This scary word “margin call”

April 5-11, 2025

Big news. Without a doubt, this is a partial reversal of Trump’s tariff innovations. The reason for this is the extremely difficult situation with the Treasury auctions.

The charts show a sharp increase in yield (70 points, something that hasn’t happened for a long time) on 10-year and 30-year Treasuries (i.e. a fall in prices), which threatened massive margin calls for hedge funds. The price of the issue (to close the missing collateral) was about $2 trillion. There is a hypothesis that difficult negotiations were held, as a result of which Trump partially abandoned his tariffs, and the Fed gave the banks the necessary liquidity.

The Nasdaq market index, which fell by more than 25% in the previous days, rebounded on Wednesday by the most in 24 years (over 12%):

The Japanese Nikkei index has similar dynamics:

The problem was solved, but only for a while. There is no doubt that it will return in the coming months.

Macroeconomics. Industrial production in Germany -4.0% per year, 21st consecutive monthly minus:

Mexico -1.3% per year, 7th minus in a row:

Japan Economic Observer Index Weakest Since Summer 2022:

As well as its variety, which characterizes expectations:

Brazil business sentiment at its worst in 9 years (not counting Covid):

Brazil’s CPI (Consumer Inflation Index) (+5.5% p.a.) at 2-year high:

Japan’s PPI (industrial inflation index) (+4.2% per year) is also at its highest in 2 years:

China’s PPI (-2.5% p.a.) has been declining annually for 30 months in a row:

And this is a sign of serious depression.

American pessimism (according to the University of Michigan) is the worst in the 55-year history of the survey, with the exception of June 2022 (the levels of that time, however, are very close):

At the same time, 5-year inflation expectations (+4.4% per year) are at their highest since 1991:

And annual (+6.7% per year) – even since 1981:

Details on this from Pavel Ryabov are in the final section of the Review.

The Central Bank of New Zealand has cut the rate by 0.25% to 3.50%. The Central Bank of India has also cut the rate by 0.25%, to 6.00%.

Oil is trading at a 4-year low:

Gold, which had fallen in price, immediately recovered all of its losses and flew above $3,200 per ounce:

Main conclusions. Let’s face it: Trump did nothing unexpected, nothing that would fundamentally destroy the economic system. He only accelerated the crisis processes that had been developing in the global (and American), in general, dollar economy for many years, if not decades. But the overall instability of the system has grown significantly, and many problems have come out of the shadows to the surface.

One of the problems has become consumer mistrust. Including in terms of the ability of monetary authorities to keep inflation within acceptable limits. Here the floor goes to Pavel Ryabov.

“Unprecedented by historical standards acceleration of inflation expectations in the US

The latest operational data from the University of Michigan show an unprecedented and historically unprecedented acceleration of inflation expectations, which amounted to 6.7% for the year ahead vs. 5% in March, 4.3% in February, 3.3% in January and an average of 2.9% in 2024.

These are the highest inflation expectations since 1981, when actual inflation was consistently above 10%. The last peak of inflation expectations was in mid-2022 – 5.4% with actual inflation at 9%, if the proportion is maintained, the inflation spike could be over 10-12% per annum in the second half of 2025.

Here, not only the levels are surprising, but also the speed – the decompression of expectations by almost 4 percentage points in just four months, which is the strongest and fastest shift in expectations in the entire history of consumer sentiment research.

Long-term (5-year) inflation expectations rose to 4.4% – a maximum since 1991 vs. 4.1% in March, 3.5% in February, 3.2% in January and an average of 3% in 2024.

The aggregate consumer confidence index collapsed to 50.8 points. Over the entire history of observations (more than 50 years), only once and for one month was the index below this level – June 2022 (50 points), i.e. even during the 2008 crisis at the peak of destructive processes, the bottom of the index was 55.3 points in Nov. 08 and an average of 58 points from Oct. 08 to Mar. 09 (the active phase of the crisis).

It is curious that the population’s perception of economic prospects in 2025 is in strong contrast to what it was during Trump’s first term (before the COVID crisis), since from Feb. 17 to Dec. 19 the average value of the index was – 97. For comparison, in 2024 – 73, in 2023 – 65.4.

The decomposition of the index by components is quite indicative: expectations for the year ahead have collapsed to 47.2 points, lower only in the early 80s during the recession and inflation hell that lasted almost 10 years (at that time), but what is important is that before Trump’s inauguration, the population’s expectations were quite optimistic – an average of 75 points, which corresponds to the historical average in conditions of economic growth and is the best indicator in the post-pandemic period.

The assessment of current conditions also collapsed to one of the lowest values ​​​​in history – 56.5, updating the minimum of autumn 2008, but still slightly above the minimum of mid-2022 (53.8).

The rate of degradation of sentiment is one of the strongest in history – stronger than in the 2008 crisis and comparable to the shock of the COVID crisis.

The mood of the population is classified as total hopelessness, hopelessness and despondency, and the current state as terrible and gloomy.

As the University of Michigan explains it:

“This decline, like last month, was broad-based and unanimous across age, income, education, geography, and political affiliation.

Sentiment has fallen more than 30% since December 2024 amid growing concerns about the development of a trade war.

Consumers report multiple warning signs that raise the risk of a recession:

Expectations for business conditions, personal finances, income, inflation, and labor markets continued to deteriorate this month.

The share of consumers expecting unemployment to rise in the coming year has increased for the fifth month in a row, now more than double the November 2024 figure and the highest since 2009.

This lack of confidence in the labor market stands in stark contrast to the past few years, when robust spending was supported primarily by strong labor markets and incomes.”

Please note that the interviews for this issue were conducted between March 25 and April 8, closing before the partial lifting of tariffs on April 9…”

Note that inflation expectations are surprisingly similar to actual inflation in the US. About 8% according to Summers (see https://fondmx.pro/itogi-nedeli/priznakov-uluchshenija-ne-obnaruzheno/ ) or 10-12% according to our estimates. So Trump’s main achievement was not the worsening of the economic situation, but only the awareness of households and entrepreneurs of a more or less real state of affairs.

By the way, we think that this is rather a good thing. Illusions in a crisis are often very expensive. Note that this does not apply to our readers, they have never had illusions, and we congratulate them on this. So we wish them a pleasant weekend and a not too tiring work week!