Aurelia Butler

Nato has accused Moscow of escalating its war on Ukraine after Kremlin allies in occupied territories announced referendums to join Russia and the country’s parliament approved legislation that clears the way for military mobilisation.Four Moscow-controlled regions in Ukraine will hold votes this week, a step that the Kremlin has resisted to date and which western powers and Kyiv immediately denounced as a sham. Russia’s Duma also passed a law on Tuesday to increase penalties for desertion and evasion of conscription in the event of mobilisation, a further sign of Moscow’s hardening stance. On Tuesday, US secretary of state Antony Blinken called the referendums “the sign of Russian failure”. “If these referenda proceed, and if Russia purports to annex Ukrainian territory, the United States will never, never recognise it,” he said during the UN General Assembly in New York.Jens Stoltenberg, secretary-general of Nato, decried the referendums as “a further escalation” of the war. “Sham referendums have no legitimacy and do not change the nature of Russia’s war of aggression against Ukraine,” he said.Go deeper: FT reporters take a look at what Putin’s next move could be. Thanks for reading FirstFT Asia. Share feedback on today’s newsletter at [email protected]. — EmilyFive more stories in the news1. China EV maker targets Hong Kong’s biggest IPO of 2022 Electric vehicle maker Zhejiang Leapmotor Technology is seeking to raise as much as $1bn in what would be Hong Kong’s largest initial public offering this year, in the latest test of investor appetite for China’s fast-growing EV market.2. Ecuador reaches debt restructuring deal with China The government of centre-right president Guillermo Lasso said it had reached a $1.4bn deal with two Chinese banks to extend the maturity on loans and reduce interest rates and amortisation. China has been Ecuador’s most important financial partner for the past decade, beginning under leftist former president Rafael Correa, who was in office from 2007-2017.3. Investors in Trump media Spac scramble for better terms Donald Trump and the backers of a blank-cheque company that plan to take his Truth Social media business public are pushing to renegotiate a $1bn financing package with investors ahead of a crucial deadline for the deal. Related news: Chamath Palihapitiya, one of the big boosters of special purpose acquisition companies, has thrown in the towel, returning $1.5bn to investors after failing to find targets.4. Private equity may become a ‘pyramid scheme’, warns Danish pension fund Mikkel Svenstrup, chief investment officer at ATP, compared the private equity industry to a pyramid scheme, warning buyout groups are increasingly selling companies to themselves and to peers on a scale that “is not good business”.5. Number of super-rich individuals swells by a fifth The ranks of the super-rich swelled in 2021, with the number of people worth over $100mn increasing by 21 per cent to 84,500, according to the latest Credit Suisse Global wealth report.The day aheadCardinal Zen faces trial in Hong Kong After the start of the trial, originally set for Monday, was delayed after the judge contracted Covid-19, Cardinal Joseph Zen Ze-kiun and five well-known members of the Democratic Front are due to appear in a court today, accused of failing to properly register a humanitarian fund for which they were administrators.

Cardinal Joseph Zen, centre, at a new year protest in Hong Kong in 2019 © Kin Cheung/AP

US interest rate decision The Federal Open Market Committee is expected to announce today that it will raise interest rates by at least 0.75 percentage points for the third time in a row as it tries to hit the brakes on the overheating US economy.UK business secretary announces support scheme Jacob Rees-Mogg is expected to share details of a business support scheme for companies on Wednesday, ahead of chancellor Kwasi Kwarteng’s “mini-Budget” on Friday.What else we’re reading Hong Kong pins hopes on rugby sevens to rejuvenate city Hong Kong is betting on November’s return of the rowdy rugby sevens tournament to restore the Asian financial centre’s fortunes as the city’s leader said he would “actively study” relaxing a hotel quarantine requirement that has frustrated businesses and residents of the territory since 2020.Indonesia’s unexpected success story As sharply rising US interest rates add to economic problems in the developing world, Indonesia appears unruffled, and its economy is prospering. Yet even as investors pile in, some worry about the sustainability of Indonesia’s newfound stability, particularly its politics.Europe ditches negative rates as inflation surges The era of negative interest rates in Europe is set to end this week when Switzerland’s central bankers leave Japan as the sole proponent of one of the most controversial economic experiments of recent times. After more than a decade, the policy ultimately fell short of hopes that it would quickly vanquish the threat of deflation and revive growth.‘Magic numbers’ are clouding the climate debate Climate change has become an existential crisis of notable exactitude, its parameters mapped out by precise temperature rises, thresholds, deadlines and “tipping points” of no return. But some scientists say climate messaging needs a fundamental reset to make it more accurate and relevant to our lives.Are the British the worst idlers in the world? In the 2012 book Britannia Unchained, five Conservative MPs argued: “Once they enter the workplace, the British are among the worst idlers in the world.” Given that two of the book’s authors were Prime Minister Liz Truss and chancellor Kwasi Kwarteng, Sarah O’Connor says it is worth asking: is there any truth to it?Style Baseball caps are back, but what about in the office? Even in our casualised, post-lockdown world, workplace hats may be a step too far, writes Teo van den Broeke. More

The Federal Reserve’s highly anticipated policy decision arrives later on Wednesday, with markets bracing for another big dose of tightening. The lead-up to the U.S. central bank event has been bumpy and could spell more volatility for Asian markets in the hours before the Fed’s statement.Ahead of the rate decision, rates continued their ascent. Yields on the benchmark U.S. 10-year Treasury note hit 3.6% on Tuesday, their highest since 2011. The 2-year Treasury yield, which tracks Fed rates closely, approached 4%, the highest since 2007.Equity markets are struggling to digest the persistent move up in rates. The S&P 500 slid 1.1% and touched its lowest point in two months, as traders positioned ahead of the Fed. MSCI’s gauge of stocks across the globe also sank to a two-month low.On Tuesday, Sweden provided the appetizer for the feast of central bank action to follow the rest of the week. The country’s central bank caught markets off-guard in hiking interest rates by a larger-than-expected full percentage point. Will Sweden prelude a similar outcome in the U.S.? Markets are bracing for the Fed to raise rates by 75 basis points, but since inflation data came in hot last week, they have been pricing in a chance of a full percentage point hike. Such odds were around 16% late on Tuesday.Beyond Wednesday’s rate move, what Fed Chair Jerome Powell has to say in a press conference following the decision will be critical for investors seeking to gauge the rate trajectory going forward. How Powell is thinking about the threat to the economy from higher rates is also top of mind.Central banks in England, Switzerland and Japan will have their say later in the week.Key developments that could provide more direction to markets on Wednesday: Federal Reserve policy statement/press conferenceBank of Japan meeting beginsKorea 20-day exportsSpeech by Reserve Bank of Australia’s deputy governor More

NEW YORK (Reuters) -The yield on two-year U.S. Treasury notes, a rough gauge of interest rate expectations, rose to almost a 15-year high on Tuesday, a day before the Federal Reserve is likely to hike rates by 75 basis points as it continues to fight inflation.The two-year is highly sensitive to shifts in monetary policy expectations and early on Tuesday it hit 3.992%. The last time its yield broke above 4% was Oct. 18, 2007.The Fed is due to announce its latest policy decision on Wednesday. Money markets are fully pricing in a 75 basis point rate hike, with the chance of a larger full-point rate hike fading to just 16%, according to CME’s FedWatch tool. Sweden’s central bank earlier raised rates by a larger-than-expected full percentage point to 1.75% and warned of more to come as it joins other central banks around the world that also are jacking up rates to tame inflation.Fed Chair Jerome Powell will stand by his hawkish stance and desist offering a moderate tone that has driven recent post-meeting rallies, said Johan Grahn, head of ETF strategy at AllianzIM. “I don’t think you’re going to see even a single dovish feather. He’s tried that a couple of times and then he gets the exact opposite from the market,” Grahn said.Yields on the benchmark 10-year Treasury shot to 3.604% before paring some gains. They were up 8.6 basis points to 3.575% after topping 3.5% for the first time in 11 years on Monday. The two-year yield rose 2.5 basis points to 3.971%. The 10-year moving higher and faster than the two-year could be positioning ahead of Wednesday’s Fed statement or it could be Sweden’s Riksbank raising rates more than expected, said Lawrence Gillum, fixed income strategist at LPL Financial (NASDAQ:LPLA).”What’s happening for the Fed and other central banks is there’s a push to front-load these rate hikes,” Gillum said.”There’s a lot of jitters and some pre-positioning that’s going into (Wednesday’s) meeting,” Gillum added. “Foreign rates moving higher, that makes our rates less attractive.”The closely watched gap between two- and 10-year yields earlier reached a discount of as much as -47.5 basis points, approaching its most negative since Aug. 10 when the discount widened to -56.2 basis points. The gap later narrowed to -39.8 basis points. The two- and 10-year yield inversion, when the short end is higher than the long end, often has been seen as a reliable predictor of a recession in a year or two.After the Fed statement on Wednesday the market will try to gauge whether the central bank will raise rates by 50 basis points in November, said Anthony Saglimbene, chief market strategist at Ameriprise Financial (NYSE:AMP) in Troy, Michigan.”I don’t think they’re going to communicate that, but I think the market will try to anticipate that and if they do, then you could see over the coming months some equilibrium level in rates,” Saglimbene said. “The terminal rate at which the Fed will stop raising interest rates is higher, and that terminal rate is likely to last longer,” Saglimbene added. “All of it is centered around inflation pressures that are more persistent.”Tighter monetary policy is pushing rates up and different securities are setting new milestones. The breakeven rate on five- and 10-year Treasury Inflation-Protected Securities, or TIPS, have surged to 13- and 12-year highs, respectively.The five-year TIPS breakeven rate was last at 2.546%, while the 10-year TIPS breakeven rate was last at 2.403%. The latter indicates the market sees inflation averaging about 2.4% a year for the next decade.The yield on the 30-year Treasury bond rose 7.2 basis points to 3.577%. The U.S. dollar five years forward inflation-linked swap, seen by some as a better gauge of inflation expectations due to possible distortions caused by the Fed’s quantitative easing, was last at 2.410%.The Treasury sold $12 billion in 20-year bonds with a high yield of 3.82%. The auction was “pretty well bid,” with yield about 1.5 basis points lower than the market at the bidding deadline, Lou Brien, market strategist at DRW Trading, said in a note.Sept. 20 Tuesday 3:45 PM New York / 1945 GMTPrice Current Net Yield % Change (bps) Three-month bills 3.2675 3.3408 0.039 Six-month bills 3.7725 3.8995 0.021 Two-year note 98-170/256 3.9707 0.025 Three-year note 98-192/256 3.9481 0.048 Five-year note 97-42/256 3.7588 0.066 Seven-year note 96-128/256 3.7011 0.084 10-year note 93-44/256 3.5748 0.086 20-year bond 93-164/256 3.8346 0.062 30-year bond 89-116/256 3.5771 0.072 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 38.00 1.25 spread U.S. 3-year dollar swap 17.50 0.25 spread U.S. 5-year dollar swap 8.75 0.50 spread U.S. 10-year dollar swap 6.25 -0.50 spread U.S. 30-year dollar swap -31.25 -1.75 spread More