Not content with capturing the Venezuelan president and threatening to seize Greenland or start a war with Iran, US president Donald Trump has now turned his ire homewards, to the head of the Federal Reserve.
Late last week, the Department of Justice opened a criminal investigation into Fed chairman Jerome Powell, relating to testimony he gave the Senate Banking Committee last June about the multi-year renovation of Fed buildings.
Of course, the subpoena is not really about the increased costs of renovating the Fed’s Eccles and 1951 Constitution Avenue buildings, but rather Trump’s apparent dislike of Powell, whom Trump himself appointed in November 2017.
The pair have repeatedly been at loggerheads over the pace of Fed rate cuts, with Trump demanding lower rates faster, and regularly threatening the Fed’s independence.
Many would see Trump's barrages and especially trying to criminalise Powell as damaging the Fed's independence.
That said, a wholesale assault to formally remove its independence is unlikely, even if Trump succeeds in his attempts to depose Powell.
As researchers at ING noted, US Treasury futures stabilised on Monday after falling in the wake of Powell’s subpoena. “That is the most important signal markets aren’t ready to price in a loss of Fed independence just yet,” they added.
For all Trump’s bluster, the dollar will still be the world’s major reserve currency long after the end of his term.
However, the weekend’s latest bout of US-induced volatility highlights just how unstable the US and its markets are becoming.
Companies planning their bond funding this year should keep this in mind, especially with stellar options seemingly now available elsewhere.
Funders with a global outlook should look to the euro, where strong executions on a par with parts of the dollar market are achievable.
The dollar market has long been famed for the depth and breadth it offers issuers. Three or more tranches are common, as curve-stretching deals raise billions.
But the euro corporate bond market is maturing.
Last week, three European issuers brought strong triple tranche euro trades — and market participants expect more to follow.
In the whole of last year only 25 euro corporate triple tranche bonds were placed, excluding Reverse Yankees, data from GlobalCapital’s Primary Market Monitor show. The first was not till mid-February.
In the past, €2bn-€3bn was considered a large deal, but now transactions are pushing far past this, with trades of €4bn, €5bn or even €6bn placed over the last year.
German electricity grid Amprion, for example, raised €2.6bn in five, 12 and 20 year tranches last Wednesday, finding €9.4bn of final demand. Before that, it had never issued more than two tranches at a time. L’Oréal and Veolia also sold three parters.
The fact that all nine tranches could cruise through the market on the same day speaks to the depth available in euros, especially as two of the issuers were utilities with similarly structured deals.
Even at the tranche level, deals appear to be getting bigger. Last year, the average corporate note was €700m — so far this year it has been over €740m so far.
The spat between Powell and Trump seems unlikely to fade any time soon. It has even provoked some Republic Congresspeople to protest in Powell's defence.
The dollar market radar this year is likely to stay full of blips and unidentified incoming objects. Funding pilots may head for Europe's clearer skies.
The euro looks a competitive and stable option — especially now large size is even easier to achieve than before.