Investors Express Concerns Over Basis Trade Risks as Treasuries Lose Safe Haven Appeal [Bloomberg]
“It resembles the chaotic fluctuations we observed in March 2020, possibly linked to the basis trade,” explained a portfolio manager at Marlborough Investment Management. “Last week, we hadn’t detected any indications of hedge funds being forced out of the bond futures basis, but all of a sudden, we witnessed a surge in yields.”
On Wednesday, the Treasuries market experienced a decline for the third consecutive day, with 10-year yields soaring by as much as 22 basis points, while their 30-year counterparts climbed even higher before slightly reducing their losses. The long-term benchmark has skyrocketed over 40 basis points this week, indicating significant turbulence in the market.
China Prepares Trade-War Tactics Targeting U.S. Businesses [WSJ]
On Wednesday, China announced a substantial increase in tariffs on all U.S. imports to 84%, as a countermeasure against the newly imposed U.S. tariffs of 104% on Chinese imports that came into effect at midnight. While Trump has primarily relied on tariffs as his weapon of choice in trade negotiations, China’s strategy extends beyond mere levies, leveraging the appeal of its vast market to influence U.S. companies. A critical element of this approach is to create challenges for companies that heavily depend on their connections with the world’s second-largest economy, demonstrating a strategic depth in their trade policy.
Volatile Markets Heighten Uncertainty Regarding Trade Deal Outcomes [DealBook]
For those contemplating a deal with Trump, the question arises: what should your next move be? Given the declining markets, increasing indicators of a potential recession, and rising anxiety among Republican lawmakers and donors, coupled with escalating public disputes within Trump’s inner circle, one might consider allowing the situation to develop further before engaging in negotiations. However, this strategy could be a significant risk, especially with Trump’s hawkish trade advisers, like Peter Navarro and Steve Miran, establishing stringent rules for negotiations that some observers have compared to a “shake-down operation,” creating an environment of high stakes and uncertainty.
Summers Predicts Significant Economic Downturn and Job Losses in the U.S. [Bloomberg via Yahoo!]
“We are likely to witness a decrease in household income of $5,000 per family or more,” warned Summers. He emphasized that there will be “critical decisions” in the upcoming weeks regarding tariff policies proposed by President Donald Trump, which could surpass even those from 1930 that contributed to the Great Depression. Summers advised that it would be prudent to reconsider the policies that have been declared, highlighting the importance of strategic adjustments in response to evolving economic conditions.
Jamie Dimon Acknowledges Recession Risks Linked to Tariff Instability [CNBC]
“When you observe a 2,000-point decline,” Dimon remarked on Fox Business’ “Mornings With Maria” show, “it tends to create a self-perpetuating cycle, doesn’t it?” He noted that such market fluctuations can evoke feelings of financial loss in 401(k) accounts and retirement pension funds, prompting individuals to reduce their spending.
“While markets aren’t always accurate, there are instances when they accurately reflect reality,” Dimon continued. “This time appears to be one of those instances, as they are pricing in uncertainty at both the macroeconomic level and the microeconomic level, affecting individual companies and potentially influencing consumer sentiment. The situation remains complex and difficult to predict.”
Quant Hedge Fund Renaissance Faces Significant Losses Amid Tariff-Driven Market Disruption [FT]
The Renaissance Institutional Equities Fund, a prominent strategy within the hedge fund’s offerings to external investors, reported a decline of approximately 8 percent for April as of last Friday, according to sources familiar with the data. This downturn has diminished the fund’s gains for 2025 to 4.4 percent. However, one of Renaissance’s smaller strategies performed relatively better during the recent market upheaval. The Renaissance Institutional Diversified Alpha Fund, which managed approximately $3.6 billion as of last September, experienced a decline of 2.4 percent in April but has achieved a notable return of 11.5 percent for the year, showcasing the varying impacts of market conditions on different investment strategies.
