Inflation Highest In Democrat States, Lowest In Republican Deep South
For much of 2025 we have been mocking the University of Michigan survey, and especially its short and long-term inflation expectation question, for the simple reason that the divergence between republican and democrat respondents is no longer merely grotesque but is a caricature of Goebbelsian propaganda, meant to spark fear that runaway inflation is coming and crash markets (even as today’s CPI showed – again – it isn’t).
But maybe we were wrong all along, and Democrats – who by definition live mostly in Democratic states – are indeed experiencing higher inflation.
According to a geographic analysis of price trends from Bloomberg, while the overall US inflation rate rose 2.4% in May from a year earlier, sharp geographic divergences remain. Indeed, bicoastal inflation in the predominantly Democratic states along the East and the West coasts of the country were generally above the US average, and far above Republicans strongholds like flyover states and the deep south.
The inflation rate in West Coast states was at 2.8% in May: in the illegal-alien bastion of Los Angeles metro area the rate was 3%, and it was even higher, at 3.8%, in San Diego. The rate fell to 3.4% in the Democratic stronghold that is New York City from 3.9% in April but is still among the highest by metro area.
Meanwhile, in mid-Atlantic states along with New England states, inflation was at 2.8% in May. East Coast prices are being driven largely by housing and rent. Meanwhile, the lowest rate in the country – by a relatively wide margin at 1.4% – was in the West South Central region, which includes Arkansas, Louisiana, Oklahoma and Texas. Inflation between the regions with the highest inflation is twice as high as the parts of the country with the lowest price growth, according to Bureau of Labor Statistics figures.
In other words, another fringe benefit of voting in Democrats every election is having to pay much higher prices for, well, everything.
Musk Spoke With Trump Before Public ‘Regret’ Post On X: Report
Update (1400ET):
Following the Wall Street Journal’s report on Musk-Trump tensions easing. The New York Times further explains that Musk called President Trump late Monday night to apologize for last week’s X posts, following private discussions with Vice President JD Vance and White House Chief of Staff Susie Wiles about brokering a truce on Friday.
The outreach led to an X post by Musk earlier, in which he expressed regret, saying his comments about Trump “went too far.”
Neither Musk’s nor Trump’s media teams have publicly confirmed the reconciliation. The reports rely solely on unnamed sources “briefed on the call,” meaning either one of them could just as easily take to X or Truth Social and dismiss the entire story as ‘fake news.’
* * *
Update (1250ET):
A new Wall Street Journal report offers insight into why Elon Musk abruptly reversed course after last week’s scathing tweets targeting President Trump, following their fallout over the “Big Beautiful Bill.”
Sources say Vice President JD Vance and White House Chief of Staff Susie Wiles convinced Musk to repair his relationship with the president.
In a call last Friday, the two urged Musk to de-escalate tensions, which he did earlier in a tweet, expressing regret for his postings on X from the previous week.
“I regret some of my posts about President @realDonaldTrump last week. They went too far,” Musk said on X.
Vance, who maintained a neutral public stance, played a behind-the-scenes role in brokering what could be a peace deal between the two.
How long until Musk denies the WSJ report?
* * *
Elon Musk publicly expressed regret over his recent X post attacks on President Donald Trump, admitting that his posts on X — particularly the one linking Trump to Jeffrey Epstein — “went too far.”
“I regret some of my posts about President @realDonaldTrump last week. They went too far,” Musk wrote in an early morning X post.
I regret some of my posts about President @realDonaldTrump last week. They went too far.
The fallout stemmed from last week’s blowout after Musk opposed Trump’s “Big Beautiful Bill,” prompting Trump to hint at cutting off government contracts. In response, Musk unleashed a series of now-deleted X posts, including a claim that Trump was “in the Epstein files.”
Thursday morning, Trump was asked about Musk’s opposition to the bill, telling reporters on Thursday that he’s ‘very disappointed in Elon,’ and that Musk only opposes the bill because they eliminated electric vehicle tax credits from it.
Trump then suggested he might pull government funding from Musk’s companies such as SpaceX, which owns the only operational US spacecraft capable of transporting astronauts to and from the International Space Station. “The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts. I was always surprised that Biden didn’t do it!” -President Donald Trump via Truth Social
Musk went ballistic – announcing he would ‘immediately‘ decommission the Dragon program (which he later walked back Thursday night), proposed a new political party (that’s still his pinned post on X), endorsed another Trump impeachment, and said in a now-deleted post Trump is ‘in the Epstein files,’ which is why they haven’t been released.
Now that the dust has settled in the Trump-Musk feud, the president stated there would be consequences for Musk if he supports Democratic candidates opposing the tax and spending bill.
Musk stated in a CBS interview that BBB “undermines” the work of DOGE… The Trump administration has refuted this point.
On Monday, Trump said he had no plans to discontinue Starlink service at the White House but hinted he might have his Tesla Model S removed from the White House grounds.
“I may move the Tesla around a little bit, but I don’t think we’ll be doing that with Starlink. It’s a good service,” Trump told reporters.
Trump also said that he would not have a problem if Musk called him: “We had a good relationship, and I just wish him well.”
Musk’s actions over the past several days suggest his anger has subsided and that he may be seeking to repair his relationship with the president.
As we noted last week…
For better or worse, the BBB will pass. Instead of clashing over what is autopilot spending to satisfy legacy obligations, focus on how to generate the biggest GDP growth https://t.co/bw6DQ4pBVa
However, we do agree with Musk on codifying DOGE cuts—after all, it’s a clear mandate from the American people for the president to rein in a bloated federal government long captured by deep-state swamp creatures.
US Collected A Record $22BN In Tariffs In May… Which Was Just 3% Of Total Government Spending
First the good news. One month after April recorded the second biggest budget surplus on record (at $258BN), a total which was boosted by generous customs duties collected as a result of Trump’s aggressive tariff and trade war escalation, in May the amount of tariff receipts was off the charts, soaring to a record $22.2 billion…
… or more than triple the amount of customs duties collected during any month of the Trump 1.0 trade war.
As for the bad news… well, you probably know where we’re going with this. Unfortunately, that record $22.2 Billion in tariffs is a drop in the pool compared to all the US government spending, which there was a lot of in May, $687.2 Billion to be precise (up 2.5% from a year ago) so the tariffs covered precisely… 3% of US government spending.
To smooth out the chart, here is the same spending data on a 6 month moving average basis. With the exception of the covid panic, the US government has never spent more!
Of course, it wasn’t just tariffs, and in May total government tax receipts rose 15% to $371.2 Billion (which includes the surge in tariffs) from $323.6 Billion last year. Not bad, until one realizes that total monthly tax revenue is basically flat for the past 4 years, while spending has continued to grow exponentially higher.
Naturally, the difference between government tax receipts and spending is known as the deficit, and in May it was $316BN, a modest improvement to the $347BN deficit one year ago, if just above the $314BN estimate.
Putting it all together, the cumulative deficit for fiscal 2015 is now $1.365 trillion. This is a substantial improvement to the trendline that was in place before Trump came into the white house (as of January, the cumulative 2025 fiscal deficit was the highest ever), but it is higher compared to the $1.202 trillion cumulative deficit in 2024, and it is certainly higher on a cumulative basis as of May – with just 4 more months left in the fiscal year – than any other year on record except the outliers of 2020 and 2021.
And while all of that is a good start, and certainly a big improvement in the US fiscal picture in the first three months of Trump’s regime, the big picture sadly remains a dismal one, largely because the US debt picture remains completely unsustainable, manifesting itself in $92.2 billion in interest payments in May…
… and a cumulative $1.2 trillion in gross interest expense per year, just $300 billion shy of the biggest spending category of them all: Social Security Spending.
That said, April’s bumper revenue aside, all five main spending categories are growing much faster than revenue, and something drastically has to change for this big picture to become viable. Unfortunately, we have now seen the wholsesale pushback Trump has faced when doing just that – trying to restructure a broken status quo – which is why unless Trump magically succeeds in this undertaking, the US is pretty much doomed (while DOGE’s achievements have been admirable, they are a drop in the bucket in the context of overall spending) as nobody else will ever come close to Trump’s intended overhaul of the US fiscal picture.
Abbott Deploys National Guard To San Antonio Ahead Of Wednesday Night ICE Protest
Setting himself in stark contrast to California Gov. Gavin Newsom, Texas Gov. Greg Abbott has ordered a contingent of National Guard soldiers to San Antonio ahead of protests against the apprehensions of illegal aliens planned for Wednesday night and Saturday.
“Peaceful protests are part of the fabric of our nation, but Texas will not tolerate the lawlessness we have seen in Los Angeles,” Abbott’s press secretary said in a Tuesday night statement. “Anyone engaging in acts of violence or damaging property will be swiftly held accountable to the full extent of the law.”
News of the deployment of National Guard soldiers comes after lawless conduct by demonstrators in Austin on Monday night. Texas Department of Public Safety (DPS) officers aided local police in managing a response that kept the theft and destruction to a minimum. “During Monday evening’s response, DPS personnel deployed tear gas and pepper ball projectiles to ensure officer safety and maintain order,” said DPS in a statement. Five arrests were made, with charges including felony criminal mischief and resisting arrest. Here’s video of the tear-gas deployment:
🚨UNLAWFUL ASSEMBLY:
Police declare the protest in Austin Texas an unlawful assembly‼️
Watch as police launch tear gas at Antifa / Anti ICE / Trans / LGBT protesters 🇺🇸
The Wednesday protest at City Hall in San Antonio promises to be just a warm-up for Saturday, when leftists are planning “No Kings Day Nationwide Day of Defiance” protests in cities all across the country — coinciding with a military parade in Washington to celebrate the 250th anniversary of the US Army (which also happens to be Trump’s 79th birthday). Saturday’s uprising is receiving organizational backing — or, at the very least, logistical support — from a web of nearly 200 groups, including a wide range of NGOs.
As Abbott deploys soldiers as a preventative measure, Newsom has filed for an emergency restraining order blocking Trump from dispatching troops to patrol Los Angeles, following four days of burning and looting and attacks on police. Abbott has aggressively deployed the National Guard before — to fend off invasions of Texas by illegal immigrants. In defiance of then-President Biden, he deployed troops to the Rio Grande border city of Eagle Pass, where the pace of illegal crossings reached a jaw-dropping 4,000 in a single day. Abbott even built a new, permanent military base in the vicinity — Forward Operating Base Eagle — to support his long-running, border-focused Operation Lone Star, which is a joint undertaking of the National Guard and DPS.
“The State of Texas stands ready to deploy all necessary personnel and resources to uphold law and order across our state,” said Abbott’s press secretary on Tuesday. “Texas National Guard soldiers are on standby in areas where mass demonstrations are planned in case they are needed.” Note that, while it’s certainly a “blue city,” San Antonio has a different culture than ultra-leftist Austin. Criminality like what was seen in Austin on Monday night is certain to provoke a public backlash and widespread endorsement of whatever counter-action Abbott’s soldiers and Texas DPS use to bring the hammer down:
Rioters in Austin, Texas steal chairs, tables, and signs from businesses, and dump them in the streets (most likely to help deter police) along with rental scooters, cones, street signs, barricades….
Rep. Mark Green (R-Tenn.) on Monday announced his intent to resign from Congress before his term ends.
Green, chairman of the House Homeland Security Committee, revealed his plans to retire after the final vote on President Donald Trump’s massive budget package that has become known as the “big, beautiful bill.”
The Tennessee Republican originally announced his intent to resign at the end of the previous Congress, but changed his mind.
Green said that he wanted to ensure that Trump’s priorities, including the border security component of the reconciliation package, made it through Congress.
The congressman said that after he retires, he’ll work in the private sector for an opportunity that was “too exciting to pass up.”
His next election would have been held in 2026.
“I am grateful to Speaker Johnson and House Leadership for placing their trust in me to chair the Committee on Homeland Security, lead the effort to impeach former Secretary Alejandro Mayorkas, and to pass H.R. 2, the Secure the Border Act, the strongest border security legislation in history to ever pass the House,” Green said in a statement. “However, my time in Congress has come to an end.”
Trump’s mega policy bill passed the lower chamber in a narrow 215-214 vote.
The bill is now under consideration by the Senate. If the upper chamber makes any changes, the House must approve the Senate’s modified version before it goes to the president to sign into law.
Green’s delayed departure could help the GOP pass the massive budget package in the House since Republicans, with their already narrow majority, needed every vote.
There will be 219 Republicans and 212 Democrats in the House when Green’s resignation takes effect.
Green, 60, has served Congress since 2019. Border security has been a key focus of his congressional tenure.
In addition to overseeing the border security section of Trump’s bill, he also led the effort on the Homeland Security Committee to write the border security section of the Secure the Border Act.
Before leading efforts on Mayorkas’s impeachment, Green led the committee through a nearly year-long investigation into the causes, costs, and consequences of the border crisis, which resulted in a five-phase report that covered the whole investigation.
In addition to leading the Homeland Security Committee, the congressman also served as a member of the House Committee on Foreign Affairs.
“It was the honor of a lifetime to represent the people of Tennessee in Congress,” Green said. “They asked me to deliver on the conservative values and principles we all hold dear, and I did my level best to do so.”
Green previously served as an Army surgeon and in the state Senate and is from Montgomery County. During his military service, he was deployed to Iraq and Afghanistan.
The congressman didn’t disclose any further details about what he will do in the private sector.
A special election will be held to replace him, but the timing of that election depends on when he leaves office. Tennessee Gov. Bill Lee must call a special election within 10 days of the seat’s official vacancy.
Green’s seat is expected to stay Republican as Trump won his district by 22 points in the November 2024 presidential election.
War Brewing? US Prepares Departure Of All Nonessential Staff From Iraq, Kuwait, Bahrain Embassies
Is something brewing amid US-Iran tensions, given the stalled nuclear negotiations and ratcheting accusations, demands, and counter-demands?
The State Department is preparing to order all nonessential personnel to leave the US Embassy in Baghdad due to potential regional unrest, according to two US officials cited in The Associated Press. Additionally:
—U.S. MILITARY DEPENDENTS IN BAHRAIN CAN TEMPORARILY DEPART DUE OF HEIGHTENED REGIONAL TENSIONS- US OFFICIAL TELLS REUTERS
—WTI GAINS 4.6% ON REUTERS REPORT ON US EMBASSY IN IRAQ
Again, the only ‘unrest’ and tension could be Iran-related, though the Baghdad embassy has at various times over several years come under Shia militia attacks, and even rioting outside its gates.
The embassy is already operating with limited staff, so in reality the move affects a small number of people.
As it stands, nonessential personnel and family members in Bahrain and Kuwait are being authorized to leave voluntarily, per the report. The Pentagon has further indicated it is ready to assist with a possible evacuation from the Baghdad embassy.
But if the US and Iran proceed with the next round of talks, these immediate tensions are likely to be defused.
Oil prices spiked (and gold climbing) on the alarming headlines which suggest new regional conflict could be imminent, also with Israel potentially poised to act…
Meanwhile, the Board of Governors at the International Atomic Energy Agency was set to potentially vote on a measure to censure Iran. That could set in motion an effort to snap back United Nations sanctions on Iran via a measure in Tehran’s 2015 nuclear deal with world powers that’s still active until October.
Amid the reports of preparations for embassy departures, Iran’s mission to the U.N. posted on social media that “threats of overwhelming force won’t change the facts.”
“Iran is not seeking a nuclear weapon, and U.S. militarism only fuels instability,” the Iranian mission has warned in a public written statement.
All eyes on the Middle East as the U.S. embassy in Baghdad is on high alert preparing for an immediate evacuation.
President Trump has definitely expressed his preference for negotiated solution, but Iran insists that it be able to keep enriching uranium, at least at low levels, as a matter of national sovereignty.
Wisconsin’s health department is keeping in place its recommendation that pregnant women and all children receive one of the currently available COVID-19 vaccines, diverging from guidance by the Centers for Disease Control and Prevention.
The Wisconsin Department of Health Services said on June 4 it is continuing to recommend COVID-19 vaccination for people aged 6 months and older.
Officials also said the state’s Medicaid would keep covering the vaccine for eligible members, including pregnant women.
“The current COVID-19 vaccine was thoroughly reviewed for safety and effectiveness and continues to be an important tool in preventing severe illness and death,” Kirsten Johnson, secretary of the department, said in a statement.
The CDC in late May stopped recommending that pregnant women receive a COVID-19 vaccine. The agency also now says that healthy children should only receive one of the shots after consulting with doctors and parents.
“Their decision should be based on informed consent through the clinical judgement of their healthcare provider,” a spokesperson for the U.S. Department of Health and Human Services, the CDC’s parent agency, told The Epoch Times in an email at the time.
Health Secretary Robert F. Kennedy Jr. said that the previous recommendations, which said that children should receive a vaccine regardless of prior vaccination and infection, were put into place “despite the lack of any clinical data to support the repeat booster strategy in children.”
Wisconsin officials said the changes “were not made based on new data, evidence, or scientific or medical studies” and that they were keeping in place the recommendations following an independent review.
The U.S. Department of Health and Human Services did not return a request for comment on Wisconsin’s move.
The Wisconsin Department of Health Services did not respond when asked for evidence the vaccines prevent severe illness and death.
The current versions of the vaccines from Pfizer, Moderna, and Novavax were clearedby federal regulators in 2024 based on animal data and antibody data from humans, rather than data from human clinical trials. The CDC then issued its recommendations, which were unchanged from the advice for previous formulations.
Data from CDC systems presented to the agency’s vaccine advisers in April pegged a dose of one of the currently available vaccines as providing 21 percent to 36 percent additional protection to adults when measuring emergency department and urgent care visits, and 42 percent to 48 percent additional protection for immunocompetent adults aged 65 and up when measuring COVID-19 associated hospitalizations.
No other states appeared to react to the recent CDC updates apart from Florida, which praised the narrowed recommendations. The move “is an important advancement for parents, physicians, and children across the country,” Dr. Joseph Ladapo, Florida’s surgeon general, said in a statement. He added that “ultimately, scientific evidence dictates that the use of these products should end for all populations.”
The American Pharmacists Association said on June 9 that it was not endorsing the updated adult immunization schedule. The group said that COVID-19 vaccination during pregnancy “has been proven safe and effective” and that it views pregnancy as a condition that places women at higher risk of severe COVID-19.
The group, which did not respond to a request for comment, said that it hopes future updates to the schedule are “based on scientific evidence” and that they are based on advice from the CDC’s vaccine advisory panel, the Advisory Committee on Immunization Practices.
A subgroup of that panel said in the spring that they supported shifting the CDC’s universal recommendations for COVID-19 vaccines to a non-universal recommendation.
The panel, whose members were all later terminated by Kennedy, is scheduled to convene later in June to discuss matters including COVID-19 vaccination.
AI can’t solve a problem that hasn’t been previously solved by a human.
– Arnaud Bertrand
A lot can be said about AI, but there are few bottom lines. Consider these my last words on the subject itself. (About its misuse by the national security state, I’ll say more later.)
The Monster AI
AI will bring nothing but harm. As I said earlier, AI is not just a disaster for our political health, though yes, it will be that (look for Cadwallader’s line “building a techno-authoritarian surveillance state”). But AI is also a disaster for the climate. It will hasten the collapse by decades as usage expands.
(See the video beow for why AI models are massive energy hogs. See this video to understand “neural networks” themselves.)
Why won’t AI be stopped? Because the race for AI is not really a race for tech. It’s a greed-driven race for money, a lot of it. Our lives are already run by those who seek money, especially those who already have too much. They’ve now found a way to feed themselves even faster: by convincing people to do simple searches with AI, a gas-guzzling death machine.
For both of these reasons — mass surveillance and climate disaster — no good will come from AI. Not one ounce.
An Orphan Robot, Abandoned to Raise Itself
Why does AI persist in making mistakes? I offer one answer below.
AI doesn’t think. It does something else instead. For a full explanation, read on.
Arnaud Bertrand on AI
Arnaud Bertrand has the best explanation of what AI is at its core. It’s not a thinking machine, and its output’s not thought. It’s actually the opposite of thought — it’s what you get from a Freshman who hasn’t studied, but learned a few words instead and is using them to sound smart. If the student succeeds, you don’t call it thought, just a good emulation.
The hidden costs of humanity’s most expensive delusion
by Arnaud Bertrand
About 2 months ago I was having an argument on Twitter with someone telling me they were “really disappointed with my take“ and that I was “completely wrong“ for saying that AI was “just a extremely gifted parrot that repeats what it’s been trained on“ and that this wasn’t remotely intelligence.
Fast forward to today and the argument is now authoritatively settled: I was right, yeah! 🎉
How so? It was settled by none other than Apple, specifically their Machine Learning Research department, in a seminal research paper entitled “The Illusion of Thinking: Understanding the Strengths and Limitations of Reasoning Models via the Lens of Problem Complexity“ that you can find here (https://ml-site.cdn-apple.com/papers/the-illusion-of-thinking.pdf).
“Can ‘reasoning’ models reason? Can they solve problems they haven’t been trained on? No.”
What does the paper say? Exactly what I was arguing: AI models, even the most cutting-edge Large Reasoning Models (LRMs), are no more than a very gifted parrots with basically no actual reasoning capability.
They’re not “intelligent” in the slightest, at least not if you understand intelligence as involving genuine problem-solving instead of simply parroting what you’ve been told before without comprehending it.
That’s exactly what the Apple paper was trying to understand: can “reasoning“ models actually reason? Can they solve problems that they haven’t been trained on but would normally be easily solvable with their “knowledge”? The answer, it turns out, is an unequivocal “no“.
A particularly damning example from the paper was this river crossing puzzle: imagine 3 people and their 3 agents need to cross a river using a small boat that can only carry 2 people at a time. The catch? A person can never be left alone with someone else’s agent, and the boat can’t cross empty – someone always has to row it back.
This is the kind of logic puzzle you might find in a children brain teaser book – figure out the right sequence of trips to get everyone across the river. The solution only requires 11 steps.
Turns out this simple brain teaser was impossible for Claude 3.7 Sonnet, one of the most advanced “reasoning” AIs, to solve. It couldn’t even get past the 4th move before making illegal moves and breaking the rules.
Yet the exact same AI could flawlessly solve the Tower of Hanoi puzzle with 5 disks – a much more complex challenge requiring 31 perfect moves in sequence.
Why the massive difference? The Apple researchers figured it out: Tower of Hanoi is a classic computer science puzzle that appears all over the internet, so the AI had memorized thousands of examples during training. But a river crossing puzzle with 3 people? Apparently too rare online for the AI to have memorized the patterns.
This is all evidence that these models aren’t reasoning at all. A truly reasoning system would recognize that both puzzles involve the same type of logical thinking (following rules and constraints), just with different scenarios. But since the AI never learned the river crossing pattern by heart, it was completely lost.
This wasn’t a question of compute either: the researchers gave the AI models unlimited token budgets to work with. But the really bizarre part is that for puzzles or questions they couldn’t solve – like the river crossing puzzle – the models actually started thinking less, not more; they used fewer tokens and gave up faster.
A human facing a tougher puzzle would typically spend more time thinking it through, but these ‘reasoning’ models did the opposite: they basically “understood” they had nothing to parrot so they just gave up – the opposite of what you’d expect from genuine reasoning.
Conclusion: they’re indeed just gifted parrots, or incredibly sophisticated copy-paste machines, if you will.
This has profound implications for the AI future we’re all sold. Some good, some more worrying.
The first one being: no, AGI isn’t around the corner. This is all hype. In truth we’re still light-years away.
The good news about that is that we don’t need to be worried about having “AI overlords” anytime soon.
The bad news is that we might potentially have trillions in misallocated capital.
Stellar 10Y Auction Stops Through, Sees 3rd Lowest Dealer Award On Record
After yesterday’s mediocre, if solid, 3Y auction nerves were less on edge ahead of today’s sale of $39BN in 10Y paper. And with good reason: moments ago the Treasury announced the result of today’s benchmark auction and they were nothing short of stellar.
The auction priced at a high-yield of 4.421%, up from May’s 4.350% but down from April’s “freak out” 10Y sale when the bond priced at 4.465%. The auction also stopped through the When Issued 4.428% by 0.7bps, the 4th consecutive through in a row, if more modest than last month’s 1.2bps, and certainly April’s 3.0bps.
The bid-to-cover was a bit on the weak side, at 2.52, down from 2.60 last month, and the lowest since February; it was also below the six-auction average of 2.59.
The internals were solid, with Indirects almost unchanged from last month, as foreigners took down 70.6% of the auction, vs 71.2% last month. And with Directs awarded 20.5%, up from 19.9% in May and the highest since January, Dealers were left holding 9.0%, up ftactionally from 8.9% last month and the 3rd lowest on record.
Overall, this was an impressive auction, coming at a time when the global surge in duration supply has made it very dangerous to sell debt (especially in Japan). But in the US, animals spirits are back right now, and the market is clearly buying anything and everything, which is why 10Y yields slumped to session lows, just north of 4.40% after the auction and the lowest in the past week.
Israeli Ambassador to Ukraine Mikhail Brodksy said that Israel transferred US-made Patriot air defense missiles to Ukraine but was contradicted by his Foreign Ministry. They were unconvincing though so ties with Russia might be harmed after its UN envoy warned of “certain political consequences” last summer if this happened. The region has changed since then after Hezbollah chief Nasrallah was killed, Assad fled Syria, and Iran resumed nuclear talks with the US, however, so such consequences might be limited.
After all, it’s no longer realistic to countenance the scenario of Russia arming Hezbollah, finally allowing Syria to use its S-300s to defend itself from attacking Israeli jets, or providing other forms of indirect support to the Resistance in its regional proxy war with Israel that’s now practically lost. Those were always far-fetched to begin with, but now they’re less likely than ever, thus suggesting that Russia will probably just file a formal complaint and at most flirt with designating Israel as an “unfriendly country”.
Nevertheless, the second possibility can’t be taken for granted seeing as how Israel is reportedly lobbying the US to keep Russia’s bases in Syria as a counterweight of sorts against Turkiye, and the recent Trump-Bibi rift could be taken advantage of to present Putin as a more reliable partner. Moreover, Israel still doesn’t formally comply with the West’s anti-Russian sanctions, yet its leadership might finally relent if Russia officially designates them as “unfriendly”, so the Kremlin will probably tread cautiously.
The preceding insight contextualizes why Israel waited until now to finally transfer some of its US-made Patriot air defense missiles to Ukraine. Considering that the realistic range of Russia’s retaliatory options is now limited, Bibi likely calculated that the harm to bilateral ties will be manageable, ergo why Israel wouldn’t have much to lose by going through with this. As for why he did so, it might be an attempt to curry favor with US hawks, hoping that this can in turn mitigate the consequences of his rift with Trump.
This unnecessary zero-sum gamble didn’t reap any tangible dividends, however, as evidenced by the continued tensions in their ties. To the contrary, it revealed how desperate Bibi has become that he’d now risk harming ties with Russia with the expectation that this would then return Israel to the US’ good graces, which makes him look worse than before in the eyes of objective observers. The recent pressure has clearly clouded his thoughts otherwise he wouldn’t have done this.
Trump and his like-minded allies certainly took note of his calculations and might soon exploit them to the hilt, knowing as they do now how desperate Bibi has become and consequently sensing that they might now be able to extract more concessions from Israel than ever. This could take the form of getting Israel to agree to some level of Iranian nuclear enrichment as part of the deal that they’re negotiating with it instead of Israel unilaterally bombing Iran in the scenario that such a deal is reached.
Interestingly, while Israel’s transfer of some US-made Patriot missiles might harm ties with Russia, it might therefore worsen ties with the US even more if Trump makes politically unacceptable demands of Bibi after sensing how much weaker he’s become as a result of their recent rift. In response, Bibi will either capitulate at the expense of losing more support from his base, or he’ll defy the US at the expense of Israel’s national security if he goes through with bombing Iran but is then hung out to dry by Trump.
