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Warsh rocks bond markets: hike bets fully priced in

Half the FOMC wants to raise rates. Trump wants cuts. The bond market has chosen a side.

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Warsh's first meeting lands like a hike without the hike

Kevin Warsh held rates at 3.5-3.75% yesterday and still managed to send two-year Treasury yields up 15 basis points, because the message was the meeting, not the decision. The dot plot showed nine of eighteen FOMC officials expecting at least one rate increase by year-end, five of those expecting two, and the Fed's own PCE inflation forecast was revised sharply upward to 3.6% for 2026. Warsh's press conference dropped the easing bias entirely, shortened the statement to four paragraphs, and explicitly refused to offer forward guidance, which means every data release between now and December is now a live event. Interest-rate swaps are fully pricing one hike by year-end, a full reversal from the multiple-cuts consensus that greeted Warsh's nomination. Trump is publicly pushing for cuts. Half the FOMC is leaning toward raises. For UK borrowers, CFOs pricing 2027 refinancing, and anyone long duration, the working assumption of higher-for-longer just got an institutional mandate behind it.

Trump's Iran deal has a Lebanon-shaped hole in it

At the G7 in Evian, Trump admitted to a 'little dispute' with Netanyahu over Lebanon, which is diplomatic shorthand for a substantive disagreement that could unravel the wider regional settlement he is trying to lock in. Iran and Pakistan say an end to fighting in Lebanon is inside the ceasefire framework. Trump and Israeli officials say it is not, calling Israeli operations there a 'separate skirmish.' Israel currently occupies dozens of villages in southern Lebanon, has killed nearly 3,800 people in a four-month campaign, and has explicitly said its troops will stay indefinitely, regardless of the Iran deal. Negotiations on a gradual Israeli withdrawal are scheduled for Washington on June 22. The practical risk: if Iran treats Lebanon as covered by the ceasefire and Israel keeps striking, the 1.5-page MOU and its 60-day technical talks become a liability rather than a framework. Strait of Hormuz traffic is moving again, with at least seven vessels confirmed, but oil traders should watch June 22 closely.

Chinese universities are not closing in on the West. They have already overtaken it in research.

Imperial College London reached number two globally in the QS 2026 rankings, which sounds like good news until you look at the research-specific Leiden table, where Zhejiang University is now ranked first in the world and seven or eight Chinese universities sit in the top ten, displacing positions that Harvard and Stanford held as recently as the early 2000s. China surpassed the US in share of the world's top one-percent most-cited papers in 2022, at 27.2% versus 24.9%, after a fivefold increase in scientific output between 2009 and 2021. Tsinghua and Peking are now 12th and 13th globally, up from outside the top 100 in 2018, and thirteen Chinese institutions are now in the global top 200. The mechanism is deliberate: targeted state funding into a narrow elite tier, performance incentives tied to international citations, and a strategic technology push toward a 2035 global S&T leadership target. For UK investors and businesses hiring technical talent or choosing R&D partnerships, the implication is a structural one: the research pipeline is shifting east faster than league-table headlines suggest.

City investors are spooked by Burnham, and not for the obvious reason

Andy Burnham cancelled a call with hedge fund managers this week that had been set up specifically to reassure them about his borrowing plans, which is about the least reassuring thing you can do to a room of people who price uncertainty for a living. The concern in the City is less about Burnham personally and more about what his parliamentary ambitions signal: a potential Labour leadership contest that could surface a Chancellor whose views on gilt issuance and fiscal rules are untested in front of markets. The FT flagged the cancelled call as a specific trigger. Burnham's regional investment pitch plays well with business groups, roughly two-thirds of whom say more local funding control would increase their confidence, but vague public ownership rhetoric on utilities and no detailed spending arithmetic is exactly the combination that caused UK gilt yields to move sharply in late 2022. Watch the Makerfield by-election for a read on Labour's internal momentum and how quickly the Chancellor question gets forced.

Kardigan's $400m IPO is the real signal about where biotech capital is flowing

Kardigan priced its IPO at $400 million, above the original $373 million target, becoming the fourth biotech in 2026 to raise at least that amount and pushing the median 2026 biotech IPO size to nearly $302 million, well above any of the previous five years. The company was founded by ex-MyoKardia executives whose last venture was acquired by Bristol Myers Squibb for $13 billion, and its three lead assets are in-licensed from BMS, Sanofi, and Ionis, covering genetic dilated cardiomyopathy, calcific aortic valve stenosis, and acute severe hypertension. The structural point for investors is not that biotech is hot again broadly, but that the window is specifically open for late-stage, specialist teams with proven exits and cardiovascular focus, an area that historically underperformed oncology for capital allocation. Oncology fatigue and the shift toward large-burden indications is a real theme. UK life science investors benchmarking against AIM biotech valuations should take the Leiden data on cardiovascular unmet need seriously.

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Nine of eighteen FOMC officials expect rates to rise before the year is out. Five of those expect two hikes. The Fed's own PCE forecast sits at 3.6% for 2026, revised sharply upward. Kevin Warsh held at 3.5-3.75% and still sent two-year Treasury yields up 15 basis points, which is the bond market's way of saying the decision was irrelevant and the signal was everything.

The mechanism matters here. When a central bank chair describes internal disagreement as a "good family fight" on the record, he is not being candid, he is being deliberate. Warsh is using communication as a pre-commitment device, conditioning markets to price tighter policy without needing to deliver it yet. The risk is that this only works once. If July data softens and the FOMC holds again without hiking, the credibility of the dot plot collapses and the 15 basis point move reverses fast. Morgan Stanley's Szczurowski flagged the asymmetry plainly: the unanimous vote to hold sits in direct tension with the hawkish tone, and small data shifts now carry outsized weight precisely because the committee has told the market it is split.

For UK operators and investors, the transmission is specific. The gilt at 4.88% on the ten-year is already elevated against a CPI print of 3.0%, and a repricing of US rate expectations tightens the corridor the Bank of England has to work with. Sterling-denominated deals priced against forward curves set three months ago are quietly mispriced. Any UK borrower refinancing into dollar markets in Q3 should be stress-testing against a scenario where the Fed delivers one hike before November and short-end dollar rates move another 20 to 30 basis points from here.

Signal. Two-year Treasury yields moved 15 basis points on a hold decision. That is the market telling you the rate level matters less than the committee's revealed distribution of intent, and the distribution has shifted hawkish.

Watch. The US June PCE print, due late July. If it comes in above 3.0% month-on-month, the five officials pencilling two hikes before year-end become the median, not the tail, and the gilt at 4.88% starts looking like a floor.

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Nine of eighteen FOMC officials expect rates to rise before the year is out. Five of those expect two hikes. The Fed's own PCE forecast…

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Tech & AI

An activist just unlocked BWXT's dormant SMR design. The timing is the story.

BWX Technologies has agreed to license its small modular reactor design following sustained pressure from activist investor Ananym Capital Management, which argued that the IP from the shelved mPower programme was sitting idle on the balance sheet while the commercial nuclear market revived around it. BWXT was one of the US's first serious SMR developers in the early 2010s before the project stalled, and the company pivoted to high-margin defence work, including $1.4 billion in 2026 naval nuclear propulsion contracts and a $1.5 billion NNSA enrichment deal. Licensing, rather than self-developing, lets BWXT participate in the data-centre-driven SMR demand wave without diverting capital from defence. The second-order effect: if a defence-anchored nuclear incumbent starts crystallising value from dormant reactor IP under activist pressure, expect similar pressure on other diversified industrials holding advanced nuclear assets quietly. This is a template, not a one-off.

Google buried the Gemini off-switch. That is itself a product decision.

There is no 'turn off Gemini in Docs' button inside Google Docs. To disable it, you navigate to Gmail settings, find smart features, toggle off two separate options in a submenu called 'Manage Workspace smart feature settings', and accept that you will also lose spell check and smart compose in the process. Consumer Reports, CNET, and Digital Rights Watch are all now publishing step-by-step guides on how to escape Gemini, Apple Intelligence, and Copilot, which is a reliable indicator that mainstream user friction has crossed a threshold. The business risk for Google is churn among enterprise and professional users who handle confidential documents and are genuinely uncertain whether Workspace content is training Gemini models. Google's design choice, default-on AI with an obscure cross-product opt-out, maximises adoption numbers while creating a trust gap that competitors with cleaner consent flows can exploit.

Delivery robots are scaling faster than the regulations governing them

Serve Robotics has grown from roughly 100 to 2,000 autonomous sidewalk vehicles in twelve months, Starship and Coco each have fleets in the thousands, and the regulatory framework in most US cities still has not decided whether a cooler-sized robot is a pedestrian, a bicycle, or a motor vehicle. A Chicago neighbourhood petition against sidewalk bots has 3,300 signatures, roughly a third from people who submitted incident reports, while West Hollywood recorded 20,000 deliveries and only three documented complaints, which tells you the problem is density-dependent rather than categorical. The energy case is real, Thunder Said Energy analysis puts robot energy use at around 1% of a motorcycle per delivery, but the classification question is commercially critical: a 'pedestrian' ruling opens every pavement in every city; a 'vehicle' ruling triggers permitting, insurance, and speed limits that would make the economics collapse. UK operators eyeing this market should watch US municipal court rulings this year as the practical precedent-setter.

AMI Labs: Europe has the resources to compete in AI. It keeps choosing not to.

AMI Labs CEO says Europe has 'lost many races' in technology but has the means to be self-sufficient. The honest read is that the means and the willingness are different things, and Europe's structural problem in AI is not capital or talent but fragmented demand, regulatory timing that hits before scale, and a tendency to build national champions that cannot compete at continental scale. Watch whether any of the post-US-tariff industrial reshoring momentum actually converts into consolidated European compute investment, or whether it disperses into seventeen separate national AI strategies with seventeen separate procurement processes.

Markets & Economy

Warsh called it a 'good family fight'. Bond markets heard it as a hike warning.

The FOMC voted unanimously to hold, but Kevin Warsh's description of internal deliberations as a 'good family fight' is the most honest thing a Fed chair has said about FOMC dynamics in years, and markets priced it accordingly. Morgan Stanley's Andrew Szczurowski flagged that it remains unclear whether Warsh will follow through on the hawkish tone, given that the vote was unanimous for no change, while Bloomberg economist Stuart Paul noted that the committee's division means small data shifts could swing votes in either direction. The Fed's own projections show headline PCE at 3.6% this year falling to 2.3% next year, a trajectory that requires everything to go right on energy and services inflation. The practical implication for credit markets: Barings is explicitly positioning into BB and B-rated high yield at 6-8% yields as the higher-for-longer regime's most attractive risk-adjusted pocket, and institutional demand is described as sticky. Plan around elevated borrowing costs through at least 2027.

Braskem has nine days to avoid a court process. Its creditors are not aligned.

Braskem faces an approximately $100 million coupon payment on its international bonds in July, and the out-of-court restructuring talks have hit a wall over creditor treatment: some lender groups are objecting to what they see as preferential collateral packages offered to others, which is the specific condition that turns 'voluntary' restructurings into contested court proceedings. The company is rated CC by Fitch and Caa3 by Moody's, carries roughly $9.4 billion in gross debt, and is asking creditors for extended maturities and lower rates with no new equity, no debt-for-equity swap, and no major asset sales. IG4 Capital took control via a debt-for-equity deal in April; Petrobras holds 47% of voting rights. One person involved in the talks said the problem cannot be solved in less than five years, which is a long ask when you are offering creditors patient, low-coupon paper against distressed risk. Creditors holding out for better collateral terms have more leverage if the July payment triggers a formal default process.

Malaysia and Russia are building a ringgit-ruble settlement corridor. The compliance problem is the real story.

Anwar Ibrahim and Putin are discussing a bilateral local-currency settlement mechanism after Malaysia-Russia trade hit $3.11 billion in 2023, up 11% year-on-year, with Malaysian electronics exports to Russia surging 96.9% to $154 million. The Electrical and Electronics Association of Malaysia is publicly supportive, conditional on sufficient transaction volumes and bank liquidity. The mechanism itself is technically straightforward. What the reporting does not address is the correspondent banking problem: any Malaysian bank facilitating ringgit-ruble flows with a sanctioned Russian counterpart runs US secondary sanctions risk, which is why bilateral local-currency schemes for Russia-linked trade have repeatedly stalled despite political goodwill. The deal is commercially interesting for electronics and industrial goods exporters. The execution risk sits entirely with whether Malaysian banks will absorb the compliance exposure, and so far none have publicly confirmed they will.

Malaysian bond traders are betting the deficit slippage does not become a downgrade story

Malaysia's bond-swap spread sits at plus 12 basis points, meaning government bonds yield less than equivalent interest-rate swaps, a signal of relative sovereign confidence that Thailand, South Korea, and India cannot currently match, where spreads are negative. The Bloomberg coverage today follows an official warning that rising subsidy costs may cause the 2026 fiscal deficit to overshoot its target. Non-resident holdings at roughly 22% of the RM1.3 trillion government bond market are stable, and Bank Negara emphasises it is managing from a 'position of strength.' The risk is that this confidence is fragile: the BoE-style lesson from UK gilt volatility in 2022 is that investor patience with fiscal slippage is asymmetric, and it ends abruptly. Investors with ASEAN fixed income exposure should track whether Malaysia offers a credible offsetting fiscal measure before year-end, because the spread premium will not hold indefinitely against persistent deficit overshoot.

Business & Strategy

ASICS is spinning out its most profitable business. Not to float it, to run it harder.

Onitsuka Tiger delivered 34% net sales growth to 46.8 billion yen in ASICS's latest quarter, with trade sources citing an operating margin of around 38%, making it one of the highest-margin fashion footwear businesses in the world and structurally misaligned with a performance sports holding company that prizes marathon analytics over runway timing. ASICS is creating OT Group Corp. as a wholly owned subsidiary effective 1 January 2027, explicitly ruling out an IPO and appointing a separate CEO, Ryoji Shoda. The mechanism is an absorption-type company split under Japanese corporate law, giving the brand its own P&L, decision-making velocity, and management accountability without forcing a public valuation. The parallel to Nike's Jordan Brand structure is imperfect but instructive: separated brand governance tends to protect margin and allow faster product cycles. ASICS has created the architecture for a future partial float or strategic partnership without committing to one. The no-IPO statement is a current position, not a permanent one.

Policy & Regulation

Badenoch is promising to cut post-crisis bank rules. The details will determine whether this is reform or theatre.

Kemi Badenoch has pledged to roll back post-financial crisis banking regulation, positioning it as a competitiveness move for the City at a moment when Labour's credibility with financial services is under pressure over the Burnham uncertainty. The substantive question is which rules she means. Basel 3.1 implementation, the senior managers regime, ring-fencing, and the FCA's consumer duty are all candidates, but they carry very different systemic risks. Cutting capital buffers to stimulate lending is a different argument from streamlining conduct rules, and conflating them in a campaign speech is how regulatory reform rhetoric tends to die on contact with Treasury officials and the Prudential Regulation Authority. The LSE and the broader City will welcome the framing; the test is whether a Badenoch-led government would have the institutional courage to override PRA objections, given that the PRA's independence was specifically designed to insulate capital standards from political pressure.

Badenoch's City deregulation pitch and the credibility problem it needs to solve

Setting out plans to cut City red tape is the easy part of opposition politics. The hard part is that the regulatory architecture Badenoch is targeting was built after 2008 precisely because the institutions that benefit from lighter rules also failed spectacularly under them. The FCA has 58,000 authorised firms to supervise; the PRA holds capital buffer authority over the systemically important banks. Both are statutory bodies with mandates that do not pause for election cycles. Any credible deregulation plan needs to identify specific rules, the mechanism for changing them (primary legislation, FCA rule change, or Treasury direction), and the counterfactual risk model. Without those, the announcement moves gilt yields and bank equities intraday and then fades.

Quick Hits

Barings: lock in 6-8% high-yield yields before the window closes

Barings portfolio manager Kelly Burton says BB and B-rated high-yield bonds at 6-8% yields are the sweet spot for institutional allocators in a Warsh-led rate environment, with CCC risk explicitly avoided and free cash flow scrutiny at maximum.

Warsh forms task force to review the Fed's $6.7 trillion balance sheet

Alongside the rate hold, Warsh announced internal task forces covering the balance sheet, communications, and AI's impact on productivity. If the balance sheet task force leads to faster quantitative tightening, it would push long-term yields higher independently of the policy rate path.

Axios co-founder VandeHei on writing with AI: useful tool, not a replacement

Jim VandeHei says AI is now embedded in his writing process but that the quality floor it creates is also a competitive ceiling for anyone who treats it as a substitute for original reporting. Worth reading for any media operator benchmarking AI-assisted editorial workflows.

'Hi Dad' impersonation scams: £160,000 stolen in the UK this year ahead of Father's Day

UK Finance is warning ahead of Father's Day that 'Hi Dad, I've got a new number' text scams have stolen £160,000 in 2026. Forward this to a family member who would fall for it.

Inside the full edition

  • Tech & AI · 4 stories
  • Markets & Economy · 4 stories
  • Business & Strategy · 1 story
  • Policy & Regulation · 2 stories
  • Quick Hits · 4 stories

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