美国拟对伊朗实施经济孤立，英国大选法拉奇胜出

Friday the 14th. Good morning. How you doing? Let's talk about what's on the agenda. Bonds. Investors sending a warning message to Scots peasant. Easy listening. America apparently has a new plan to defeat Iran. We're going to hear about it next week. And OpenAI sees a revenue surge ahead of a potential IPO. So let's have a check in on the markets at European futures, pointing to getting to 2/10 of a percent, close to 3/10 after a flat session by the close yesterday, still near record territory for European equities.

Brent continues to be in focus, of course, as we think about what comes next for Iran with that potential plan and details next week. Currently at $87 a barrel, closing on an 88, just up 8/10 of a percent so far in the session, you're seeing a little bit of modest strength for the Japanese currency, uh, dollar down right now. Uh, just over 10% versus at the at one 5926. Of course accounts. We continue to monitor the countdown to trade starts right now.

Good. Friday morning. Good morning. What do we need to talk about? We need to talk about that auction yesterday. The US 30 year bond auction firmly in focus. Everyone is trying to figure out what message it is sending. The bond investors are sending to Scott Benson, the U.S. Treasury secretary. Is it you've got a sustainability problem? Probably not. Is it? Maybe at some point you should think about maybe either increasing revenues or cutting spending?

Yeah, probably. That is the message. I don't think it's a message surrounding the fed. But the question now is, is the Treasury secretary listening? Skyler, do you think he is? I mean, I think he's certainly listening and watching. I'm not sure there's a lot he can do in terms of containing that yield, right? I mean, in terms of actual intervention, all you could really do is by the long end. And that feels very much like an incursion.

That's not the Salton. Oh yeah. We'll just sell short. So you could you could shift it a little bit in terms of issuance of the front end. Maybe that takes the pressure off the back end, but we're already above that kind of 20% that you're meant to have in Bill. So I think it's very limiting. Um, and yeah, otherwise it's just do less debt and that seems unlikely. It's a bit of a ratio is okay, but 5.21% close to close to that.

Around about that. The highest level uh, demanded by investors since what, 2000 and 2001, 2001. So there you go. Well, over more than two decades. Um, so it is it is a one shot. If so, let's talk in the inflation data producer prices then, um, coming a little softer on the headline basis to this point to further, further, further steepening of the curve. If you get the front end cat tied around this level, but continue concerns about what happens in terms of issuance and high yields at the long end.

Yeah, these are two different stories though aren't they. You've got you've got an IT kind of inflation story which is affecting the front end. Maybe the market's thinking about what's happening with the fed. That's the narrative the fed one story. The back end is a completely different story which is about deficit inability. It's the fiscal story, and it's really interesting to see kind of which way, which is going to become the most important of those two factors for the bond market going forward, and which one we should be focusing on.

Well, I mean, I think also you need to consider the fact that there is a flaw on the front end, right, that you had deficits expand massively in 2008 post-Covid, but it didn't really matter that much for the long run because our was lower. But when you look at our SG, that's what you're really thinking about. And growth is quite concerning. Now relative to that, if you have 5.5% nominal growth in the US this year versus an R, that's not that far away from that.

Yeah. Um, I think to we're so unsure about what the outlook is because it's very much influenced by what's happening in the oil price. Right. So we had oil come down yesterday and that helped start uh, sorry. That helped bonds across the curve rally. And I think there's really a question of how sustainable that is. We're still in this phase of stalemate between the US and Iran, the U.S. has announced. And Scott Bason, in particular, has said that they're going to announce unprecedented junctions next week.

I think the question is really what is that actually, you know, investors will be parsing that over the weekend. Does it mean that you're doing something with China, which potentially opens up a new trade front? What exactly is it and will it be effective? The China point is really crucial because if you really want to exact pain in terms of the oil exports of Iran and its economy, then you have to sanction at least Chinese and potentially Indian companies as well, and try and restrict their access to that crude.

And to your point, that then sets up a very tense situation with Xi Jinping heading to Washington in September. What this also tells us probably, is that the US administration is parking this issue until the midterms. Are we going to do something? Kinetic warfare is not delivering the result we hope for. Therefore, we're going to turn to economic warfare. And we can basically part of this issue until the midterms. And maybe that's also the message for the wider market, which is we can you can put the Iran situation to one side.

The hope would be that oil prices remain reasonably stable during this period, but the danger is that they don't and they drift or they push higher. But but it feels like the U.S. administration, at least for now, is saying, we can't do this. We can't manage a big war with the risks and the volatility that it comes with going into a fairly serious election in November. The here and now, then, is the status quo, if that if that is the situation as we think about inflation, we think about energy, but also think about the spend around I interesting that from the producer prices.

You saw things like digital components computer components actually increasing 28%. That's a record that ties us to a story around the spend then, and what's happening with the Frontier Labs reporting from Bloomberg today that OpenAI is looking at revenues, at least on an annual basis, annualized revenues of around of around 40 billion USD. So we have an update there. At least that is the reporting from Bloomberg, the Financial Times reporting that its key competitor.

Of course, anthropic is set for potentially north of 100 billion by the end of this year. They are still on track. Anthropic for that IPO potentially as soon as October. The reporting suggests that OpenAI is still going to push their ads back until 2027, but the revenues are continuing. They are continuing both of these frontier labs. The gap is there clearly, between anthropic at the forefront and OpenAI in terms of driving revenues and getting traction at the enterprise layer?

They are still getting that traction. Does that continue, and are those who are buying their services starting to get a real return? We are starting to see evidence of that because they're certainly adopting. It has to keep going until we get to the IPO. This is we are prepositioning. You've got to get the numbers right into that IPO, don't you? That's the challenge right now. And the challenge also is can I get there first?

I mean, if you can't, it's how much is already out there. And are we worried about valuations from that perspective? I think to overnight we had AMD announce a 4.75 billion bond offering. And that adds to your troubles at the long end right. It tends to be long duration if you have credit markets shifting longer duration. That also means those markets become more sensitive to your interest rates. That was a record bond insurance, wasn't it, for AMD again, as they tried to spend to meet the demand that they're saying for that AMD did well.

The numbers would be nice with me. Yeah, the projections are solid. Yeah. Um, the