Bloomberg

Treasuries Fall on Inflation Concerns, Stocks Drop: Markets Wrap

(Bloomberg) — US Treasuries retreated and stocks in Asia slumped amid concern that faster inflation will keep driving interest rates higher and geopolitical threats will crimp economic growth.

The yield on the policy-sensitive two-year Treasury rose to the highest since 2007, while the 10-year climbed more than 10 basis points to 3.99%. The 30-year yield surged to the highest since 2014.

The mood remains fragile ahead of Thursday’s US inflation data, with the case for another 75 basis-point rate hike likely to be strong if the data comes in hotter-than-expected. 

In equities, chip-related stocks in Japan, South Korea and Taiwan posted some of the biggest losses after traders returned from holidays and joined the global selloff in semiconductor shares. 

The Biden administration’s curbs on China’s access to US semiconductor technology has wiped out more than $240 billion from the sector’s market value globally and spilled over into the currency market, weighing on the Korean won and Taiwan dollar. 

A measure of greenback strength climbed to the highest this month and the yen traded within sight of the original level that spurred Japanese authorities to defend the currency in September. The yuan slid as worry mounts that Beijing will uphold its Zero Covid policy well after the Chinese Communist Party Congress this month.

Investors continued to parse comments from Federal Reserve officials for any signs of a let up in the central bank’s hawkish stance. Vice Chair Lael Brainard laid out a case for caution, noting that previous rate increases were still working through the economy. Chicago Fed President Charles Evans said he wants to quickly get to a point where policy makers can feel comfortable pausing in order to reduce the risk of overshooting. 

Fed officials have been trying to enunciate that they are not going to reverse rates quickly next year, according to Laura Fitzsimmons, executive director of macro sales at JPMorgan’s Australian unit. “And I think that’s a message that the market has needed to hear for some time now and it needs to become really entrenched in people’s expectations,” she said on Bloomberg Television.

The heads of the International Monetary Fund and World Bank warned of a rising risk of a global recession as advanced economies slow and faster inflation forces the Fed to keep raising interest rates, adding to the debt pressures on developing nations.

Meanwhile, Russian President Vladimir Putin threatened further missile attacks on Ukraine after hitting Kyiv and other cities in the most intense barrage of strikes since the first days of its invasion, marking a dangerous new escalation in the war.

“It’s little wonder investors enter the week in a dreary mood, especially with headlines from Ukraine signaling a further escalation in geopolitical tensions,” Christopher Smart, chief global strategist at Barings, said in a note. “Of course, markets are meant to look ahead, but it’s hard not to see the next few quarters bringing more of the same.” 

Oil markets slipped as concerns of slowing demand again came to the fore, adding resistance to a rally spurred by OPEC+’s output cut. Gold remained under pressure after ending the previous volatile session lower.

Key events this week:

  • Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock Inc., Delta Air Lines Inc., UnitedHealth Group Inc., U.S. Bancorp, Wells Fargo & Co.
  • IMF’s World Economic Outlook and Global Financial Stability Report, Tuesday
  • Fed’s Loretta Mester speaks, Tuesday
  • BOE’s Andrew Bailey speaks, Tuesday
  • FOMC minutes for September meeting, Wednesday
  • US PPI, mortgage applications, Wednesday
  • OPEC Monthly Oil Market Report, Wednesday
  • Fed’s Michelle Bowman and Neel Kashkari speak
  • ECB’s Christine Lagarde speaks
  • US CPI, initial jobless claims, Thursday
  • G-20 finance ministers and central bankers meet, Thursday
  • China CPI, PPI, trade, Friday
  • US retail sales, business inventories, University of Michigan consumer sentiment, Friday
  • BOE emergency bond buying is set to end, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.5% as of 7:09 a.m. London time. The S&P 500 fell 0.7% on Monday
  • Nasdaq 100 futures were down 0.4%. The Nasdaq 100 fell 1%
  • The Topix Index fell 1.9%
  • The Kospi index was down 2%
  • The Hang Seng Index fell 1.6%
  • The Shanghai Composite Index rose 0.1%
  • S&P/ASX 200 Index fell 0.3%
  • Euro Stoxx 50 futures fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.3%
  • The euro fell 0.2% to $0.9684
  • The Japanese yen was little changed at 145.79 per dollar
  • The offshore yuan fell 0.5% to 7.1892 per dollar
  • The British pound fell 0.4% to $1.1013

Cryptocurrencies

  • Bitcoin fell 1% to $19,043
  • Ether fell 2.4% to $1,275

Bonds

  • The yield on the 10-year Treasury climbed nearly 11 basis points to 3.99%
  • Australia’s 10-year yield advanced 17 basis points to 4.04%

Commodities

  • West Texas Intermediate crude fell 0.5% to $90.66 a barrel
  • Gold was little changed

(An earlier version of this story was corrected to add missing reference to the 10-year Treasury yield)

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

Transcript ‘In Trust’ Episode 7: The Ranch Bid

(Bloomberg) — This is the transcript for the seventh episode of the Bloomberg and iHeart investigative podcast “In Trust.” Learn more and subscribe to “In Trust” on iHeart, Apple or Spotify. 

Our transcripts are generated by a combination of software and human editors, and may contain slight differences between the text and audio. Please confirm in audio before quoting in print. 

Episode 7: The Ranch Bid

Rachel Adams-Heard So you were part of the government that did the Bluestem acquisition?

Raymond Red Corn That’s correct. 

Rachel Adams-Heard What was that process like? 

Raymond Red Corn Fast. Really, really fast. 

Rachel Adams-Heard This is Raymond Red Corn. He’s retired now. But until recently, he was Assistant Principal Chief of the Osage Nation. That was his title in 2015 — when the rumors started.

Raymond Red Corn We’d only heard them for about a week. That that ranch, Ted Turner’s Bluestem ranch, might come up for sale. 

Rachel Adams-Heard Ted Turner’s Bluestem Ranch. More than 40,000 acres of land in Osage County — owned by the billionaire founder of CNN. Land he might be selling. That could be up for grabs for the first time in years. 

Raymond Red Corn And then a cowboy out there called Chief and told him that it was true, and they were going to be on a really tight timeline. And that successful bidders would have to get pretty much everything together for a purchase worth tens of millions of dollars in 30 days.

Rachel Adams-Heard This was land made up of so many original Osage allotments. A huge chunk of land that the Osage Nation had bought more than a century ago. That the tribe had held the property title to, before the US government privatized it. 

This ranch had been built up in the decades after allotment, long before Ted Turner bought it in the early 2000s. And before Ted Turner held title to this land, another big rancher had it — a man named Chuck Drummond. He’s the grandson of one of the Drummond brothers who started the family’s cattle business, Cecil Drummond.

Some of the parcels that made up Turner’s ranch were deeded to Cecil a long time ago, including a section William Hale owned before he went to prison. That land passed to another White man, who later sold it to Cecil in 1929. Other sections the Drummonds bought more recently.

But in 2001, Chuck Drummond did something his family rarely did: he sold this sprawling piece of land. Ted Turner was the buyer. And some 15 years later, Turner was putting it on the market again. 

Raymond Red Corn All of us who have lived here our entire lives understood that this represented an opportunity to buy one of the biggest chunks of Osage County that would come on the market in our lifetime. And it was, you just took a deep breath and, “Let’s go. I don’t know how it’s going to turn out, but we’re going to swing for the fence and see if we can get this done.”

Rachel Adams-Heard  Swing for the fence. That’s what the Osage Nation had to do if it wanted a chance to own this land — again. So in 2016, they swung, hard.

This is “In Trust.” I’m Rachel Adams-Heard.

Rachel Adams-Heard Raymond Red Corn and other Osage government leaders spent a pretty tense several weeks trying to buy Ted Turner’s Bluestem Ranch. We’ll get to that. But the story of that moment — the Osage Nation’s chance to buy the biggest piece of Osage County coming on the market in Raymond’s lifetime — it couldn’t have happened without something else. Something that happened a decade earlier. This was when Jim Gray was chief. You heard him in the first episode.

Jim Gray What I remember from that night was, is that, why is it taking so long? It doesn’t normally take this long, does it? 

Rachel Adams-Heard  This is June of 2002. Election night. Jim’s on the ballot. He’s running for chief. He and his family and supporters are waiting on the results. 

Jim Gray Is it always done this way? No, no. What they’re doing is different this year. What are they doing different this year? Oh, they’re not doing it by hand. They’re running it through a machine. I said, “Well, shouldn’t that supposed to make it quicker?”

So it was after midnight, probably 12:30 or something like that, and everyone’s getting tired. A lot of people left, you know. But the diehards are still hanging out, you know, and next thing, you know, boom, they put the final results on there. And there was a couple of my supporters in front of me and I was standing behind them and I said, “What is it? What is it?” And my cousin turned around, looked at me and he goes, “You won!”

And it was just like, oh my god! I was just blown away. I mean, my whole family came, we had a big group hug and there was just screaming and hollering. And um, no one saw that coming. I didn’t see it coming. 

Rachel Adams-Heard Jim didn’t see it coming, in part because he was pretty young as far as political candidates go. He was also running on something kind of radical — he wanted to completely reform the Osage Nation’s government. Write a new constitution. Build a new nation. 

Because when the 1906 Act allotted the reservation, it also dismantled the Osage Nation’s existing government. Appointed a whole new governing body, called the Osage Tribal Council. But Jim says, that new government was limited in power, and that left the Osage Nation vulnerable.

Jim Gray We didn’t have the power to do anything except meet once a month, approve oil leases, go about your business. That was it. So it was a very minimal role. But when people started getting killed, people were looking to the council for leadership. But by that time they were powerless. They didn’t really have any power to do anything.

Rachel Adams-Heard This whole time, under the rules of the 1906 Act, the only Osages who could vote in tribal elections were Osages who had headrights, meaning a lot of people were disenfranchised from their own government. They couldn’t vote until an older relative passed away, and they inherited their headright share.

Jim Gray I mean, when you lost your ability to govern yourself and then you see what happens when you’re not able to govern yourself and you get exploited, it’s easy to see why something had to change. And it wasn’t going to change from the outside in. It was going to have to change from the inside out.

Rachel Adams-Heard Efforts to reform the Osage government had gone on for decades. In the early ’90s, a group of Osage citizens brought a lawsuit that resulted in a court-ordered government reform. Osage voters approved a new constitution, one that opened up citizenship beyond just Osages who had headrights. But within a few years, another court decision reversed that.  

Jim Gray So we got a taste of what democracy was like, and then it was taken away from us. And that government that was there for just maybe a couple years disappeared, and it was replaced by the tribal council again. 

Rachel Adams-Heard By the time Jim ran for chief, conversations about reforming the Osage government were taking on new urgency. There was a real concern that, because of the way the 1906 Act was worded, the US government could decide the Osage Nation no longer existed once the last original allottee died. 

Jim Gray There was some people at the solicitor’s office in DC that felt like that was the basis of the trust. If you don’t have any original allottees, because they closed the rolls in 1906 — didn’t make any more Osages in the eyes of the law — then do we still have a trust relationship to the Osages? That was a question that no one really had a clear answer to.

Rachel Adams-Heard And in 2002 — almost a hundred years after allotment — there weren’t many original allottees left. 

Jim Gray A lot of discussions were happening in Osage country. About how long can we keep doing this? Knowing that the population of Osages without a headright is starting out number the Osages with headrights. How long can we keep doing this? We’re losing original allottees every year. 

Rachel Adams-Heard  So Jim runs for chief on reforming the government for good. Coming up with a government that served all Osages, whether or not they had a headright. Mostly, he tells me, he didn’t think he’d win. He just thought he was forcing the issue into the spotlight again. Getting people to talk about it, to come up with a path forward for the Osage Nation. But as Jim campaigned, a sort of coalition formed. And on that night in June of 2002, it wasn’t just Jim who won on the idea that the Osage Nation needed a new constitution. 

Jim Gray Everybody who ran and won on that council, ran on that issue as well. It was the biggest wipe out in the tribal council election since it started. 

I think we all knew it was time. I think we all felt it. I mean, one member of the council in particular, really — we were at one of those political events where everyone got chance to speak for a few minutes and sit down, you know. And this gentleman was probably in his late 70s and his mom lived into her 90s and he took care of her and she was in a nursing home and all that, you know. And when she finally passed on, he finally got to vote at the age of 77. If there ever was a poster child for government reform, he was it. He was a living breathing example of what’s wrong. That should never have been the case. He should never have to wait that long to consider himself Osage. And his talk at these events was so emotional. You couldn’t help but draw a tear, just hearing him talk about it. 

Rachel Adams-Heard Because the Osage Nation’s existing government was established under the 1906 Act, the Osage Nation wouldn’t be able to reform its own government without the US government — without an Act of Congress. Jim says this was the only federally recognized tribe with this kind of arrangement. Other tribal nations were able to determine who was a citizen themselves. But the Osage Nation needed to get federal lawmakers on board to change those rules. 

So that was the first step. Simple. An Act of Congress. 

Jim Gray I was under no illusion that when I campaigned in 2002 I was going to get a federal law passed. I know how sketchy politics is in Washington. And I wasn’t that naive to think that, “Oh yeah, I’ll do this. I’ll knock it out in two years, we’ll be back in business.” You know, that’s crazy talk.

Rachel Adams-Heard Even though it seemed like a long shot, Jim and other Osage leaders got to work. They lobbied the US Congress. Made their case. They brought lawmakers down to Oklahoma to hear from Osages who were unable to participate in their own government. And sure enough, in 2004:

(Audio clip from Congressional hearing:“Mr. Speaker, I’m here today to bring my strong support to HR 2912 to reaffirm the inherent sovereign rights of the Osage tribe to determine their membership and form of government because of a law created in 1906 by this Congress, the Osage tribe have not been afforded the same rights as every other federally recognized tribe.”)

Rachel Adams-Heard This is tape from the House floor, as U.S. lawmakers are about to pass the Osage Reform Act.  The bill is simple, short. There are basically two key lines. 

The first: “Congress hereby reaffirms the inherent sovereign right of the Osage Tribe to determine its own membership, provided that the rights of any person to Osage Mineral Estate shares are not diminished thereby.” 

And the second: “Congress hereby reaffirms the inherent sovereign right of the Osage Tribe to determine its own form of government.”

(Audio clip from Congressional hearing: “The question is, will the House suspend the rules and pass HR 2912. So many as are in favor, say ‘aye.’ Those opposed, ‘no.’ In the opinion of the chair, two-thirds of those present, having voted in the affirmative, the rules are suspended. The bill is passed, and without objection.” )

Rachel Adams-Heard The bill passed the House in June 2004, and a few months later, it passed the Senate. 

Jim Gray It was unanimous from both houses. You know how they do those list of bills that aren’t controversial — like naming a street or something, or a post office, you know.  So the House did their version, the Senate did their version, and it went to the president’s desk for signature and Dec. 3, 2004, he signed it. 

Rachel Adams-Heard The Osage Nation could decide who its citizens were, and it could create whatever kind of government it wanted. This is also when the real work began. Because the Osage Nation, it needed a new constitution. 

Priscilla Iba It was just, oh gosh, it was kind of scary. 

Rachel Adams-Heard This is Priscilla Iba. She was on the commission that was in charge of writing the new constitution. A vice-chair. She helped lead listening sessions as they tried to figure out what people wanted from this process — what they wanted from their government.

Priscilla Iba I think people did say “I’m Osage” before, but, um, but there was always that feeling that, well, “I guess I’m really not, I can’t vote on anything, I don’t have any say in what goes on.” So I think it’s truly just having a say, and that just obviously makes you feel like that government is yours. This tribe is yours. 

Rachel Adams-Heard Priscilla told me, these meetings went about how you’d expect them to. People had different ideas. Didn’t always agree. They wanted to know what would happen to the Mineral Estate. How the Osage Nation would decide citizenship?

Even establishing the process for coming up with those answers was challenging. No one on the commission had ever written a constitution for a sovereign nation before. Priscilla said it was rocky at first.

Priscilla Iba We were just glassy-eyed, you know. We didn’t know what we were doing, but we were ready to be trained. We learned a lot and,  talked to a lot of people. And there were some rough moments early on, because we didn’t know each other and we didn’t trust each other. We didn’t have the same politics. I mean, we were all very different.

Rachel Adams-Heard A year into the process, Priscilla tells me the commission was still finding its feet. The commissioners consulted a dozen Osage lawyers, and hired a program coordinator, a woman named Hepsi Barnett who would later serve as the new government’s chief of staff. 

Priscilla Iba It was that mission that, that I can’t stress enough, that must have just held us together. Truly, to have a constitution that reflected what the Osage people wanted. 

Rachel Adams-Heard And what were you hearing from people?

Priscilla Iba They were confused too. They were confused too. So they had questions for us that, you know, what’s this government gonna look like? And we kept telling them that’s going to be for you to decide. And so we had questionnaires and we had all kinds of things that went out in the mail, but then we still had town meetings.

Rachel Adams-Heard The commission worked for two years. They held meetings in Osage County, but also in Texas and California. Jean Dennison, a citizen of the Osage Nation and an Indigenous studies scholar who wrote a book about the government reform, counted more than 40 meetings in all, each about two hours. 

Then, in January 2006, the commission and its staff and consultants gathered for a three-day writing retreat at a hotel in Tulsa. It was time to write the Osage Nation’s new constitution. Over the next several weeks, the constitution took shape. On March 11, 2006, there was one final vote: Whether or not the Osage people would adopt this constitution.

Priscilla Iba We were all in Pawhuska and then we had kind of a little party, I guess, with the commission. We were all nervous — we were all really nervous. 

Rachel Adams-Heard While we were talking, Priscilla’s husband, Skip, pulled something from a cabinet. A scrapbook Priscilla made from that night. 

Skip Iba These are all of our photos. Priscilla Iba Yeah.Skip Iba This is, this is the vote.Priscilla Iba Oh there’s Jim, yeah.

Rachel Adams-Heard Alongside those photos, Priscilla had a copy of the election results from that night. 

Priscilla Iba Let’s see. Shall the constitution be approved? So “Yes” was a total of, 1,454, which was 66.64%.

The only thing I remember is signing it. It was very special. And I just, I have a nice handwriting and I look at that and I think, that doesn’t even look very good, because I was just nervous. It was a wonderful feeling. And very proud. Oh my gosh. We were so proud. 

(Audio of crowd noise at Osage constitution signing ceremony.)

Rachel Adams-Heard All that work paid off. Later that year, members of the commission and the Osage Tribal Council formally signed the constitution and transitioned to the new government. This is tape from that night.

It took a lot of people to make the constitution happen. Not just Jim, or Priscilla, but an entire community. In the video of this ceremony, the room is packed. Every seat is filled. People are standing in rows, looking over each other. 

That night in 2006, I’ve been told, was a big celebration. Almost exactly a hundred years after the 1906 Act, the Osage Nation was creating the government it wanted, on its own terms. Jim Gray started off the signatures. 

(Audio of signing ceremony. Jim Gray: “This ceremony’s the culmination of hours, and years, and generations of hard work.”)

Jim Gray We all had a constitution — big, heavy leather bound copies of it — and we all signed our signature on it. Each one of us put our name on it.

(Audio of signing ceremony. Jim Gray: “You would think I would write a — put a better signature on there, but I didn’t. Alright.”)

Jim Gray And so we had this big moment where all the councilmen, and me, and the commissioners were all in this one big line and we were signing these documents and handing it to each other. And it was just going back and forth, back and forth, until we got them all done. You know, and then I launched into my version of history.

(Audio of signing ceremony. Jim Gray: “But before we talk about moving forward — and I do want to get into that a little bit today — I want to talk about the past. Our people were never many, but they were fierce. And they were proud. And they were self-sufficient. And they exercised their own sovereignty. And as we look back at that period of time leading up to 1808 when after a visit with President Jefferson, the Osage Nation entered its first treaty with the United States.”)

Jim Gray So I’m going through this history of telling everyone how the treaties that the tribe entered into resulted in a loss of huge amounts of our territory and our land, but worse, a loss of who we were. Our culture, our customs, our oral traditions, the things that we would only pass down from one elder to a younger person. 

(Audio of signing ceremony. Jim Gray: “And it was through that period of time that we, we reached within ourselves to find a new definition of Osage and it took leaders at the time, like Chief Bigheart, who had initiated and led an effort to draft a constitution of the Osage Nation.”)

Jim Gray So they started a constitutional form of government in 1881 that tried its best to capture what they could from that old way, and bring it up to a new way, under a document that was voted on by the Osage people that they, that governed them, you know. And we used that to build up our tribe again, slowly but surely start building it up.

(Audio of signing ceremony. Jim Gray: “In 1901 we lost that constitution, due to the Secretary of Interior.”)

Jim Gray And that’s when federal policies started hitting us, like the Allotment Act.

(Audio of signing ceremony. Jim Gray: “But Congress went a step further. They not only decided who was an Osage, they also decided how the Osage government was going to be run and what their functions were going to be. This wasn’t a government of the Osage people’s design. It wasn’t what they wanted;  they already decided what they wanted. But in the face of the political winds of the day, the Osages took the Congressionally created Osage Tribal Council with the chief and assistant chief and tried to make this work for the betterment of their people.”)

Jim Gray It was impacted even further by the boarding-school era. They were taking kids out of their communities and sending them to boarding schools, to, you know, destroy that cultural part of who they were and try to make them little White people that had no knowledge of being Indian. And it devastated a generation of Osages because of those policies. 

(Audio of signing ceremony. Jim Gray: “But through the success of our ceremonies, the fact that many Osage families who retained their wealth — they were able to preserve our language and our culture in homes, in the villages. They were able to protect our ceremonies, the In-Lon-Schka. They were able to make sure that that drum was going to continue to beat every year in June. They took care of that drum. They took care of the people. They took care of those ceremonies and celebrations that defined us, who we were. All this at a time when federal policy was doing everything it could to detribalize Indian people. To separate us from our God, to separate us from our traditions and our language.”)

Jim Gray And at that point I could just say, I say all of this history to say this: At no point since our first interaction with the United States government, did we ever stop fighting for our people or our sovereignty.

(Audio of signing ceremony. Jim Gray: “And as I go on, I want to do something right now because it’s something I think is important. Because what I’m talking about is how the Osage Nation has survived. Even though they have a governing document that was not of their creation, they tried to make it work as best they could. And I would like to ask everybody in this audience who has a relative, or is descendant of a relative who has ever served on the Osage Tribal Council, please stand. Thank you. Thank you very much.”)

Jim Gray You saw it in those early treaties, you saw it in those removals. You saw it in us buying this land here. You saw how we preserved the mineral estate in the 1906 Act. You saw it in our commitment to — heck, we declared war on Japan and Germany through a tribal council resolution in World War II, after Pearl Harbor. A resolution I might add has never been rescinded. We’re stubborn folks, you know. Osages had never given up the notion of sovereignty. It didn’t just happen on my watch, it has been the culmination of generations of Osages. 

Rachel Adams-Heard A year after the new constitution was adopted, Jim sent out a survey to Osage citizens. He wanted to know what they wanted from their new government — what they thought should be the top priorities. And survey after survey came back with the same answer: land. Or more specifically, buying back land. Expanding the Osage Nation’s reservation base. 

Because finally, the Osage people had a government that was theirs. Finally, they had the ability to take back what had belonged to them a century ago.

Jim Gray But if there’s anything that you can hopefully learn from all this is that Osages never gave up. They never gave up trying to retain the things that made us who we were. And I think the same attitude that drove the Osages to come to this land here and buy it outright, so that we would never move again, is the same attitude that drew the Osages to buy the Turner ranch. It’s part of who we are.

Rachel Adams-Heard When we come back, the Bluestem Acquisition.

After the Osage government reform, there was still a long way to go to make good on Osage citizens’ desire to buy back land and expand the reservation base. Federal policies over the last hundred years had worked to strip land away from the Osage Nation and its citizens. 

So when those rumors made their way to Raymond when he was assistant principal chief — the rumors that Ted Turner was selling his ranch — Raymond didn’t waste any time. He started working the phone. Spent his Christmas holiday talking to bankers, lawyers, other Osage government officials. 

Raymond Red Corn  We were simply trying to map out a path from point A to point B. Having never done anything like this before. Ever. 

It’s a little bit hard for me to not get emotional at this point. We all understood that it was an historical inflection point for the Osage Nation. And we all carry with us our ideas about the future and our ideas about the past. Mine can be summed up very easily: With the purchase of this ranch we would be able to do something we had not done for 200 years if we needed to — and that was feed ourselves.

That represents —  if you think about it, even in the modern context — that represents an enormous, amount of sovereignty and independence. To me, it’s the ultimate safety net, socially, economically, and certainly from just the simple aspect of food, shelter, clothing. That’s how it looked at me and that was my motivation. 

Rachel Adams-Heard The stakes were clear to Raymond. To the chief too — Chief Geoffrey Standing Bear. Raymond told me a lot of people were supportive of the purchase. But others were skeptical it was going to cost a lot of money. 

Land in Osage County is valuable. This was a huge, contiguous ranch, with prime grass for ranchers to graze cattle or bison or horses. Raymond knew they’d have competition. The Osage Nation was going to have to bid high if they wanted to win.

The Nation was in a better financial position than before, thanks in large part to revenue from the casino businesses it started opening in 2002. But spending so much of it at once made a lot of Osage citizens nervous.  

Raymond Red Corn My responsibility was to work Congress because I sit with them as assistant chief, spent eight years on the Congress prior to that and so I knew the rules. And it was lobbying, pure and simple. The primary goal of the lobbying was to get the Congress to get the price up as high as we could get it. 

Rachel Adams-Heard Raymond told me, he could feel the pressure. They didn’t want to lose the bid. The Nation also had to secure the financing for the land. And they had to do all this in 30 days, when the bids were due, or they’d miss out. 

Raymond went back and forth with members of the Osage Congress. They had emergency meetings, narrowed in on a number, the highest bid they’d let Raymond and Chief Standing Bear submit. 

Raymond Red Corn The Congress has met for the final time. They’ve established the maximum number. I’ve been advising chief all along on general strategies related to on bidding and auctioneering.

And he always sits at one end of the conference table. I always sit on the other. And that’s exactly where we were in the morning after Congress gave us the number. So he sat down and he said, “You go first.” I said, “OK, well, I think the number needs to be this, and the way I arrived at that is, is, you know, and then I explained my rationale of how I ended up with this number, which was below that of the Congress.”

He said, “No, that’s not what we’re going to do.” He said, “We’re just going to bid the max.” And I leaned back in my chair and I said, “Really?” He said, “Yep, we’re just going to bid the max. And I’ll be fully responsible for it.” And he said, “It’s real easy for me to tell you why we’re going to bid the max.” I said, “Why is that?”

He said, “Because there’s only two outcomes: we win or we don’t win. And I will take the heat from Congress all day for maximizing the bid for their maximum appropriation, but that will fade over time. And what will never fade is if we swing for the fence and miss, because we did not maximize our bid.” And as soon as he said that the political wisdom of it occurred to me immediately. And I said, “I’m good with that.” Because it made sense. It wasn’t a financial decision or a business decision. It was a really simple thing about how history was going to view what we did. 

Rachel Adams-Heard The amount Chief Standing Bear told Raymond the Osage Nation would bid — the max amount — was $74 million.

It was a closed bidding process. Raymond would have to deliver the bid in person, to an office in Kansas, where the land broker was. Raymond brought company, a man named RJ Walker. RJ was on the Osage Congress at the time — now he’s the assistant principal chief. I’ve talked to him about this day, too. He called it fateful.

Raymond showed me a picture of that morning, the morning they drove a $74 million bid to Kansas. 

Rachel Adams-Heard Oh, wow. So yeah, it looks like it’s got “Confidential” and red ink all over it: Osage Nation, executive branch. 

Raymond Red Corn And at this point, Congress doesn’t know that we put the whole number in there either. 

Rachel Adams-Heard The broker was in a town called Hutchinson, Kansas — almost three hours away from Pawhuska. They had until 4:30 that afternoon to submit their bid. But Raymond and RJ weren’t taking any chances. They left Osage County first thing that morning. 

Raymond Red Corn And Osage police had been notified. We checked in from time to time. And if for any reason we were in an auto accident or anything else — and we joked about this —  they would send the Osage Nation police up. They would leave us roadside, bleeding to death. And they would pick up the bid and they would go on to Hutch and deliver. Well, it wasn’t quite like that, but that’s how we thought of it. But the main thing — Rachel Adams-Heard So you actually notified Osage police? Raymond Red Corn Yes. Rachel Adams-Heard So they were like, basically…Raymond Red Corn Backup. To get the bid to them, regardless of what happened to us. I hope that doesn’t speak to how goofy we might appear. I hope it speaks to how important we thought it was. 

Rachel Adams-Heard By the time they got there, they ended up having plenty of time to kill. So they made a stop before going to the broker’s office. 

Raymond Red Corn Yeah, we were just in a Goodwill store, passing time, because — Rachel Adams-Heard  — because you were so early? Raymond Red Corn Yeah, we both bought a jacket and we both still own the $2 jacket, the suit jackets that we bought in there. I remember that. 

Rachel Adams-Heard Raymond said there was a reason they didn’t go straight to the broker’s office, and hand in their $74 million bid right when they got there.  

Raymond Red Corn We were in Hutch. We knew we’d made the made the time and everything. There’s also sometimes when you’re among native people for a really long time, and you begin to understand history, your trust level does not go all the way to the bottom. There’s some things you just do not trust and RJ and I talked about it. And we weren’t going to just lay that down and walk off. We just weren’t going to do that, because under nefarious circumstances — which we did not think it was, but we weren’t taking any chances — anybody could have shown up at any time that day and delivered the bid. The deadline was 4:30.

Anybody could put whatever number they wanted to in there. So we were going to wait until that was not a possibility. We just sat there with ours in our hand. Four o’clock got there and there still was only two bids, and we expected three. We didn’t know — we had our own grapevine going, but we knew that there might be as many as three bids and possibly four, but the number that we kept hearing was three.

Rachel Adams-Heard So Raymond and RJ wait, outside the broker’s office, all day. Bid in hand. Waiting to turn it in at the last possible moment. 

Raymond Red Corn So it’s four o’clock, we’re sitting there still chit-chatting with the broker. And I reach a point where it’s like: let’s just go. I mean, I was kind of bored and I mean, we’d had enough talk with him and we knew what our number was. So, RJ did not want to leave. RJ wanted to stay. He said, “Nah, I think we should stay here until 4:30.” 

I said, “RJ, it’s going to be like super awkward if we’re sitting here for an hour-and-a-half, and then another bidder walks in and we’ve been sitting here for this long. I mean, that doesn’t smell good.” And so it was as much for appearances as anything else. And I was in the executive branch and invited RJ along, so RJ kind of reluctantly relented, and we said goodbye and left our bid at about ten after four.

We leave his office — he’s on the fourth or fifth floor — we leave his office, walk to the vestibule, outside the elevators, and there’s a cowboy standing there with a briefcase. And we’re getting ready to go down, and he’s just arriving.

And as we’re going down, RJ says, “You think that was that other guy?”

I said, “I don’t know, RJ. I’m really tired of thinking about it. I’m just wore out. Let’s just go.” 

So we went back to the car we got in and we headed home. I checked in when chief told him we’d delivered the bid successfully, etcetera. And, as it turns out, the gentlemen was the other bidder, and we did not know that at the time. 

But we’re on our way back. We figure the last bit has been submitted. We don’t know where we stand. It’s two-and-a-half-hour drive home. We are still on I-35. We are less than an hour out of Hutch, but we’re still in Kansas.

My cell phone rings and he said, “I have reviewed the bids. I have spoken with Ted Turner and you are a successful bidder and at present, you’re the high bid.”

Rachel Adams-Heard Raymond knew when he got this call that it wasn’t the end of it. There were still a lot of other details to be worked out — the financing, all the legal stuff, everything involved in a massive land deal. 

But he was the first person in the Osage Nation to know that their bid — their $74 million bid — was the highest. That if everything else fell into place, they’d own this land — again. And as that starts to sink in, Raymond feels — 

Raymond Red Corn  Elated. Just elated. We pulled, we pulled over on the side of I-35 and got out and high-fived. I just didn’t want to try to drive and talk about this at the same time. Chief was incredulous that — I was incredulous that I got a call on the way home. I mean, that was totally unanticipated. It was wonderful.

Rachel Adams-Heard What did you say to RJ, because I assume you’re on the phone and he can’t hear. What did you tell him? 

Raymond Red Corn I just remember we’re in that Ford — we call it the Chiefmobile — we’re in that Ford and we pull over and he said, “You’re shitting me.”

And I said, “No, I’m not.” And, um, he was every bit as giddy as I was — giddy is a really good term to describe how we felt with that.

Rachel Adams-Heard The deal closed six months later in June 2016. Nearly 150 years after the Osage Nation bought this land from the Cherokee Nation, they owned a big piece of it again. 

Raymond Red Corn It was just an incredible feeling to be so close to an historical inflection point. It was, I don’t know — I’ll never have that feeling again, I don’t think, and to have it once in your tribe’s history is a lot. It’s a really good feeling and I’m proud of us for doing that.

It does go without saying that this never would have happened if not for the reformation of the government. So that old saw about standing on the shoulders of those that came before you — there were sacrifices and visionaries in the past in Osage government going all the way back to the ’60s that were trying to move us out of the position we were replaced in, in 1906.

Rachel Adams-Heard In the years since, the Osage Nation has brought in more bison to graze on this land. Cattle too. The tribe’s also bought some more land. Nothing like the Bluestem acquisition; that much land doesn’t go on the market very often. But the Osage Nation’s buying property in downtown Pawhuska, building a new health center. A food processing plant. 

There’s still something outstanding with the ranch the Osage Nation bought from Ted Turner. Right now, it’s held in something called “fee simple.” The most common way to own real estate.

Osage leaders want to change that, to make sure that land can never again leave the Osage Nation. They want to put the land in trust. 

Raymond Red Corn One must remember that the purpose of the land-into-trust process was instituted by the United States to allow tribes to go back and reacquire lands that may have been lost for any number of reasons, and taken out of the tribe’s hands.Rachel Adams-Heard And so it’s a level of protection that you couldn’t get if the land is not held in trust?Raymond Red Corn That’s correct. It’s a night-and-day difference between fee and trust. 

Rachel Adams-Heard But there’s a problem. When the Osage Nation applied to have this land put into trust, the federal government said it couldn’t do that, at least not yet.  The surface land, the government said, was too damaged from decades of oil and gas drilling. They said it would need millions of dollars worth of remediation work before they would agree to accept the title on behalf of the Osage Nation.

Raymond says it’s bit of an ironic twist. Because all that oil and gas drilling was permitted by the U.S. government. That was their job, as trustee of the Osage Mineral Estate. 

Raymond Red Corn That set of facts would point to the BIA as the responsible party for that environmental degradation. Yet the same entity, the BIA, is the one that raises its hand and says, “We can’t put this into trust, look at this environmental degradation.”

Rachel Adams-Heard  I’ve asked the BIA about this. They declined to comment and have not made Secretary Deb Haaland available for an interview. I’ve also talked to RJ Walker about this, since he’s the current assistant principal chief. He said the Osage Nation is working with the BIA to submit a new application to put the land in trust.

As with so much of the history here, the Osage Nation is trying to make sure its land and its sovereignty are secure forever. Trying to take back control of what was theirs. And Raymond told me, just like it took time for this land to leave Osage hands, it’ll take time to get it back.

Rachel Adams-Heard And so when you look out at a plat map of Osage county today, and you see how many non-Osage landowners there are, you see that as a design of allotment?Raymond Red Corn  Honestly, I think I’m enough of an optimist that I don’t look at those maps. What I do look at is the map of Osage holdings and see how much more there is that we need to do.

If I spend too much time as an elected official dwelling on the past, I’m not focusing on the future. We only all have 100% of our attention to apply to anything, and if we apply it to the future, then we’re going to continue on this path of reacquisition of lost land. If we’re looking back all we’re doing is dwelling on something that we can’t change. Can we, should we study it and learn from it? Absolutely. Should it be what we quote chapter and verse on a daily basis? Not in my opinion. We’re going to succeed by looking forward and figuring out how we continue to earn the resources to continue this purchase of previously owned lands. That’s where I think our first focus should be always. 

I was there when chief signed the deeds, and to close it, and said: “This is the day we stop going backwards. This is the day we begin to go the other direction toward buying all of this reservation back.”

And it will take as long to buy back as it did sell it. Perhaps even longer. But we have the means to do so. If the Drummonds can build a small land empire, there’s no reason we can’t.

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©2022 Bloomberg L.P.

Malaysia Assets Decline on Parliament Dissolution, Asia Selloff

(Bloomberg) — Malaysia’s stocks and the ringgit weakened after Prime Minister Ismail Sabri Yaakob announced the dissolution of parliament on Monday, paving the way for polls this year, and as equities slumped in Asia.

The benchmark KLCI Index fell as much as 1.6% as trading resumed after a holiday, while the ringgit slid 0.5% versus the dollar, with both among the worst performers in Southeast Asia. The 10-year yield rose 5 basis points to 4.46%.

The dissolution comes three days after Ismail’s administration presented a budget for next year that cuts taxes while still narrowing the fiscal deficit through more targeted subsidies. The spending plan will have to be tabled again after elections are held, Finance Minister Zafrul Aziz told local media on Friday, citing the 1999 early polls as precedent.

While elections will be viewed positively by investors if it is able to restore political stability, the possibility of a hung parliament and the subsequent inability to pass the budget remains a key risk, CGS-CIMB’s head of Malaysia research Ivy Ng wrote.

“We advise investors to stay defensive in view of election uncertainty and concerns over global recession,” she said.

READ: Malaysia PM Dissolves Parliament, Paving Way for Early Vote

Ng added that construction and property sectors could potentially benefit in the medium term, while other potential beneficiaries include regulated assets like telco and utilities from policy clarity. 

The ringgit may face some weakness amid the uncertainty ahead of the elections, according to Qi Gao, FX strategist at Scotiabank in Singapore. The currency is the worst performer among major Southeast Asian currencies after the baht.

“The ringgit will follow the broad market tone, and will be propped up if the incumbent prime minister wins the elections,” he added.

The 2023 budget contains something for almost everyone and should bode well for consumption and corporate earnings, Citigroup Inc. analysts including Megat Fais wrote in a note.

READ: Budget Boost May Propel Malaysia Consumer Stocks Before Polls

(Adds bonds performance in second paragraph.)

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Musk Sued by Twitter Investor Over ‘Fraudulent’ Buyout Flip-Flop

(Bloomberg) — Elon Musk was sued by a Twitter Inc. investor who says the world’s richest person’s on-again off-again purchase of the social-media platform and his public attacks on the company were designed to manipulate its stock price.

Giuseppe Pampena says that when Musk agreed last week to go ahead with his purchase of Twitter, at the originally agreed upon price, he “essentially acknowledged that he had been bluffing all along” about backing out of the deal.

The flip-flops and Musk’s accusations about Twitter sunk its stock price, hurting investors while all the while improving Musk’s bargaining position, according to the securities class-action complaint filed Monday in federal court in San Francisco.

Musk offered to buy Twitter in April for $54.20 per share, or $44 billion, but then announced his was pulling out of the deal three weeks later. 

Then, “Musk proceeded to make statements, send tweets, and engage in conduct designed to create doubt about the deal and drive Twitter’s stock down substantially in order to create leverage that Musk hoped to use to either back out of the purchase or re-negotiate the buyout price by as much as 25% which, if accomplished, would result in an $11 billion reduction in the buyout consideration,” according to the suit. “Musk’s conduct was fraudulent and illegal.”

Musk has previously been sued at various points along the way in the Twitter buyout saga.

Representatives of Quinn Emanuel Urquhart & Sullivan LLP, the law firm that represents Musk in several legal matters including the Twitter buyout, didn’t immediately respond outside regular business hours to a request for comment.

The case is Pampena v. Musk, 22-cv-05937, U.S. District Court, Northern District of California (San Francisco).

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Stocks, Treasuries Fall as Inflation Angst Rises: Markets Wrap

(Bloomberg) — Technology companies led stocks lower in Asia amid concern that rising interest rates and geopolitical threats will crimp economic growth.

Some of the biggest losses were in chip-related equities in Japan, South Korea and Taiwan, where traders returned from holidays to join the global selloff in semiconductor shares. 

The Biden administration’s curbs on China’s access to US semiconductor technology has wiped out more than $240 billion from the sector’s market value globally and spilled over into the currency market, weighing on the Korean won and Taiwan dollar. 

A measure of greenback strength climbed to the highest this month and the yen traded within sight of the original level that spurred Japanese authorities to defend the currency in September. The yuan slid as worry mounts that Beijing will uphold its Covid zero policy well after the Chinese Communist Party Congress this month.

Yield on the 30-year Treasury rose to the highest since 2014 as trading in US government bonds resumed following a break for Columbus Day. The 10-year yield climbed around 10 basis points to 3.98%.

Investors continued to parse comments from Federal Reserve officials for any signs of a let up in the central bank’s hawkish stance. Vice Chair Lael Brainard laid out a case for caution, noting that previous rate increases were still working through the economy. Chicago Fed President Charles Evans said he wants to quickly get to a point where policy makers can feel comfortable pausing in order to reduce the risk of overshooting. 

The mood remains fragile ahead of Thursday’s US inflation data, with the case for another 75 basis-point rate hike likely to be strong if the data comes in hotter-than-expected. 

The heads of the International Monetary Fund and World Bank warned of a rising risk of a global recession as advanced economies slow and faster inflation forces the Fed to keep raising interest rates, adding to the debt pressures on developing nations.

“A recession is very possible — our subjective probability over the next year is 35% — but we think it would require additional shocks,” Goldman Sachs Group Inc. chief economist Jan Hatzius wrote in a note. Renewed upward pressure on fuel prices is an area to watch and Goldman also sees “a small but growing risk of an unnecessary monetary policy overshoot if Fed officials focus too much on lagging inflation indicators.” 

Meanwhile, Russian President Vladimir Putin threatened further missile attacks on Ukraine after hitting Kyiv and other cities in the most intense barrage of strikes since the first days of its invasion, marking a dangerous new escalation in the war.

“It’s little wonder investors enter the week in a dreary mood, especially with headlines from Ukraine signaling a further escalation in geopolitical tensions,” Christopher Smart, chief global strategist at Barings, said in a note. “Of course, markets are meant to look ahead, but it’s hard not to see the next few quarters bringing more of the same.” 

Oil swung between gains and losses as concerns over a global slowdown and potentially weaker demand vied with a tightening supply outlook after OPEC+ last week announced an output cut. Gold remained under pressure after ending the previous volatile session lower.

Key events this week:

  • Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock Inc., Delta Air Lines Inc., UnitedHealth Group Inc., U.S. Bancorp, Wells Fargo & Co.
  • IMF’s World Economic Outlook and Global Financial Stability Report, Tuesday
  • Fed’s Loretta Mester speaks, Tuesday
  • BOE’s Andrew Bailey speaks, Tuesday
  • FOMC minutes for September meeting, Wednesday
  • US PPI, mortgage applications, Wednesday
  • OPEC Monthly Oil Market Report, Wednesday
  • Fed’s Michelle Bowman and Neel Kashkari speak
  • ECB’s Christine Lagarde speaks
  • US CPI, initial jobless claims, Thursday
  • G-20 finance ministers and central bankers meet, Thursday
  • China CPI, PPI, trade, Friday
  • US retail sales, business inventories, University of Michigan consumer sentiment, Friday
  • BOE emergency bond buying is set to end, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.4% as of 12:37 p.m. Tokyo time. The S&P 500 fell 0.7% on Monday
  • Nasdaq 100 futures fell 0.4%. The Nasdaq 100 fell 1%
  • The Topix Index fell 1.7%
  • The S&P ASX Index was little changed
  • The Hang Seng Index fell 1.4%
  • The Shanghai Composite Index rose 0.4%
  • Euro Stoxx 50 futures fell 0.5%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2%
  • The euro was little changed at $0.9693
  • The Japanese yen was little changed at 145.68 per dollar
  • The offshore yuan fell 0.5% to 7.1918 per dollar
  • The British pound was little changed at $1.1054

Cryptocurrencies

  • Bitcoin fell 0.9% to $19,061.67
  • Ether fell 2.1% to $1,279.97

Bonds

  • The yield on 10-year Treasury climbed 10 basis points to 3.98%
  • Australia’s 10-year yield advanced 13 basis points to 3.99%

Commodities

  • West Texas Intermediate crude fell 0.4% to $90.75 a barrel
  • Spot gold fell 0.1% to $1,666.45 an ounce

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©2022 Bloomberg L.P.

Musk Claims Twitter Ordered Whistle-Blower to Destroy Evidence

(Bloomberg) — Just before Elon Musk revived his proposal to buy Twitter Inc. last week, the billionaire accused the company of ordering a whistle-blower to destroy evidence of its missteps as part of a $7.8 million severance package. 

Peiter Zatko, Twitter’s ex-head of security, said he burned 10 handwritten notebooks and deleted 100 computer files at the behest of company managers as part of his separation agreement, according to Oct. 3 court filings that were unsealed Monday. The books contained notes of the whistle-blower’s meetings with company counterparts during his year-long tenure as security chief, the filings show.

Zatko has been at the center of Musk’s arguments that Twitter misled him about a raft of operational problems at the social-media platform — which justified walking away from the $44 billion buyout. The billionaire then reversed course last week and agreed to buy the company for the original $54.20-per-share price. 

“Twitter’s attempt to buy Mr. Zatko’s silence failed, but Twitter achieved its secondary aim of ensuring Mr. Zatko’s corroborating evidence would never come to light,” Musk’s lawyers said in the unsealed filing.

Twitter didn’t immediately respond to a request for comment on the filing, which is part of the Twitter lawsuit to force Musk to consummate the buyout that has since been paused.

Delaware Chancery Judge Kathaleen St. J. McCormick put the case on hold and set an Oct. 28 deadline for Musk and Twitter to complete the deal. Musk’s lawyers are asking McCormick to sanction Twitter’s attorneys for ordering the destruction of potential evidence in the case.

Zatko created a stir in Washington when he testified to the Senate Judiciary Committee last month that Twitter’s lax approach to computer security threatened US national security. 

Twitter has said it fired Zatko in January for poor performance and said he gave “a false narrative about Twitter and our privacy and data security practices that is riddled with inconsistencies and inaccuracies and lacks important context.”

Zatko contends he warned Twitter CEO Parag Agrawal about serious computer security issues and privacy concerns tied to the social-media platform’s operations that amounted to violations of settlements the company reached with government regulators. He also said his Twitter colleagues showed little interest in doing a deep dive into the issue of how many spam and robot accounts were included among the company’s more than 230 million users.

Musk’s lawyers accused Twitter’s top two lawyers, Vijaya Gadde and Sean Edgett, and Chief Privacy Officer Damien Kieran, along with Agrawal, of seeking to cover up the violations of the legal settlements by ordering Zatko to destroy his documents.

The document-destruction order deprived Musk’s legal team of “critical corroborating evidence of Mr. Zatko’s allegations, which would support his account of key meetings and conversations relevant to this case,” according to the unsealed filing.

Meanwhile, Twitter complained in its own unsealed filing that Jared Birchall — Musk’s top aide — showed up to his Sept. 21 pre-trial deposition in the case unprepared to answer questions about a host of issues related to the transaction.

“Throughout the deposition, Birchall unequivocally conceded both his lack of knowledge and his lack of preparation — on topic after topic,” Twitter’s legal team said in the filing. Birchall runs Musk’s family office and was deeply involved in the negotiations over the buyout of the social-media platform.

Twitter’s lawyers said Birchall had little or no information about his communications with government regulators about the deal, the hiring of data scientists to review the number of spam or robot accounts embedded in Twitter’s customer base or the Musk side’s efforts to retrieve relevant messages about the transaction.

A spokesman for Musk’s lawyers didn’t immediately respond Monday to a request for comment about Twitter’s complaints about Birchall’s deposition performance.

The case is Twitter v. Musk, 22-0613, Delaware Chancery Court (Wilmington).

(Updates with date of original filings in second paragraph)

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©2022 Bloomberg L.P.

Musk Spoke to Kanye About Tweet That Got Him Kicked Off Twitter

(Bloomberg) — Elon Musk, who is poised to buy Twitter Inc, says he has spoken to Kanye West to express his concerns about the musician’s recent tweet.

Twitter removed a tweet from West last week about Jewish people, and had restricted the handle for violation of its policies. The account was locked just a day after he returned to the platform for the first time in nearly two years. 

Musk, who is now proceeding with his offer to purchase Twitter, has said he will prioritize free speech on the platform and criticized its decision to ban individuals such as former President Donald Trump for violating its rules.

Read more: Twitter, Trump and How Online Speech Is Moderated

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The Most Powerful Buyers in Treasuries Are All Bailing at Once

(Bloomberg) — Everywhere you turn, the biggest players in the $23.7 trillion US Treasuries market are in retreat.

From Japanese pensions and life insurers to foreign governments and US commercial banks, where once they were lining up to get their hands on US government debt, most have now stepped away. And then there’s the Federal Reserve, which a few weeks ago upped the pace that it plans to offload Treasuries from its balance sheet to $60 billion a month.

If one or two of these usually steadfast sources of demand were bailing, the impact, while noticeable, would likely be little cause for alarm. But for every one of them to pull back is an undeniable source of concern, especially coming on the heels of the unprecedented volatility, deteriorating liquidity and weak auctions of recent months.

The upshot, according to market watchers, is that even with Treasuries tumbling the most since at least the early 1970s this year, more pain may be in store until new, consistent sources of demand emerge. It’s also bad news for US taxpayers, who will ultimately have to foot the bill for higher borrowing costs. 

“We need to find a new marginal buyer of Treasuries as central banks and banks overall are exiting stage left,” said Glen Capelo, who spent more than three decades on Wall Street bond-trading desks and is now a managing director at Mischler Financial. “It’s still not clear yet who that will be, but we know they’re going to be a lot more price sensitive.”

Treasuries dropped again on Tuesday in Asia. The yield on 30-year US bonds jumped nine basis points to 3.94%, the highest since 2014, while that on 10-year notes climbed seven basis points to 3.95%. 

To be sure, many have predicted Treasury-market routs over the past decade, only for buyers (and central bankers) to swoop in and support the market. Indeed, should the Fed pivot away from its hawkish policy tilt as some are wagering, the brief rally in Treasuries last week may be just the beginning.

Analysts and investors say that with the fastest inflation in decades hamstringing the ability of officials to loosen policy in the near term, this time is likely to be much different.

‘Massive Premium’

The Fed, unsurprisingly, represents the largest loss of demand. The central bank more than doubled it’s debt portfolio in the two years through early 2022, to in excess of $8 trillion. 

The sum, which includes mortgage-backed securities, may fall to $5.9 trillion by mid-2025 if officials stick with their current roll-off plans, Fed estimates show.

While most would agree that lessening the central bank’s market-distorting influence is healthy in the long run, it nonetheless is a stark reversal for investors who have grown accustomed to the Fed’s outsized presence. 

“Since the year 2000, there has always been a big central bank on the margin buying a lot of Treasuries,” Credit Suisse Group AG’s Zoltan Pozsar said during a recent live episode of Bloomberg’s Odd Lots podcast. 

Now “we’re basically expecting the private sector to step in instead of the public sector, in a period where inflation is as uncertain as it has ever been,” Pozsar said. “We’re asking the private sector to take down all these Treasuries that we are going to push back into the system, without a glitch, and without a massive premium.”

Still, if it was just the Fed — with its long-telegraphed balance-sheet runoff — reversing course, market angst would be much more limited.

It’s not. 

Prohibitively steep hedging costs have essentially frozen Tokyo’s giant pension and life insurance companies out of the Treasury market as well. Yields on US 10-year notes have slumped well below zero for Japanese buyers who pay to eliminate currency fluctuations from their returns, even as nominal rates have jumped above 4%.

Hedging costs have surged in tandem with the dollar, which has climbed more than 25% this year versus the yen, the most in data compiled by Bloomberg going back to 1972. 

As the Fed has continued to boost rates to tame inflation in excess of 8%, Japan in September intervened to support its currency for the first time since 1998, raising speculation the country may need to start selling its hoard of Treasuries to further prop up the yen.

And it’s not just Japan. Countries around the world have been running down their foreign-exchange reserves to defend their currencies against the surging dollar in recent months.

Emerging-market central banks have trimmed their stockpiles by $300 billion this year, International Monetary Fund data show.

That means limited demand at best from a group of price-insensitive investors that traditionally put about 60% or more of their reserves into US dollar investments.

Peter Boockvar, chief investment officer at Bleakley Financial Group, said Monday it’s dangerous to just assume that the US Treasury will “ultimately find buyers to take the place of the Fed, foreigners and the banks.”

Citigroup Inc. flagged concern that the drop in foreign central bank holdings may set off fresh turmoil, including the potential for so-called value-at-risk shocks when sudden market losses force investors to rapidly liquidate positions.

Investors should bet on a drop in swap spreads “to position for continued CB selling and for further dash-for-cash style liquidity events,” Jason Williams, a Citigroup strategist, wrote in a report. VaR-shock-type events are more likely “given Fed risks are still pointed hawkish,” according to the report.

Banks Bail

Over the past decade, when one or two key buyers of Treasuries has seemingly backed away, others have been there to pick up the slack.

That’s not what’s occurring this go around, according to JPMorgan Chase & Co. strategist Jay Barry.

Demand from US commercial banks has dissipated as Fed policy tightening drains reserves out of the financial system. In the second quarter, banks purchased the least amount of Treasuries since the final three months of 2020, Barry wrote in a report last month.

“The drop in bank demand has been stunning,” he said. “As deposit growth has slowed sharply, this has reduced bank demand for Treasuries, particularly as the duration of their assets have extended sharply this year.”

It all adds up to a bearish undertone for rates, Barry said.

The Bloomberg US Treasury Total Return Index has lost about 13% this year, almost four times as much as in 2009, the worst full year result on record for the gauge since its 1973 inception.

Yet as the structural support for Treasuries gives way, others have stepped in to pick up the slack, albeit at higher rates. “Households,” a catch-all group that includes US hedge funds, saw the biggest jump in second-quarter Treasury holdings among investor types tracked by the Fed.

Some see good reason for private investors to find Treasuries attractive now, especially given the risk of Fed policy tightening tipping the US into a recession, and with yields at multidecade highs.

“The market is still trying to evolve and figure out who these new end buyers are going to be,” said Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities. “Ultimately I think it’s going to be domestic accounts, because interest rates are moving to a point where they’re going to be very attractive.”

John Madziyire, a portfolio manager at Vanguard Group Inc., said large pools of excess savings held at US banks earning next to nothing will prompt “people to shift into the short-end of the Treasury market.” 

“Valuations are good with the Fed getting closer to the end of its current hiking cycle,” Madziyire said. “The question is whether you are willing to take duration risk now or stay in the front-end until the Fed reaches its policy peak.”

Still, most see the backdrop favoring higher yields and a more turbulent market. A measure of debt-market volatility surged in September to the highest level since the global financial crisis, while a gauge of market depth recently hit the worst level since the onset of the pandemic.

“The Fed and other central banks had for years been the ones suppressing volatility, and now they’re actually the ones creating it,” Mischler’s Capelo said.

(Updates to add prices in sixth paragraph, and comments from Citigroup in 22nd and 23rd)

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Hacks in Australia Spur Call for Review of Data Retention Laws

(Bloomberg) — Australian phone company Telstra Corp. called for a review of laws governing data retention after scams targeting customers reached new highs and a leak of years of information about its employees.

“The time is right for a discussion on the laws around keeping data,” Chief Executive Officer Vicki Brady told Telstra’s annual meeting Tuesday. “It’s a fine balance between identifying our customers, protecting them against fraud, maintaining their privacy, and helping law enforcement combat crime.”

Telstra is blocking “unprecedented levels of malicious activity” against customers, including rogue calls and text messages, Brady said. As these attacks grow, clients are rightly asking what identity documents are being held, for what purpose, and for how long, she said.

Telstra’s main rival Optus, which is owned by Singapore Telecommunications Ltd., last month revealed a vast hack of the records of almost 10 million current and former customers. Optus faces complaints that it failed to protect personal information and destroy data it no longer needed.

SingTel on Monday disclosed a second Australian business it owns, technology consultancy Dialog, had also suffered a recent cyberattack that potentially exposed client and customer data. 

Brady said the Optus attack puts the cyber threat into “stark focus.” Telstra last week said a third party was affected by a data breach that included limited information about Telstra employees from 2017. While Dialog has provided services to Telstra, it’s not clear whether the attack on Dialog was the one that exposed data on Telstra staff.

Telstra Chairman John Mullen also called on businesses and government to work together to combat cyber attacks.

“It is easy to be critical when it isn’t you in the firing line, and we should all avoid hubris because no one can be complacent and no organization can ever be 100% sure that it is completely protected and safe,” Mullen told the annual meeting. 

“The threat and sophistication of the attackers grows every day, and business needs to put aside competitive rivalry and work constructively across industries, with government, and with the community, to protect Australia from this modern scourge,” he said.  

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Crypto Exchange Coinbase Secures Singapore Digital-Asset Permit

(Bloomberg) — Cryptocurrency exchange Coinbase Global Inc. received a digital-assets license in Singapore, where regulators are stepping up vigilance after the high-profile blowups of crypto outfits like Three Arrows Capital. 

The Monetary Authority of Singapore has granted Coinbase Singapore in-principle approval under the Payment Services Act to provide regulated services in the city-state, the company said Tuesday. About 15 firms have received such permits since Singapore launched the licensing regime in 2019, including rival Crypto.com.

Singapore will be a “beachhead” for Coinbase’s planned expansion in the Asia-Pacific region, where markets like Indonesia and Vietnam are attractive, said Hassan Ahmed, chief executive of its local unit. Coinbase this month unveiled a revamp of its operations in Australia, part of efforts to bolster growth overseas. 

“We see Singapore as a strategic market for institutional clients as well,” Ahmed said in an interview. He also pointed to Australia and Japan as “very key markets within the broader APAC sort of region that we’re going to continue to double down on.”

Read more: Crypto Exchange Coinbase Revamps its Platform in Australia 

Coinbase has around 100 employees in Singapore, Ahmed said. The firm has been selective about hiring in recent months but is “starting to get a little bit of appetite back,” he said.

Singapore has been emerging as a key crypto hub in Asia, with a regulatory regime that’s seen as more comprehensive than that of rival financial center Hong Kong. But the pace of issuing licenses has been slow, with a string of industry upheavals causing the MAS to take a cautious approach to welcoming new players. 

Three Arrows, a crypto hedge fund that at one point was based in Singapore, is being liquidated after aggressive bets on digital assets blew up as token prices crumbled. 

Hodlnaut, a crypto lender which holds a license in Singapore, was granted protection from creditors by the local High Court in August, after the market rout prompted it to halt withdrawals. At around the same time, the MAS said it’s considering restricting retail investors’ use of leverage and credit facilities to trade digital assets. 

Coinbase CEO Brian Armstrong is prioritizing international growth after cutting almost a fifth of the company’s workforce and reporting second-quarter revenue and trading volume that missed estimates. Its shares are down 73% year to date, underperforming the MVIS CryptoCompare Digital Assets 100 Index’s 60% decline.

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