Aurelia Butler

NEW YORK (Reuters) – U.S. short-term interest rate futures on Monday reflected a reduced chance of an interest rate increase by the Federal Reserve before its two-day March policy meeting.St. Louis Fed President James Bullard, a voter on the policy-setting Federal Open Market Committee, told Bloomberg last Thursday that he was open to the idea of an inter-meeting interest rate hike. He did not repeat that notion in an interview with CNBC on Monday, however. Instead, he doubled down on the need for 100 basis points or a full percentage point of policy-tightening by July 1, slightly faster than he suggested before. That implies at least one hike of a half-percentage point at one of those meetings instead of the quarter-point increases that the Fed used in recent years.In early afternoon trading on Monday, futures on the fed funds rate using February contracts implied just a 3% chance of a rate hike of 25 basis points by the Fed before the March meeting. That was as high as 30% on Thursday after Bullard spoke.Similarly, futures on the secured overnight financing rate (SOFR), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, factored in just a 2% chance of an inter-meeting move on Monday, using February contracts as well, down from a 16% chance factored in late last week. The debate on any move between meetings was made irrelevant by the Fed’s release late on Friday of the schedule for its final month of asset purchases. Fed officials have said the U.S. central bank was unlikely to tighten rates before the conclusion of its bond buying program.”An inter-meeting rate hike was never a likely outcome,” wrote Lou Crandall, chief economist at Wrightson, in a research note.”The primary goal of an emergency move in between meetings is to shore up confidence and staunch any financial market bleeding that might lead to further economic damage. That is why most inter-meeting moves are rate cuts rather than rate hikes.”He added that an argument might be made for a move between meetings if long-term inflation expectations were getting out of control. But the University Michigan’s 5-to-10-year inflation expectations, which held steady at 3.1% in the early February report, dispelled that.”With long-term inflation expectations well within the range of recent decades, there is nothing obvious to be gained by appearing to panic,” Crandall said. More

The White House official was confirming what a source familiar with the matter had earlier recounted to Reuters about a conversation by national security adviser Jake Sullivan with congressional leaders.”Yes it’s something we are considering as part of the additional macroeconomic support we are exploring to help Ukraine’s economy amidst pressure resulting from Russia’s military build-up,” the Biden administration official said.Russia suggested on Monday that it was ready to keep talking to the West to try to defuse a security crisis in which it has massed a huge force within striking distance of Ukraine, while a Ukrainian official said Kyiv was prepared to make concessions. More

Law enforcement agencies and scientists have analysed the genetic make-up of more than 4,000 African elephant tusks seized from poachers over the past 20 years to track international criminal cartels who ship ivory from Africa to Asia. They believe three to five interlinked gangs dominate the illegal ivory trade which continues to drive the slaughter of the world’s largest land animals.The slaughter of African elephants for their tusks has pushed elephants toward extinction in the wild. The continent’s elephant population has fallen from 5mn in 1900 to 1.3mn in 1979 and around 400,000 today.Scientists working with conservation bodies and the US Department of Homeland Security published DNA analysis on Monday showing how tusks from genetically related elephant groups were split up before being shipped out to Asia, the main destination for poached African ivory. The tusks were hidden in different consignments.“These methods are showing us that a handful of networks are behind a majority of smuggled ivory and that the connections between them are deeper than even our previous research showed,” said Samuel Wasser, director of the University of Washington’s Centre for Environmental Forensic Science, before the publication of the research in the journal Nature Human Behaviour. “Identifying close relatives indicates that poachers are likely going back to the same populations repeatedly, year after year, and tusks are then smuggled out of Africa on container ships by the same criminal networks,” he said. “We are laying out whole smuggling networks that are trying to get these tusks off the continent.”John Brown, an environmental crime agent at the Department of Homeland Security, said the three to five organisations believed to dominate the illegal ivory trade use “smuggling processes consistent with those used by the mafia or drug cartels in South America” but appeared less interested than them in maintaining gang loyalty. “They’ll often work side by side, not necessarily competing with each other,” he said.Brown said the DNA forensic analysis was already paying off by providing a “road map for multinational collaborative investigations”.Although Brown was unwilling to talk about specific investigations, Wasser said the analysis of multiple shipments led to the arrest of two suspected criminals from the Democratic Republic of Congo who were arrested in Seattle in December.

“It really strengthens prosecutions if you can show that an individual is responsible for a large number of shipments and not just one shipment,” said Wasser. The researchers said the distribution of elephant poaching had changed in recent years, with fewer cases in east Africa and more in other regions including central and west Africa and the southern “transfrontier” region where an estimated 230,000 of the continent’s remaining 400,000 elephants live.But Brown and Wasser said there was no evidence to show a sustained overall reduction in the slaughter. They estimate that poachers gather 500 tonnes of ivory a year, only 10 per cent of which is seized by smugglers.The 1990 ban on the ivory trade imposed under the Convention on International Trade in Endangered Species, which has since been bolstered by bans imposed by individual countries, has not made as big an impact on poaching as had been hoped. Wasser said he and other experts believe entrepreneurs are buying tusks for stockpiling.“It sounds horrible but they may be waiting for elephants to go extinct,” he said. “If they are holding all the ivory when there are no more elephants, they can sell it and all of a sudden they can make a fortune.” More

Bond markets are signalling increasing concern that the US central bank will derail the recovery from the pandemic by overreacting to severe inflation that is sweeping across the world’s biggest economy. Short-term US government bonds have declined sharply this year, in a sell-off that gained momentum after the release of data last week showing consumer prices surged in January at the swiftest clip in four decades. The price fall has sent the yield on two-year Treasury notes, which are highly sensitive to monetary policy expectations, soaring to 1.6 per cent on Monday from 0.5 per cent three months ago. Yields on debt maturing many years in the future — typically a barometer for investors’ assessment of economic growth prospects — have also risen, but to a lesser degree than those on the shorter end of the spectrum. The result has been a dramatic “flattening” of the yield curve, as a narrowing gap between short- and long-dated yields is known. The move comes as traders now expect the Federal Reserve to deliver about seven quarter percentage point interest rate increases this year in its attempt to cool inflation. However, the flattening of the curve indicates that investors expect this policy could backfire by slowing the economy too aggressively.“The US is now more definitively moving towards a late-cycle environment where Fed expectations are being repriced for ‘bad’ reasons,” said George Saravelos, Deutsche Bank’s global head of currency research. Supply constraints in the economy are fuelling inflation, “requiring the central bank to slow down growth,” he added.The difference between two and 10-year yields shrunk to 0.4 percentage points on Monday, its narrowest point on a closing basis since April 2020, having declined sharply in the wake of last week’s US inflation data. The difference in these two yields was about 1.2 percentage points a year ago. Parts of the yield curve have even begun to flip upside down, typically an ominous signal for investors’ economic outlook. For example, seven-year yields on Monday ticked up above 10-year yields. This highlights the difficult balance the Fed has to strike between raising interest rates to tame inflation, but not moving so far that it hampers the economic recovery. A more complete inversion of the curve — such as 10-year yields falling below short-term interest rates — has in the past been a reliable predictor of recession.

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“This is a very tough spot for the Fed,” said Edward Al-Hussainy, a rates strategist at Columbia Threadneedle. “[They] may have to live with an inverted curve for some time to squeeze out inflation risk.”Though a flattening yield curve is typically a sign of a slowing economy, there has been no evidence of that yet. The US earlier this month reported higher than forecast jobs growth in January and unexpectedly revised upwards employment figures for December and November. And the US economy grew last year at the fastest annual pace since 1984.Some investors argue that while the Fed — and other central banks — made a mistake by being overly tolerant of inflation, they risk compounding that by tightening too fast as they play catch-up. Markets are now pricing in a high probability that the Fed lifts interest rates by an unusually large half a percentage point in March. “We believe that a [0.5 percentage point] hike could do more harm than good as it could be seen by markets as a tacit admission of a policy error, requiring policymakers to jam the brakes on much more abruptly and raising recession risk in the quarters to come,” said Mark Dowding, chief investment officer at BlueBay Asset Management.The current dilemma is not unique to the Fed. In the UK, where the Bank of England has already raised interest rates twice, the flattening of the yield curve has been even more dramatic. Traders expect six more BoE rate rises this year, despite a weaker growth outlook than that in the US. The gap between two and 10-year yields is just 0.09 percentage points, while the yield curve is inverted in several places. Three-year bond yields, at 1.48 per cent, are higher than 50-year bond yields. Ultimately, some analysts argue, central bankers may need to choose between curbing inflation and keeping the recovery on track.“If the Fed can fight inflation in the short term but that leads us into a recession, their credibility is maintained, and the US does not get into this stagflationary world,” said George Goncalves, head of US rates strategy at MUFG. “Then real growth prospects in the distant future should be better. That’s the most optimistic that I can get at this point.” More

The writer is a fellow at the American Enterprise Institute, a think-tankWar is an indisputably frightening spectre. But while Russian troops mass on the border with Ukraine, we should not lose sight of the fact that states seeking to intimidate and punish their adversaries are much more likely to use non-military methods, from cyber attacks to intellectual property theft to stealthy acquisitions of companies developing sensitive technologies. This so-called greyzone aggression, which falls below the threshold of formal conflict, takes place every day. Increasingly, companies are the target. A new survey by international insurance broker WTW, due out next month, reveals profound industry concern about being caught in the greyzone crossfire. Last January, Sweden’s foreign trade minister, Anna Hallberg, suddenly received a string of alarming text messages from Ericsson’s chief executive, Börje Ekholm. Sweden’s telecoms agency, the PTS, had decided to exclude Ericsson’s Chinese rival Huawei from Sweden’s 5G network, and Ekholm was afraid Beijing would retaliate against his company. “At the moment Sweden is a really bad country for Ericsson,” Ekholm complained in his messages to the minister. He was right to be alarmed: Beijing swiftly cut Ericsson’s business in China, one of the company’s key markets.Ericsson’s fate has not gone unnoticed in global boardrooms. Nor has the rollercoaster ride experienced by European energy companies after they joined Russia’s Nord Stream 2 gas pipeline, or the woes of countless European companies whose cargo, containing Lithuanian parts, was held up in Chinese ports in revenge for Vilnius’ closer relations with Taiwan. Geopolitical aggression directed at companies has become such a pronounced trend that this year WTW added it to its annual risk survey.The results of this poll make for sobering reading. Nearly three-quarters of companies expressed concern about state-sponsored cyber attacks, while over half are worried about government-led retaliation against private companies in international diplomatic disputes. Just under half reported concerns about growing use of sanctions targeting private companies or individuals. (With the renminbi increasingly able to compete with the dollar, Beijing will soon be able to follow Washington’s path and impose sanctions on companies of its choosing.) In total, 40 per cent worry about state-sponsored theft of intellectual property, and 31 per cent fear state-directed acquisitions of sensitive technologies. This brings a dilemma for business leaders, who are used to operating in a world of globalise-or-lose. Now globalisation itself poses a risk. Had Ericsson exclusively sold its wares in western countries, Sweden’s 5G decision would have been of no consequence. But even as confrontation between states appears to be increasing, the operation of a global market place remains indispensable for companies and countries alike. If governments really want to prevent their companies being crippled by state-sponsored cyber attacks and coercion, they must set up regular consultations about prospective threats. Establishing such dialogue with top executives would enable security officials to alert critical industries to potential aggression headed their way. It would also open a channel for executives to contribute threat intelligence to government.Such links are essential preparation for if an attack does occur — they would allow businesses, diplomats and security personnel to put up a united front. Desperate text exchanges between chief executives and ministers are in no one’s interest. Dialogues between governments and industry won’t eliminate greyzone attacks, but they will remove their sting. In an era in which geopolitics is challenging the very principles of globalisation, that is no mean feat. More