FIG Topics of Interest




1-Mo: 2.4325
2-Mo: 2.366
3-Mo: 2.309

6-Mo: 2.165
1-Yr: 1.954

1-Mo: 2.40113
3-Mo: 2.42788
6-Mo: 2.34163
1-Yr: 2.333

Click here to download a pdf of this article, settles6.11.pdf


Are we so simple that we think anything sent to Hong Kong or Taiwan has not been seen and or re-engineered by mainland China?  This is yet another distraction, which takes our gaze away from our own inept Congress? 
House Speaker Nancy Pelosi, a Democrat, issued a statement Wednesday calling for legislative action in the U.S. Congress to “reassess” whether Hong Kong is “sufficiently autonomous” under the One Country, Two Systems framework that guides its relations with Beijing. She said she looked forward to the introduction of legislation in coming days that she referred to as the Hong Kong Human Rights and Democracy Act.
Hong Kong’s special trading status for some sensitive U.S. technology imports. The move would be a severe blow to Hong Kong’s reputation as a investment destination.

Under the terms of the United States-Hong Kong Policy Act of 1992, the U.S. agreed to treat the former British colony as fully autonomous for trade and economic matters even after China took control in 1997. That means Hong Kong is exempt from Trump’s punitive tariffs on China and enjoys U.S. support its participation in international bodies like the World Trade Organization.
“The extradition bill imperils the strong U.S.-Hong Kong relationship that has flourished for two decades,” Pelosi said. “If it passes, the Congress has no choice but to reassess whether Hong Kong is ‘sufficiently autonomous.’”

Senate Majority Leader Mitch McConnell, a Republican, issued a similar statement saying that Hong Kong residents “rightly view” the extradition bill “as another erosion of the rule of law and tightening of Beijing’s grip on their imperiled autonomy.”

The statements are the strongest indication, yet that Congress may act on a recommendation issued last year by the U.S.-China Economic and Security Review Commission to reconsider. 

Click here to download a pdf of this article, Missile.pdf


“Uncertainty levels remain high, but owners are focused on a very busy Main Street,” report authors William Dunkelberg and Holly Wade wrote. “The surge in optimism was supported by solid gains in reported capital spending, hiring, inventory investment and profit trends.”
The National Federation of Independent Business optimism index increased 1.5 points to 105 on more upbeat views of the economy, employment, capital outlays and sales, a report showed Tuesday. Analysts had forecast a 1.5-point decline in the gauge.

The fourth straight improvement in optimism, the longest streak in two years, is the latest sign of brighter assessments by small business owners despite trade-policy uncertainty. NFIB’s gauge, based on responses from 650-member firms surveyed in May, remains at one of its highest levels of the expansion and not far from the record 108.8 level in August

Click here to download a pdf of this article, Missile.pdf


U.S. Vice President Mike Pence said Mexico had offered “more” on Thursday than on Wednesday but that it would be up to Trump - who returns from a European trip on Friday - to decide if it were enough.
“There has been some movement on their part. It’s been encouraging,” he said. “The discussions are going to continue in the days ahead.”
Mexican Foreign Minister Marcelo Ebrard told reporters the Mexican government had offered to send 6,000 members of the National Guard to secure its southern border with Guatemala.
In a sign of a wider crackdown, the leftist administration of Mexican President Andres Manuel Lopez Obrador said earlier that it blocked the bank accounts of 26 people for alleged links to human trafficking, while it detained on Wednesday at least 350 migrants crossing into Mexico and arrested two prominent migrant rights activists.
U.S.-Mexico migration talks will continue on Friday, Mexico’s Ebrard said.
Analysts warn that tariffs could spark a recession in Mexico. Credit ratings agency Fitch downgraded Mexico’s sovereign debt rating on Wednesday, citing trade tensions among other risks, while Moody’s lowered its outlook to negative.

Click here to download a pdf of this article, Missile.pdf


Federal Reserve Chairman Jerome Powell calls slumping inflation “one of the major challenges our time.’’ Shawn Smith, who trains some of the nation’s most vulnerable low-income workers, sees it differently.

The people in Smith’s world don’t want higher prices. Even slight increases “make a huge difference to someone who is living on a limited income,’’ Smith, who’s the director of workforce development at Goodwill of Central and Coastal Virginia, said at a recent Richmond Fed event.

“Whether it is a 50 cents here or 10 cents there, they are managing their dollars day to day and trying to figure out how to make it all work,’’ he said.
“I have heard a lot about price stability and fiscal sustainability from the Fed for a very, very long time,” Patrick Dujakovich, president of the Greater Kansas City AFL-CIO, told the audience in Chicago. “Maybe I wasn’t listening, but today is the first time I’ve heard about employment sustainability and employment security.”

U.S. central bankers are struggling with a problem already faced by many central banks around the world. Ageing demographics, less capital-intensive forms of investment and unusually low inflation mean interest rates are stuck at low levels. If a recession hits, they will probably have to cut rates to zero and resume crisis-era measures like bond purchase that remain politically controversial.
The Fed hasn’t committed to any change, but one idea that is getting some air time among officials is something called average inflation targeting, or pursuing higher inflation for a while -- to make up for undershoots of the 2% target. Inflation has averaged just 1.5% since the expansion that began in 2009. A 2% target for inflation has been adopted by a number of central banks because it’s seen as low enough to deliver price stability, without being so low as to risk tipping into harmful deflation.

The story emerging in the Fed listening sessions is that a strategy seeking higher inflation hits the most vulnerable part of the population hard.

“The sometimes-positive impacts of inflation for certain of us have no good benefits for people at the lower end of the spectrum,’’ Stuart Comstock-Gay, president of Delaware Community Foundation, told an audience at the Philadelphia Fed that included its president Patrick Harker and Fed Board Vice Chairman Richard Clarida.

Click here to download a pdf of this article, Missile.pdf


The International Monetary Fund (IMF) lowered its 2019 growth forecast for the world’s second-largest economy to 6.2% from 6.3% on Wednesday, after the conclusion of the organization’s visit to China over roughly the last two weeks.
“The trade tensions have had an impact, significant, but in our view, so far contained,” Kenneth Kang, deputy director of the Asia-Pacific Department at the IMF and leader of the visiting team, told CNBC in an interview Wednesday.

“The renewed trade tensions are a significant source of uncertainty and a downside risk to our outlook ... But I think we need to wait a few more months,” he said.

The IMF expects China’s growth to slow to 6% next year, and to 5.5% by 2024.

Click here to download a pdf of this article, Missile.pdf


Mexican Foreign Minister Marcelo Ebrard on Tuesday said he expects to find common ground with U.S. officials in immigration and tariffs talks amid a diplomatic push in Washington this week.

“We’re going to find common ground, I think,” Ebrand told a news conference ahead of the second day of discussions that he said are expected to conclude on Wednesday. “We are ready” for negotiations, he added.

Click here to download a pdf of this article, Missile.pdf


Though the paper released Sunday in Beijing is largely a rehash of well-established policy positions and language, including a requirement that the U.S. must remove all existing tariffs for any deal, it also contains some interesting insights into China’s thinking. Here are some key excerpts:
U.S. Breach
The paper says Trump’s decision to raise tariffs on $200 billion of Chinese goods on May 10 was a breach of an agreement reached by Trump and President Xi Jinping:
“These acts contradicted the agreement reached by the two presidents to ease friction through consultation -- and the expectations of people around the world -- casting a shadow over the bilateral economic and trade consultations and world economic growth.”
U.S. Backtracking, Not China
The US has backtracked on its commitments in the China US economic and trade consultations, not the other way around.
“The U.S. government accusation of Chinese backtracking is totally groundless. It is reckless to accuse China of ‘backtracking’ while the talks are still under way.”
Greedy U.S.
"From late March to early April, the working teams of the two countries held another three rounds of high-level consultations and made substantial progress. Following numerous rounds of consultations, the two countries had agreed on most of the issues. Regarding the remaining issues, the Chinese government urged mutual understanding and compromise for solutions to be found. But the more the U.S. government is offered, the more it wants. Resorting to intimidation and coercion, it persisted with exorbitant demands, maintained the additional tariffs imposed since the friction began, and insisted on including mandatory requirements concerning China’s sovereign affairs in the deal, which only served to delay the resolution of remaining differences.”
‘Red Lines’
“One side should not cross the other’s ‘red lines.’ China will not give ground on issues of principle. Both China and the U.S. should see and recognize their countries’ differences in national development and in stage of development and respect each other’s development path and basic institutions. The right to development cannot be sacrificed, still the less can sovereignty be undermined.”
Remarkable Progress
While the U.S. administration accuses China of stealing its intellectual property and forcing American companies to transfer their technology to Chinese competitors to gain market access, China sees things very differently:
“Turning a blind eye to China’s unremitting efforts and remarkable progress in protecting intellectual property and improving the business environment for foreign investors, the U.S. issued a myriad of slanted and negative observations, and imposed additional tariffs and investment restrictions on China, provoking economic and trade friction between the two countries.”
Deal Enforcement
A key concern for the U.S. is how a deal would be enforced, especially if existing tariffs were removed, as China demands. China’s message is there’s no need to worry:
“The 11 rounds of high-level consultations have made significant progress...China has kept its word during the consultations. China has emphasized repeatedly that if a trade agreement is reached, it will honor its commitments sincerely and faithfully.”
Varying Interpretations
Economists and former officials interpreted the paper differently.
The key message is that “China is willing to work together with the U.S. to find solutions,” said Ding Shuang, chief China and North Asia economist at Standard Chartered Bank Ltd. in Hong Kong. “It is still willing to do whatever is possible to delay a potential conflict between the two countries.”
Enodo Economics in London saw the paper as alarming in many ways. “While it’s not necessarily an escalation of the conflict, it’s a confirmation that China is digging its heels in and preparing for a drawn-out geopolitical conflict with the U.S.,” said chief economist Diana Choyleva in London. “Prepare for the Great Decoupling.”
“The white paper signaled that the trade standoff between China and the U.S. will be prolonged,” said Zhou Xiaoming, a former commerce ministry official and diplomat. “Don’t expect China to take the initiative to resume the talks. Before Washington makes concessions in key issues, even if the US wants to resume talks, the Chinese side may not respond.”

Click here to download a pdf of this article, Missile.pdf


He warned that the levy “would gradually increase until the illegal immigration problem is remedied at which time the tariff will be removed.” The tariffs could rise as high as 25% on Oct. 1, Trump said in a statement released by the White House.
President Donald Trump vowed to impose a 5% tariff on Mexican goods until that country stops immigrants from entering the U.S. illegally, brandishing a weapon used against a widening group of countries and jeopardizing a new North American trade agreement.

The move, which has major implications for American automakers and other companies with production south of the border and the U.S. economy as a whole, represents Trump’s latest expansion of his trade wars. It comes just days after he removed steel tariffs on Mexico that had caused retaliation against U.S. farm products.

Economists warned the move could hurt both countries. Mexico’s exports to the U.S. account for about four-fifths of total overseas shipments, or about 28% of its gross domestic product, according to Bloomberg chief economist Tom Orlik.

For the U.S. economy, 5% tariffs on $346 billion of Mexican imports means a price tag of about $17 billion, which rises to $87 billion if the taxes increase to 25%. American consumers will feel the impact more than they did with the China tariffs, as price increases for items like food are more directly observable, Orlik said.

Click here to download a pdf of this article, Missile.pdf


Roll update...over 80% complete ahead September taking
lead from June ahead first notice tomorrow. June future's staggered expiration
on June 19 for 10s, 30s and Ultras, and June 28 for 2s and 5s. Update:
* TUM/TUU appr 37,900 from -8.50 to -7.75, -8.0 last, appr 89% complete;
* FVM/FVU appr 58,900 from -5.5 to -5.00, -5.0 last, appr 87% complete;
* TYM/TYU appr 127,000 from -10.25 to -9.5, -9.75 last, appr 86% complete;
* USM/USU appr 5,400 from 20.0 to 20.5, 20.25 last, appr 85% complete;
* WNM/WNU appr 5,400 from -24.25 to -23.5, -23.75 last, appr 87% complete

Click here to download a pdf of this article, Missile.pdf