A 30% chance that the figures will fall within the consensus range.</li>
<li>A 20% chance of coming in below expectations.</li>
<li>Inflation is becoming entrenched in the service side, Arora says.</li>
<li>In order for core inflation (excluding shelter)&nbsp;to decelerate and align with the Fed&#39;s 2% target, the unemployment rate would need to increase to at least 4%.</li>
<li>Arora doubts the reliability of the methodology used for calculating non-farm payrolls.</li>
<li>Despite being a lagging indicator that reflects past data, the market places significant emphasis on it, considering the NFPs as the &quot;mother of all economic reports&quot; even more important than the inflation rate, he explained.</li>
</ul>
&quot;We fully agree with the recent rise in market-implied probabilities of Fed rate hikes in June. In fact, we anticipate two or three rate hikes in the upcoming meetings, and we do not foresee any rate cuts this year,&quot; Arora added. &quot;I&#39;m very underweight bonds.&quot;
<img alt="" src="https://www.benzinga.com/files/u1363475/usnfp_2023-05-31_16-45-48_9e861.png" style="height:500px; width:100%" />
Next:&nbsp;<a href="https://www.benzinga.com/government/23/05/32645332/us-dollar-rises-to-10-week-peak-with-debt-ceiling-breakthrough-rate-hike-buzz-crucial-house-vote-wed" target="_blank">US Dollar Rises To 10-Week Peak With Debt Ceiling Breakthrough, Rate Hike Buzz - Crucial House Vote Wednesday</a>
Image by <a href="https://pixabay.com/users/geralt-9301/?utm_source=link-attribution&amp;utm_medium=referral&amp;utm_campaign=image&amp;utm_content=227173">Gerd Altmann</a> from <a href="https://pixabay.com//?utm_source=link-attribution&amp;utm_medium=referral&amp;utm_campaign=image&amp;utm_content=227173">Pixabay</a>

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Strong Non-Farm Payrolls Ahead? Expect Aggressive Fed Rate Hikes, Macro Wiz Says

The&nbsp;International Monetary Fund says&nbsp;the U.S. economy won&#39;t escape the challenge of&nbsp;persistent inflation if the job market does not soften&nbsp;and monetary policy does not stay tight for an extended period of time. On Friday, the U.S. Bureau of Economic Analysis (BEA)&nbsp;revealed&nbsp;another hotter-than-expected price consumption expenditure (PCE)&nbsp;inflation reading, cementing market expectations for an interest rate <a href="https://www.benzinga.com/economics/macro-economic-events/23/05/32593305/feds-favorite-inflation-gauge-rises-more-than-expected-in-april-market-expectatio" target="_blank">hike in June or July.&nbsp;</a>&nbsp;
&quot;The strength in demand and labor market outcomes is a double-edged sword, contributing to more persistent inflation,&quot; the IMF Article IV mission statement read. The IMF&nbsp;added&nbsp;that core and headline PCE inflation will continue to stay over the Fed&#39;s 2% target during 2023 and 2024.
To effectively return inflation to target, the Fund anticipates that the federal funds rate will need to remain in the 5.25% to 5.5% range until late&nbsp;2024.
The IMF&#39;s Article IV represents a recurring health check of the member countries&#39; economic and financial performance, and is carried out&nbsp;by an official staff visit or mission.&nbsp;
IMF Sees Greater Risks for US Economy
The Fund&#39;s staff&nbsp;advised the Federal Reserve to communicate more clearly about its future policy path, since this may assist in aligning financial conditions more closely with the stance of monetary policy.
More importantly, the IMF also points to systemic risks to both the U.S. and the global economy regarding the brinkmanship over <a href="https://www.benzinga.com/topic/debt-ceiling" target="_blank">the federal debt ceiling.&nbsp;</a>
&quot;To avoid exacerbating downside risks, the debt ceiling should be immediately raised or suspended by Congress,&quot; the IMF&nbsp;statement says.&nbsp;
Given the present level of inflation, fiscal policy is still considered overly accommodative, and a stricter fiscal posture would reduce the Federal Reserve&#39;s burden in deflating the economy. Even with the required adjustment, the U.S. &quot;debt would remain well above pre-pandemic levels over the next decade,&quot; the Fund said.
U.S. Economic Projections By the IMF
<ul>
<li>The IMF forecasts a 1.7% U.S. GDP growth in 2023, falling to 1% in 2024.</li>
<li>Headline inflation is anticipated to reach 3.8% at the end of 2023, falling to 2.6% by the end of 2024. Core inflation is expected to be 4.1% this year and 2.8% in 2024.&nbsp;</li>
<li>The unemployment rate is forecasted to rise from 3.8% in 2023 to 4.4% in 2024.&nbsp;</li>
<li>The U.S. public debt-to-GDP ratio is expected to slightly rise from 96.6% in 2023 to 98.4% in 2024.&nbsp;</li>
<li>The yield on the 10-year Treasury bond is seen edging down&nbsp;from 4% at the end of this year to 3.7% at the end of 2024.&nbsp;</li>
</ul>
Read now:<a href="https://www.benzinga.com/news/earnings/23/05/32591305/us-stocks-set-to-open-modestly-higher-as-debt-talks-linger-why-this-analyst-sees-headwinds-easing" target="_blank">&nbsp;US Stocks Soar On Debt Ceiling Deal Hopes Despite Fed Hike Risks; Nvidia Eyes $1-Trillion Market Cap On Monster AI Rall&nbsp;</a>

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IMF Anticipates 'Persistent Inflation Problem' For US, Interest Rates To Stay At 5.5% Until 2024

Current Fed Chair Jerome Powell and former Fed Chair&nbsp;Ben Bernanke both appeared at the Thomas Laubach Research Conference on Friday, <a href="https://www.benzinga.com/topic/interest-rates" target="_blank">offering monetary policy remarks.&nbsp;</a>
&quot;Price stability is the cornerstone of an economy&quot;&nbsp;Powell said in his opening comments, adding that the Fed is &quot;strongly committed to returning to the 2% goal.&quot;&nbsp;
&quot;Inflation in non-housing services persists,&quot; the Fed chair highlighted.&nbsp; 
Powell suggested that interest rates may not need to climb as high as they would otherwise due to tightening bank lending conditions, but he also said that &quot;banks and the banking system are strong and resilient, and they can deal with these and other challenges in the future.&quot;
&quot;As policy has become more restrictive, the risk of doing too much than doing too little is becoming more balanced now&quot;, but &quot;we haven&#39;t made any decisions yet,&quot; the Fed chair stated.&nbsp;
Market Reactions
Market expectations for a June rate hike plummeted on Friday, after&nbsp;Republican&nbsp;senior debt-ceiling negotiators withdrew from a meeting with White House officials, putting the status of discussions to prevent a U.S. default in jeopardy. Traders currently assign a 15% probability for a June hike, as compared to a 45% probability&nbsp;earlier on Friday.
Treasuries, which are tracked by the iShares U.S. Treasury Bond ETF (ARCA: GOVT), rebounded as yield fell across the board. Stocks flipped to losses, with the SPDR S&amp;P 500 ETF Trust (ARCA: SPY) down 0.3%.
Read Also:&nbsp;<a href="https://www.benzinga.com/government/23/05/32489115/markets-quake-as-gop-debt-ceiling-negotiators-abruptly-leave-closed-door-meeting">Markets Quake As GOP Debt Ceiling Negotiators Abruptly Leave Closed-Door Meeting</a>
Fed Responses To US Banking Crisis
According to Bernanke,&nbsp;the current financial crisis caused by Silicon Valley Bank&#39;s failure is considered a &quot;classic situation&quot; where assets were exposed to danger, in the case of interest rates. The bank run accelerated because &quot;social-media-savvy consumers&quot; rapidly withdrew their money.
&quot;It ultimately affects credit conditions,&quot; but &quot;borrowers are in a much better shape today compared to the past great financial crisis.&quot; &quot;That makes a big difference on the impact of consumer spending and the economy in general.&quot;&nbsp;
Further Inflationary Risks Ahead?
Powell said that disinflationary &quot;supply shocks of the past do not appear to be repeated&quot; after the disruptions caused by the pandemic and the conflict in Ukraine. &quot;We don&#39;t know whether globalization will be partially or completely reversed,&quot; Powell said, adding that &quot;what a central banker can do is control inflation even if supply shocks occur.&quot;
Labor Market And Inflation: Relationship Broken?
&quot;The Pandemic scrambled the usual signals between the labor market and inflation,&quot; Bernanke said, due to supply shocks and inflation expectations. 
Powell indicated that the Fed has been looking at different&nbsp;job market indicators other than the unemployment rate, such as the number of&nbsp;unemployed persons&nbsp;per&nbsp;job opening, to gauge labor market tightness.
Now Read:&nbsp;<a href="https://www.benzinga.com/government/23/05/32489115/markets-quake-as-gop-debt-ceiling-negotiators-abruptly-leave-closed-door-meeting" target="_blank">Markets Quake As GOP Debt Ceiling Negotiators Abruptly Leave Closed-Door Meeting</a>
Photo: Courtesy of&nbsp;<a href="https://www.flickr.com/photos/imfphoto/" rel="noreferrer noopener" target="_blank">International Monetary Fund</a>&nbsp;and&nbsp;<a href="https://www.flickr.com/photos/medilldc/" id="yui_3_16_0_1_1683905938492_131757" rel="author" title="Go to Medill DC's photostream">Medill DC</a>&nbsp;on Flickr

Powell Says Credit Crunch Could Mitigate Need For Higher Rate, Bernanke Emphasizes 'It's Different Than 2008'

A group of Democratic Senators plans to urge President Joe&nbsp;Biden&nbsp;to invoke the 14th Amendment in order to address <a href="https://www.benzinga.com/topic/debt-ceiling" target="_blank">the debt ceiling crisis.</a>
A letter has circulated among Democrats in the Senate, indicating rising skepticism about the path of debt ceiling discussions as the June 1 deadline approaches, <a href="https://www.nbcnews.com/politics/congress/senate-democrats-urge-biden-prepare-invoke-14th-amendment-lift-debt-li-rcna84935">according</a> to NBC News.
The draft letter has been spearheaded by&nbsp;Senator Tina Smith (D-MN), as well as Sens. Elizabeth Warren (D-MA), Jeff Merkley (D-OR), Ed Markey (D-MA)&nbsp;and Bernie Sanders (I-VT).&nbsp;
Sanders said in an interview on Wednesday that Congress cannot balance the budget by putting children, the elderly&nbsp;and working families at risk of going hungry.
&quot;We write to urgently request that you prepare to exercise your authority under the 14th Amendment of the Constitution, which clearly states: &#39;the validity of the public debt of the United States...shall not be questioned,&#39;&quot; reads the draft letter&nbsp;obtained by NBC News.
The letter further states that by invoking the 14th Amendment, the U.S. would continue to pay its payments on schedule and without delay, avoiding a worldwide economic disaster.
&quot;While we cannot default on our debt, we cannot also allow the destructive Republican budget to be implemented,&quot; the Democrats say in the letter.&nbsp;
What Does The 14th Amendment Say?
The Fourteenth Amendment to the Constitution states in section four that &quot;the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.&quot;
Also Read:<a href="https://www.benzinga.com/trading-ideas/long-ideas/23/05/32452997/the-spy-breaks-bullishly-following-bidens-debt-ceiling-remarks-quick-take-technical-anal">&nbsp;The SPY Breaks Bullishly Following Biden&#39;s Debt Ceiling Remarks: Quick Take Technical Analysis</a>
Expert Says Biden &#39;Has No Power To Unilaterally Raise The Debt Ceiling&#39;
According to Harvard University law professor&nbsp;Noah Feldman, the president is not authorized under the Constitution to unilaterally increase the debt limit.
&quot;The whole reason (why) the Constitution gave the spending and borrowing powers to Congress was to ensure a separation of powers between Congress and the executive branch. That separation was intended to let the political process, not the will of one person, determine how the US borrows and spends money,&quot; Feldman wrote in a <a href="https://www.bloomberg.com/opinion/articles/2023-05-17/debt-ceiling-is-kevin-mccarthy-s-problem-to-fix-not-joe-biden-s?sref=TBDibEcD#xj4y7vzkg">Bloomberg </a>opinion piece.&nbsp;
According to the professor, it is very unlikely the Biden administration will use constitutional justifications to defy the debt ceiling.
&quot;The obligation to pay the government&#39;s debts lies on Congress,&quot; he said, adding that&nbsp;&quot;if McCarthy decides not to pay the nation&#39;s bills, there&rsquo;s nothing Biden can do about it.&quot;
Market Reactions
Markets are becoming&nbsp;slightly more confident the debt ceiling crisis will be addressed soon, after Biden said&nbsp;that the&nbsp;<a href="https://www.benzinga.com/government/23/05/32449244/biden-says-us-will-not-default-before-leaving-for-g7-meeting-gop-senator-says-white-house-playing-ru" target="_blank">U.S. will never default on its debt</a>, indicating the meeting he had with congressional leaders was productive.&nbsp;
The yield on the one-month Treasury bill, a gauge of market worries about the potential of a U.S. default, fell by 12 basis points, the most in a single day in May. Other maturities saw yields&nbsp;rising&nbsp;on anticipation of a debt limit raise, with the iShares U.S. Treasury Bond ETF (ARCA: GOVT) down 0.2% on the day.
Now Read:&nbsp;<a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/05/32438942/whartons-jeremy-siegel-sees-no-threat-of-debt-default-what-is-most-likely-is">Wharton&#39;s Jeremy Siegel Sees No Threat Of Debt Default; &#39;What Is Most Likely Is...&#39;</a>
Photo: Shutterstock

Democrats Call On Biden To Invoke 14th Amendment For Last-Minute Debt Ceiling Hike: Is It Within Presidential Power?

The probability that the U.S. economy will enter a recession within the next year has increased <a href="https://www.benzinga.com/topic/recession">to 68.2% in April</a>.
That&#39;s the greatest level since late 1982, according to the Federal Reserve Bank of New York.
The model employs the U.S. Treasury yield curve, and specifically the spread between three-month and 10-year yields, as a metric for estimating the <a href="https://www.benzinga.com/government/23/05/32343916/3-alarming-charts-us-yield-curve-mirrors-2008-subprime-crisis-as-default-recession-worries-mount" target="_blank">likelihood of a future recession.</a>
<h3>U.S. Recession Probabilities And Wild Yield Curve: What You Need To&nbsp;Know</h3>
<ul>
<li>Recession probabilities as measured by the Federal Reserve Bank of New York have skyrocketed from nearly 5% in January 2023 to 68.2% in April, the highest level since the end of 1982.</li>
<li>The move has been sparked by a significant inversion of the U.S. Treasury yield curve, with the 10-year yield falling to over 1.7% versus the three-month yield, the most negative since the 1980s.&nbsp;</li>
<li>The 10-year&nbsp;versus three-month yield inversion has been a reliable recession predictor, anticipating each of the past eight U.S. economic recessions.&nbsp;&nbsp;</li>
<li>Concerns around the current state of the economy, the banking turmoil and the growing stress associated&nbsp;to the debt ceiling stalemate have further inverted the US Treasury yield curve over the past weeks, causing recession probabilities to grow substantially.</li>
<li>A one-month T-Bill, which is the most sensitive to the debt-ceiling frenzy because it is the closest to mature after the June 1st&nbsp;deadline, currently yields 5.68% annualized, compared to a&nbsp;3.46% yield in the 10-year benchmark, for a difference of over 220 basis points (or 2.2 percentage points), the widest since data began in 2002.</li>
</ul>
<h3>Chart: New York Fed&#39;s Probability Of A&nbsp;U.S. Recession Within A Year</h3>
<img alt="" src="https://www.benzinga.com/files/u1363475/screenshot_2023-05-12_alle_19.21.51.png" style="height:500px; width:100%" />
Source: New York Fed
<h3>Most-Popular Exchange Traded Funds (ETFs) Investing In&nbsp;US Treasuries:&nbsp;</h3>
<ul>
<li>SPDR Bloomberg 1-3 Month T-Bill ETF (ARCA: BIL)</li>
<li>SPDR Bloomberg 3-12&nbsp;Month T-Bill ETF&nbsp;(ARCA: BILS)</li>
<li>iShares 1-3 Year Treasury Bond ETF (NASDAQ: <a href="https://www.benzinga.com/stock/shy#NASDAQ">SHY</a>)</li>
<li>iShares 7-10&nbsp;Year Treasury Bond ETF (NASDAQ: <a href="https://www.benzinga.com/stock/ief#NASDAQ">IEF</a>)</li>
<li>iShares 20+&nbsp;Year Treasury Bond ETF (NASDAQ: <a href="https://www.benzinga.com/stock/tlt#NASDAQ">TLT</a>)</li>
</ul>
Next: <a href="https://www.benzinga.com/trading-ideas/long-ideas/23/05/32367097/debt-limit-standoff-3-favorite-hedges-for-bond-investors-seeking-shelter-from-crisis" target="_blank">Debt-Limit Standoff: 3 Favorite Hedges For Bond Investors Seeking Shelter From Crisis</a>
Photo via Shutterstock.&nbsp;

Recession Probability At 40-Year High, Treasury Yield Curve Goes Wild Amid Debt Ceiling Crisis

The U.S. Treasury yield curve entered an unprecedented state&nbsp;this week, with one-month yields rising&nbsp;above three-month yields for the first time since the subprime mortgage crisis, due to investors&#39; mounting concern about the <a href="https://www.benzinga.com/government/23/05/32302154/what-is-the-debt-ceiling-and-what-happens-if-congress-cant-raise-it-in-time" target="_blank">U.S. debt ceiling situation.&nbsp;</a>
The yield differential between one-month and three-month Treasury bills widened to more than 30 basis points on Thursday, the largest ever recorded since early 2008. Over the past two weeks, one-month yields have risen by nearly 2 percentage points from 3.5% to 5.5%.&nbsp;
The yield curve in the United States is now completely&nbsp;inverted between one month and five years, which is often seen by the market&nbsp;as a condition of danger that the debtor would be unable to meet its obligations in the near future.
Read more:&nbsp;<a href="https://www.benzinga.com/economics/macro-economic-events/23/05/32321261/unraveling-treasury-yield-curve-5-charts-depicting-haywire-shifts-in-the-debt-cei" target="_blank">Unraveling Treasury Yield Curve: 5 Charts Depicting Haywire Shifts In The Debt-Ceiling Crisis</a> 
Chart: 1-Month T-Bill Yield&nbsp;vs. 3-Month T-Bill Yield
<img alt="" src="https://www.benzinga.com/files/u1363475/us01my-us03my_2023-05-11_12-53-46_a59f0.png" style="height:500px; width:100%" />
3-Month Versus 10-Year Yield Spread Indicates A Recession Is Just Around The Corner
Furthermore, the 3-month to 10-year yield spread increased to 1.84%, the highest recorded since 1983, reflecting mounting market fears about an impending recession. 
The 3-month versus 10-year yield&nbsp;gap is being used as a gauge by the New York Fed&#39;s recession risk tracker, which now indicates a 68% likelihood of a recession developing within the next twelve months.
Chart: NY Fed&#39;s Twelve-Month Ahead Recession Probability
<img alt="" src="https://www.benzinga.com/files/u1363475/screenshot_2023-05-11_alle_14.27.32.png" style="height:500px; width:100%" /> 
Bond&nbsp;Investors Are Betting Big That The Fed Will Cut Interest Rates Soon
Bond investors currently hold the strongest conviction since November 2007 that the Fed will be compelled to reduce interest rates significantly and swiftly in the near future.
The 2-year Treasury yield, a crucial proxy for assessing market expectations&nbsp;on the Fed&#39;s short-term&nbsp;interest&nbsp;rate, fell to 3.83% on Thursday, moving around 1.4% below the current level of the Fed funds rate.
Such a level of negative spread between 2-year yields and the Fed funds rate, typically implies traders wagering heavily on Fed interest rate cuts to foster a recovery when a&nbsp;recession hits.
Chart: 2-Year Yields vs. Fed Funds Rate&nbsp;
<img alt="" src="https://www.benzinga.com/files/u1363475/us02y-usintr_2023-05-11_14-31-07_d9f77.png" style="height:500px; width:100%" />
Most-Traded Exchange Traded Funds (ETFs) Investing In&nbsp;US Treasuries:&nbsp;
<ul>
<li>SPDR Bloomberg 1-3 Month T-Bill ETF (ARCA: BIL)</li>
<li>SPDR Bloomberg 3-12&nbsp;Month T-Bill ETF&nbsp;(ARCA: BILS)</li>
<li>iShares 1-3 Year Treasury Bond ETF (NASDAQ: <a href="https://www.benzinga.com/stock/shy#NASDAQ">SHY</a>)</li>
<li>iShares 7-10&nbsp;Year Treasury Bond ETF (NASDAQ: <a href="https://www.benzinga.com/stock/ief#NASDAQ">IEF</a>)</li>
<li>iShares 20+&nbsp;Year Treasury Bond ETF (NASDAQ: <a href="https://www.benzinga.com/stock/tlt#NASDAQ">TLT</a>)</li>
</ul>
Now read: <a href="https://www.benzinga.com/government/23/05/32324212/biden-condemns-gop-for-holding-the-economy-hostage-amid-debt-ceiling-crisis-says-us-default-not-an-o" target="_blank">Biden Condemns GOP For &#39;Holding The Economy Hostage&#39; Amid Debt Ceiling Crisis, Says US Default Not An Option</a>
Photo: Shutterstock

BILS

iShares Trust Barclays 7-10 Year Treasury Bond Fund

iShares Trust Barclays 1-3 Year Treasury Bond Fund

3 Alarming Charts: US Yield Curve Mirrors 2008 Subprime Crisis As Default, Recession Worries Mount

The cost of insurance against the risk of a United States sovereign debt default reached its highest level since 2009 on Tuesday, as the&nbsp;protracted&nbsp;debt-ceiling impasse&nbsp;continued to keep <a href="https://www.benzinga.com/government/23/05/32275687/the-clock-is-ticking-economic-disaster-looms-if-congress-fails-to-raise-debt-ceiling-treasury-secret">markets on&nbsp;tenterhooks.</a>
Spreads on U.S. 5-year credit default swaps, which are market-based measures of the risk of an entity&#39;s default, grew to 64.37 basis points, effectively implying a 1.09% likelihood of default.&nbsp;
With barely three weeks left until the government runs out of available cash, insurance against the Treasury failing to pay its obligations on time has climbed by 53.4% over the week, 82.35% over the past month, and 302.3% over the past year.
The iShares U.S. Treasury Bond ETF (ARCA: GOVT) closed 0.5% lower on Monday, marking its third straight session of losses.&nbsp;
Chart: U.S. 5-Year Credit Default Swaps Spike On Debt-Ceiling Impasse
<img alt="" src="https://www.benzinga.com/files/u1363475/united-states-5-years-cd.png" style="height:500px; width:100%" />
Source and credit: Worldgovernmentbonds.com
What Are Credit Default Swaps (CDS)? Credit default swaps are a form of credit derivative that offer protection against a borrower&#39;s&nbsp;default and other risks to the buyer. Investors purchase credit default swaps to speculate on an entity&#39;s defaults or to hedge a loan risk.&nbsp; 
If a borrower fails to satisfy their commitments, a buyer of a CDS receives compensation from the seller.
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CDS experienced a surge in popularity during the 2008-2009 financial crisis, as traders speculated on trillions of dollars worth of subprime mortgage securities amidst the turmoil. This phenomenon was documented in the movie &quot;The Big Short.&quot;
Why Are US Credit Default Swaps Costs&nbsp;Rising? The market is getting increasingly&nbsp;anxious as the impasse continues over raising the $31.4 trillion debt ceiling.&nbsp; 
If Congress does not raise the debt ceiling by June 1, the Treasury would virtually run out of cash&nbsp;needed to meet its short-term obligations, Treasury Secretary Janet Yellen said Monday in a CNBC interview.&nbsp;
President Joe Biden will meet with House Speaker Kevin McCarthy on Tuesday, but Senate Republican Leader Mitch McConnell has <a href="https://www.benzinga.com/government/23/05/32279189/mitch-mcconnell-rules-out-helping-joe-biden-on-debt-ceiling-crisis-theyre-assuming-theres-some-littl" target="_blank">allegedly warned that he will not come to the president&#39;s aid on the debt ceiling</a> problem by breaking a partisan gridlock.
Read now:&nbsp;<a href="https://www.benzinga.com/news/23/05/32284215/us-stock-futures-slide-on-inflation-fears-analyst-sees-risk-off-mood-as-debt-ceiling-crisis-looms" target="_blank">US Stock Futures Slide On Inflation Fears: Analyst Sees Risk-Off Mood As Debt-Ceiling Crisis Looms</a>
Photo: Shutterstock

Debt Ceiling Standoff Propels US Treasury Default Insurance Costs To Highest Levels Since 2009

Nobel Prize-winning economist&nbsp;Paul Krugman&nbsp;claimed&nbsp;that&nbsp;issuing premium bonds or minting a $1 trillion platinum coin will break the impasse in raising the <a href="http://www.benzinga.com/economics/macro-economic-events/23/05/32195894/powell-says-important-to-raise-debt-ceiling-in-a-timely-way-says-we-should-not-ev" target="_blank">U.S. Treasury&#39;s&nbsp;debt ceiling.&nbsp;</a>
Krugman&nbsp;stated in a tweet that there are four different ways that the debt ceiling situation might be resolved.&nbsp;The first alternative is to discharge the petition and force a&nbsp;floor vote that gets the support of a &quot;handful of sane Republicans,&quot;&nbsp;which, according to Krugman, would most certainly be President Joe Biden&#39;s preferred choice.&nbsp;
The second requires invoking the&nbsp;14th amendment, in which Congress&nbsp;declares that the debt ceiling&nbsp;is unconstitutional.&nbsp;
The third and fourth suggestions are drawing&nbsp;the most attention: the Treasury minting a trillion-dollar platinum coin or issuing premium bonds with a 10% coupon rate.&nbsp;
Between the last two options, Krugman would prefer&nbsp;to issue premium bonds rather than a platinum coin&nbsp;because no one understands the formers while many people mistakenly believe they understand coins.&nbsp;
It&#39;s &quot;a route that doesn&#39;t inspire confident misconceptions,&quot; Krugman said.&nbsp;&nbsp;
<blockquote class="twitter-tweet">About possible end runs around the debt ceiling. I have no inside information, but my guess is that premium bonds are a more likely route than the platinum coin. Why? Because nobody understands premium bonds, while people think &mdash; wrongly &mdash; that they understand the coin 1/
&mdash; Paul Krugman (@paulkrugman) <a href="https://twitter.com/paulkrugman/status/1653734738178310144?ref_src=twsrc%5Etfw">May 3, 2023</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>How Would A Treasury Premium Bond Work?&nbsp;
Premium bonds, as proposed by Krugman, would come with an annual interest rate of 10%, which comprises a principal&nbsp;or face value of $1,000 paid at maturity and a coupon of $100 paid annually.
Since market interest rates are well below 10%, such a premium bond could be auctioned off for significantly more than its $1,000 face value.&nbsp; 
Despite raising a substantial amount of money, the U.S. government debt wouldn&#39;t increase if the Treasury says that the premium bond replaces an existing $1,000 bond.
Read Also:&nbsp;<a href="https://www.benzinga.com/news/23/05/32221139/fridays-jobs-number-could-all-but-guarantee-that-the-federal-reserve-takes-its-foot-off-the-gas-on-i">Friday&#39;s Jobs Number Could All But Guarantee That The Federal Reserve Takes Its Foot Off The Gas On Inflation</a>
Krugman Accused&nbsp;Of MMT-Style Debt Financing Ideas
Krugman&#39;s ideas have elicited a wide range of reactions, with some accusing the economist of supporting inflationary and unrealistic concepts similar to the Modern Monetary Theory (MMT).&nbsp;
&quot;I keep seeing people saying that this would be MMT, that we&#39;d just be printing money to cover the deficit, but it&#39;s not at all,&quot; Krugman replied.&nbsp;
The Fed would very certainly sterilize any effect on the monetary base by selling part of its massive holdings of US bonds.&nbsp;It&#39;s a way of &quot;covering deficits by selling bonds &mdash; i.e., normal deficit finance, just through the back door,&#39;&quot; Krugman stated.
On whether Fed Chair Jerome Powell would ever accept a $1 trillion coin or if the Supreme Court Justices would prohibit the issuing of premium bonds, Krugman responded, &quot;nobody wants to be the guy who destroys the world economy.&quot;
Read now:&nbsp;<a href="https://www.benzinga.com/economics/macro-economic-events/23/05/32214774/moodys-says-u-s-debt-limit-standoff-elevates-credit-risk-for-various-debt-issuers" target="_blank">Moody&#39;s Says U.S. Debt-Limit Standoff Elevates Credit Risk For Various Debt Issuers; Says Lowest-Rated Issuers Are Most Vulnerable To Heightened Market Uncertainty Between Now And The X-date</a>
Photo: Shutterstock

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