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“The [bond market] selloff has largely run its course,” says Guggenheim CIO Scott Minerd, confirming his call from two weeks ago to ‘buy the dip’ in bonds as investors’ “reach for yield” puts downward pressure on 10-year Treasury rates, likely rendering the current yield unsustainable.

The bond market has had difficulty sustaining rates at or near the Fed’s neutral rate projection, and we see no reason to expect a different result this time. The selloff has largely run its course. https://t.co/m2RQTdfV7R pic.twitter.com/ysuDGOrd23

— Scott Minerd (@ScottMinerd) March 22, 2021

In fact, for foreigners, buying USTreasuries on an FX-hedged basis offers the biggest yield advantage over domestic sovereigns since 2014…

Source: Bloomberg

But, Guggenheim warns that “conflicting guidance” from Fed Chair Powell is potentially holding back bond investors.

Last week’s FOMC meeting showed that the Federal Reserve (Fed) intends to maintain rates at zero even when the economy overshoots traditional measures of full employment and price stability. But Fed Chair Jay Powell stopped short of pushing back on the bear steepening of the Treasury curve.

Powell is giving conflicting guidance to bond investors. Dovish forward guidance is bullish for the short end while the Fed’s efforts to lift inflation expectations have been bearish for the long end. The belly of the curve is caught in the middle.

The question investors face is whether the selloff has more room to run. Our analysis suggests it has largely run its course. The market is now pricing in a neutral rate of 2.35 percent, nearly in line with the Fed’s optimistic long run dots. The chart below shows that the bond market has had difficulty sustaining rates at or near the Fed’s neutral rate projection, and we see no reason to expect a different result this time. Nor do we expect the Fed to revise up its neutral rate estimate.

While the Fed has succeeded in lifting growth and inflation expectations, it now has a different problem: the market is pricing in premature rate hikes, as the chart below shows. The upshot for bond investors is that the steeper yield curve now offers an attractive carry and rolldown profile.

If the Fed is as patient as we expect it to be, total returns for core fixed income investors have the opportunity to be much better going forward than they have been in the recent past.

Earlier this month a report from The New York Times was the first to reveal that the Biden administration is planning a series cyberattacks targeting Russia in the “coming weeks”.

Anonymous senior US officials told the Times that a “series of clandestine actions across Russian networks” will be done in such a way as to be “evident to President Vladimir Putin and his intelligence services and military but not to the wider world.” It’s also expected to come alongside new anti-Russia sanctions.

Naturally, the first question people asked was why announce in advance a “surprise” cyberattack against an “enemy”? Or as Mollie Hemingway at The Federalist put it… “What idiot pre-announces a cyberattack?”

Note from a source: “What idiot pre-announces a cyberattack?” https://t.co/cA4WShJpXN via @YahooNews

— Mollie (@MZHemingway) March 21, 2021

The Telegraph followed up in its latest reporting as follows:

The attack, which is expected in the next fortnight, is in retaliation for the SolarWinds hack, the large-scale infiltration of American government agencies and corporations discovered late last year that was traced back to the Kremlin.

The White House confirmed it will take “a mix of actions” – both “seen and unseen” – although it did not provide specifics on when and how it would do so.

But it appears nothing will really be “unseen” given the administration clearly conducted a pre-planned “leak” to the Times starting two weeks ago, meant perhaps as a ‘warning’ and threat to Russia of what’s to come in response to the Office of the Director of National Intelligence (ODNI) findings recently out alleging that Russia ‘interfered’ via various cyber intrusions and attacks in the 2020 elections.

Or ultimately it’s just Biden seeking to appear “tough” for his domestic base which generally went all in when it comes to all things ‘Russiagate’ and the continuing spin-off claims. Biden, after all, has to always being “doing something” against those pesky and nefarious Russians.

Leading Russiagate disinformation agent claims on top influence network that Trump’s COVID-19 response was potentially infiltrated by Russian intelligence via ex-HHS spox Michael Caputo, and that DOJ should
investigate. She closes with surprising lucidity: “This is nutty stuff.” pic.twitter.com/2HjpPaaENu

— Aaron Maté (@aaronjmate) March 19, 2021

Within the past days US National Security Adviser Jake Sullivan confirmed the imminent US cyber-action. “I actually believe that a set of measures that are understood by the Russians, but may not be visible to the broader world, are actually likely to be the most effective measures in terms of clarifying what the United States believes are in bounds and out of bounds, and what we are prepared to do in response,” he said.

No doubt, the Kremlin is currently preparing and on high alert in expectation of such US ‘dirty tricks’ targeting sensitive state networks, which the Biden administration has further indicated will “not target civilian structures or networks”.

Previously the Kremlin slammed the impending US action as “pure international cybercrime”. Tensions rose further last week with Biden and Putin’s latest and unprecedented tit-for-tat statements, with Biden agreeing that the Russian president is “a killer” and Putin firing back that the US leader is engaged in “psychological projection”. Thus Biden is in fact describing himself, according to Putin’s response in a televised address days ago.

Authored by Jonathan Turley,

In a Scientific American article entitled, “Physicists Need To Be More Careful How They Name Things,” two professors and a journalist call for the abandonment of the term “quantum supremacy” in physics because it is “uncomfortably reminiscent of ‘white supremacy.”  Physics Professor Ian Durham (St. Anselm College), freelance journalist Daniel Garisto, and Math Professor Karoline Wiesner (University of Bristol) all agree that the term is not racist but still believe that it must be changed to avoid “adding insult to injury.”

The term was coined in 2012 by John Preskill to describe how quantum computers can perform tasks would take even supercomputers years to complete. The authors called for “quantum supremacy” to be replaced with “quantum primacy.”

The article struggles to make the case that this clearly non-racial term holds a dangerous potential for being viewed as racist, including reference to other terms like “judicial supremacy” which would also presumably have to be abandoned:

The word supremacy—having “more power, authority or status than anyone else”—is closely linked to “white supremacy.” This isn’t supposition; it’s fact. The Corpus of Contemporary American English finds “white supremacy” is 15 times more frequent than the next most commonly used two-word phrase, “judicial supremacy.”

Since “judicial supremacy” is even more common than “quantum supremacy,” it would appear the same argument for abandonment would apply.

It is not clear if the problem is simply “supremacy.” Would Pareto superiority also raise such problems?

We have previously discussing the dropping of terms as offensive despite their clearly non-sexist or non-racist meaning. These efforts are reminiscent of our own debate at George Washington over the use of the Colonials as a moniker. The student organizers asked “When we talk about the Colonial in history, what does it mean? And is that really what we want our school identity to be?” The emphasis however is the history of colonialism in the world, not the Colonial as a term in the United States. Just as we strive to understand the meaning and traditions of other countries, there should be a modicum of effort to recognize our own meanings and traditions. The Colonials fought against foreign rule. They were not advocates of colonialism. For those interested in GW, that is part of understanding our history and our values. It simply does not matter that the Colonials were anti-colonialism. The victory is pretending that they are something that they were not and then changing the term to reject a falsely claimed meaning.

The authors take a jab at Professor Steve Pinker who we previously discussed as the target of an anti-free speech campaign.  Pinker lashed out at such efforts to ban words and regulate speech. The authors reject that premise:

It is true that “supremacy” is not a magic word, that its meaning comes from convention, not conjurers. But the context of “quantum supremacy,” which Pinker neglects, is that of a historically white, male-dominated discipline. Acknowledging this by seeking better language is a basic effort to be polite, not prissy.

They are not the first to make this proposal. A 2019 letter in Nature,  the magazine was called out for using “quantum advantage” and the authors argued:

In our view, ‘supremacy’ has overtones of violence, neocolonialism and racism through its association with ‘white supremacy’. Inherently violent language has crept into other branches of science as well — in human and robotic spaceflight, for example, terms such as ‘conquest’, ‘colonization’ and ‘settlement’ evoke the terra nullius arguments of settler colonialism and must be contextualized against ongoing issues of neocolonialism.

It is difficult to take issue with such articles without running the risk of being called insensitive or insufficiently concerned about racism. That is not true. Many of us fail to see how such campaigns advance real racial justice as opposed to superficial progress through cancelling campaigns. Real progress is measured by getting more minority graduate students and teachers into physics.

In coordination with the newly announced European Union sanctions on select Beijing officials for the alleged ongoing major crackdown on Muslim Uighurs, the Biden administration has hit Beijing with its own punitive sanctions, setting tensions further on edge just two days after the conclusion of the fiery Alaska summit. 

The US sanctions target to top Chinese officials for “serious human rights abuses” against Uighur minorities concentrated in northwest Xinjiang province. Along with the EU, the sanctions were coordinated with Canada and the United Kingdom, which rolled out with similarly targeted sanctions that included additional individuals, according to a Treasury Department statement.

“Chinese authorities will continue to face consequences as long as atrocities occur in Xinjiang,” Treasury’s Director of the Office of Foreign Assets Control Andrea M. Gacki said. Meanwhile, it could be the US administration is still smarting over this…

“if there were ever to be a date for historians to mark the televised humiliation and official end of American hegemony, it would be the public verbal slapping of Secretary of State Antony Blinken and NSA Jake Sullivan by Chinese ambassador on U.S. soil.” https://t.co/dWPBs13GdA

— Mollie (@MZHemingway) March 22, 2021

“Treasury is committed to promoting accountability for the Chinese government’s human rights abuses, including arbitrary detention and torture, against Uyghurs and other ethnic minorities,” she added. The statement identified the following individuals that fall under the new US action:

The US designated Wang Junzheng, the Secretary of the Party Committee of the Xinjiang Production and Construction Corps, and Chen Mingguo, Director of the Xinjiang Public Security Bureau.

“These individuals are designated pursuant to Executive Order (E.O.) 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act and targets perpetrators of serious human rights abuse and corruption,” the Treasury Department added.

The UK government neanwhile said of the coordinated actions in a statement: “Acting together sends the clearest possible signal that the international community is united in its condemnation of China’s human rights violations in Xinjiang and the need for Beijing to end its discriminatory and oppressive practices in the region.”

In response to the earlier Monday morning EU sanctions announcement, which was a first in over three decades, China’s Ministry of Foreign Affairs blasted the EU as “disregarding and distorting the facts” as well as “grossly interfering in China’s internal affairs” by bringing sanctions against government officials.

China has maintained the Uighur crackdown and charges of genocide are “based on nothing but lies and disinformation.”

EU-targeted individuals will have their assets frozen and are effectively banned from traveling to EU countries. China swiftly retaliated, according to an official statement on government websites: “China has decided to impose sanctions on 10 persons and 4 entities that have seriously harmed China’s sovereignty and interests and maliciously spread lies and false information on the European side.

Similar ‘retaliatory’ action is now expected imminently to be leveled against Washington.