After a stellar 3Y auction and a solid, but tailing 10Y auction, moments ago the Treasury held the week’s final refunding auction when it sold $25 billion in 30Y bonds in yet another stellar auction.

The high yield of 4.635% was fractionally below last month’s 4.671% (and well below the cycle high of 4.837%in October 2023); it also stopped through the When Issued 4.642% by 0.7bps, following last month’s modest tail, and was the 5th stopping through auction in the past 6.

The bid to cover rose to 2.409% from 2.367%, and also above the six-auction average of 2.38%.

The internals were solid with Indirects awarded 64.9%, up from 64.4% but below the recent average of 66.8%. And with Directs awarded 19.8%, Dealers were left holding 15.4% of the final auction.

Overall, this was a very strong close to refunding week, and the market clearly approved with yields sliding to session lows in kneejerk reaction to the solid demand for the ultra-long dated paper.

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Former President Donald Trump on Thursday confirmed that his lawyers asked a New York state appellate court to issue a ruling on a judge’s gag order that prohibits him from speaking about certain individuals connected to his ongoing trial.

His team filed a motion on Wednesday, which has been sealed and is inaccessible, according to the court docket. The Manhattan district attorney’s office filed a response to the motion, but it was also sealed.

While speaking with reporters outside the courthouse on Thursday morning, President Trump confirmed the move. Anonymously sourced reports published Wednesday said that it was a motion to expedite the ruling.

“I just want to let you know that we’ve just filed a major motion in the appellate division concerning the absolutely unconstitutional gag order, where I’m essentially not allowed to talk to you about anything meaningful that’s going on in the case. And many good things are going on with the case. It shouldn’t have been filed,” he said.

During his comments to reporters, he did not go into specifics about the motion.

The former president is under a gag order that prohibits him from making public statements about potential witnesses, court staff, prosecutors’ staff, or family members. Judge Juan Merchan, who issued the order and later expanded it, ruled that President Trump violated his directive 10 times before threatening to jail the former president if he makes future comments that he believes violate that

Previously, the New York Court of Appeals rejected the former president’s bid to pause the trial while he battles the gag order. They also rejected an attempt to pause the enforcement of the order, which was issued in March after prosecutors requested it.

His lawyers have argued that the gag order violates the former president’s First Amendment right to free speech, noting that he is currently the leading Republican presidential candidate.

But earlier this week, Judge Merchan fined the former president for a 10th time for an April remark that he made to a media outlet about the Manhattan jury pool, which he said was “95 percent” Democratic. The judge then said that a $1,000 fine isn’t enough and that he might have to jail the former president, although he did not go into specifics about how that would look like.

“Your continued willful violations of this court’s orders threaten to interfere with the … administration of justice,” Judge Merchan said before issuing a warning about possible jail time.

The former president, in response, criticized the judge and wrote on Truth Social that he is now not allowed to respond publicly to “lies and false statements” made about him during the New York trial. It came after witness Stormy Daniels made salacious allegations about President Trump during her first trial appearance, which President Trump has denied.

According to emails reviewed by The Epoch Times, the Trump campaign also used the judge’s threat as a means to fundraise for his presidential campaign. “The liberal judge in New York just threatened to THROW ME IN JAIL,” read one of the emails, adding that they want him “in HANDCUFFS.”

During his remarks to reporters on Thursday, the former president also quoted multiple legal analysts’ commentary on the case to say that it should never have been brought against him. Those analysts, which President Trump read aloud from a piece of paper, stated prosecutors revived the case after more than seven years in a politicized attempt to harm his 2024 reelection campaign.

“‘I’ve been doing this for 60 years, and I don’t understand what crime he’s been charged with. Nobody understands this. I just don’t get the crime. There’s no evidence of any crime whatsoever. This is a sham,’” President Trump said, quoting retired Harvard professor Alan Dershowitz.

The trial is expected to last another two weeks. On Thursday, Ms. Daniels, whose real name is Stephanie Clifford, again took the witness stand and was grilled by defense attorneys about whether she was using her allegations against President Trump to make money for herself and bolster her name recognition.

President Trump is charged with 34 counts of falsifying business records to cover up his former lawyer Michael Cohen’s $130,000 payment to Ms. Daniels for her silence ahead of the 2016 election about the alleged encounter. President Trump has pleaded not guilty and denies Ms. Daniels’ claims.

The case is seen by some as the least consequential of the four criminal prosecutions President Trump faces. But the chances of the other three, going to trial before the election are growing more distant. He has pleaded not guilty in all the cases.

The former president’s cases in Georgia and Washington were paused by the respective judges overseeing them. Meanwhile, in a major legal win, a Florida federal judge suspended his classified documents case indefinitely after prosecutors revealed that the contents of an evidence box were inexplicably rearranged.

Reuters contributed to this report.

By Michael Every of Rabobank

Yesterday saw the Riksbank in Sweden cut rates by 25bp to 3.75% for the first time since 2016 (as Brazil cut 25bp to 10.50% as expected, yet the BoJ opened the door to another tiny June hike). Rate cuts, and a month before the ECB is expected to do the same! As Bloomberg put it, “their choice signals that the domestic situation, with subsiding inflation and a sputtering economy, takes precedence over any concern that moving ahead of bigger peers will lead to another bout of korona weakening that in turn would fuel import prices.” Or that cutting rates doesn’t see speculation and inflation return locally; and/or that the global backdrop doesn’t suddenly do anything (additionally) nasty that would complicate the inflation environment for everyone.

On that latter note, the headlines speak to a dynamic that risks exactly that kind of development, if not immediately then over time.

First, ‘Biden warns Israel he will halt US weapon supplies if it invades Rafah’. The US president doesn’t mean just the $260m of munitions already on hold despite Congressional approval, but most offensive weapons, even if defensive systems such as iron dome interceptors will still flow.

There are few topics less well understood and more passionately championed on both sides that the current conflict between Israel and Hamas, but these points hopefully underline why this US action has a key geopolitical, and potential market, impact.

• The US is trying to dictate Israel’s policy, but far too belatedly to please the anti-Israel crowd.
• It removes the only pressure-point left to force Hamas to release the remaining Israeli hostages which it holds (including dual US citizens), displeasing the pro-Israel crowd.
• This as a huge political win for Hamas. It leaves Israel with only the recent Hamas-penned deal that would see it hold hostages for longer, retake control of Gaza, and gain the release of high-profile Palestinian prisoners into the West Bank. That latter action would crush the popular standing of the Palestinian Authority, leading to a Hamasification that would undermine both US/Western hopes for Arab states helping rebuild Gaza under a reformed Palestinian Authority and a two-state solution.
• This US “offense things bad, defensive things good” strategy is a mirror image of what they have tried and failed with vs. Russia (re: Ukraine) and Iran (re: Israel), among others, so far.
• Saudi Arabia will be wondering if a defense alliance with the US is worth it when their future actions might be proscribed by a White House National Security Advisor who a week before 7 October proudly claimed that the Middle East was “the quietest it has been in years.” Other allies in other regions, from Europe to Asia, may also start to wonder how reliable the US is when push really comes to shove.   
• Israel, seeing this as existential, could ignore the US, creating a rupture between key allies. Or it could pivot to attack Hezbollah in Lebanon, which would be a far more destructive, destabilising conflict: and any US refusal to supply ammunition for that would be a true geopolitical earthquake that would embolden all forces pushing back on the US and its allies further.

In market terms, this doesn’t mean anything for energy prices immediately: indeed, some may wrongly take it as a “de-escalation” signal. However, the underlying pressure on the geopolitical tectonic plates has increased enormously, and the risks of a fresh eruption of some kind –with an inflationary impact of various potential forms (i.e., look at the Houthis)– has increased in tandem.

Second, the IMF’s Gopinath this week stated: “Consider a world divided into three blocs: a U.S. leaning bloc, a China leaning bloc, and a bloc of nonaligned countries.” Which is of course exactly what we did years ago, when almost nobody else in markets was talking about it seriously. While she stresses that “connector countries” like Mexico and Vietnam are key ‘middlemen’ between the US and China, she notes we are seeing signs of real embryonic geopolitical and geoeconomic rupture.

The currency composition of cross-border payments for US-leaning countries is unchanged, but for those China-leaning the CNY share has more than doubled, from around 4% to 8% – and this is not only Russia, but a broader upstream trade commodity finance shift I have flagged before. She notes China’s shift from SWIFT to its own CIPS; central banks’ increased gold purchases for FX reserves; and flags the potential risks of trade fragmentation like Brexit on steroids, financial fragmentation that will see capital flows shift, and even that “the global payment system could become fragmented along geopolitical lines with the emergence of new payment platforms with limited or no interoperability.” Which is what happened in the 1930s, as well as in the Cold War, and which I have flagged as a risk repeatedly for years – and I have stressed that the dollar still wins even in a fractured world order where we all lose.

In a mild scenario, the IMF thinks this could reduce world GDP by 0.2%; in an extreme scenario, losses could be 7%; and low-income countries could experience 4 times the GDP loss of other countries in the event of fragmentation of commodity markets into two blocs. Most of the losses would be due to trade restrictions of agricultural commodities, raising concerns about food security in poorer countries: you think cocoa is volatile now? Again, we did this geopolitical work on agri commodity flows years ago.

Fragmentation of trade in minerals for the green transition would also make the already vastly expensive energy transition even more costly, as these minerals are geographically concentrated and not easily substituted. Again, this is a point made here before.

Understandably, the IMF asks, “So, what can we do to prevent this?” Yet the answer is: “The ideal solution would be to preserve and strengthen the multilateral rules-based global trading system and the international monetary system… and making more progress on dealing with subsidies and national security trade restrictions and developing international rules and norms on… industrial polices… But given where we are today, the ideal may be difficult to achieve.”

So, all the IMF can offer is “to keep open the lines of communication and stay engaged,” and “work together on areas of common interest,” which means little, and “limit harmful unilateral policy actions, including industrial policies” – which are about to expand massively, even in Europe.

Third, US presidential candidate RFK, Junior says that he has a dead worm in his brain and, “I have cognitive problems, clearly. I have short-term memory loss, and I have longer-term memory loss that affects me.” But not to worry, because you have the alternative choice of Joe Biden. Or of Donald Trump.

That all says, “disinflation and rate cuts”, right? So, surely, it’s time to risk doing just that?

In this visualization, Visual Capitalist’s Pallavi Rao shows Pew Research’s findings on what bothers Americans the most about the tax system.

This data was collected after surveying more than 5,000 American adults between the period of March 27-April 2, 2023.

The survey was weighted to be representative of the U.S. adult population. Visit Pew Research’s methodology page for more details.

Americans Want More Taxes for Some

Six in every 10 Americans feel that both corporations and the wealthy don’t pay their ‘fair share’ in federal taxes.

Their sentiments are not entirely unfounded.

Note: No answer responses are not shown, thus percentages may not sum to 100.

A 2021 ProPublica investigation found some of the wealthiest Americans – also the wealthiest people in the world – did not pay a single penny in federal income taxes in some years.

A significant part of why this is possible is how taxes are collected depending on the source. Since much of the top 1% grow their wealth in equity and property, they are not subject to taxes until they make an actual transaction.

As this Brookings Institution article explains: most Americans make money through their wages, and wages are subject to heavier taxation than capital income.

Thus, the tax share of America’s highest-income households is often lower than America’s middle-income households.

Finally, Pew Research noted that their findings were essentially unchanged since 2021.

Authored by Simon White, Bloomberg macro strategist,

It’s time once more to increase vigilance for a US recession.

Soft, survey data is starting to deteriorate, while hard data is already fragile. Expectations of a downturn are currently low, but they could quickly swing higher.

Stocks – which experience their worst drawdowns in recessions – are not priced for such an outcome, while yields are biased lower in the coming months.

S curves are nature’s approximation of a binary on-off switch. They pop up in all sorts of places, from neurons in the brain to the progression of diseases, and from population growth to the adoption of new technologies. They also describe how recessions evolve.

Economies are typically believed to develop in a linear fashion, from a non-recessionary to a recessionary state. But instead they do so in a highly non-linear way, with recessions often happening abruptly. Downturns have either a low risk of occurring in the next 3-4 months, or a high risk, but rarely anything in between – much like the shape of an S as depicted below.

That is why most standard recession models don’t make a lot of sense, as they assume recession risk can evolve smoothly. But it is essentially meaningless to talk of the likelihood of a recession rising from, say, 45% to 50%, when we acknowledge their regime-shift nature.

Just now we are at the bottom-left hand side of the S, with a low risk of an imminent recession. But the data has evolved in the last few weeks to suggest we could soon move to the right and on to the steep upward section of the curve – meaning the probability could quickly climb much higher. If so that would make a recession more likely than not over the next 3-4 months.

Stocks are expecting a soft or no landing. They are currently behaving in a way consistent with the Fed’s first rate cut — the most likely move if it changes rates this year — occurring in the absence of a recession. However, rate cuts that happen when there is a slump have historically led to a much worse outcome for equities — both before and after the recession — than currently priced (white line in chart below).

Six months ago I wrote that a US recession was unlikely through most of 2024. That could still end up being the case, but if we are shifting along the S curve, then investors should be prepared for an environment that could quickly look more recessionary, even if an actual downturn doesn’t arrive for another six months. Remember: stocks sell off before the onset of a recession, and even longer before the NBER finally announces the economy is in one.

The upgrading of recession risk has been prompted by the weakening in soft data in recent weeks, coinciding with hard data that remains fragile.

The manufacturing ISM is one of the single-most important data points for the economic and stock outlook.

The headline survey dropped below 50 in April. It is led by the new orders-to-inventory ratio, which is turning lower and slipped below the important level of one, where orders are expected to be just enough to match inventory.

It was the rise in this ratio, along with other indicators, that fed the view last year that the US was likely to avoid a recession for a while yet.

Yet as much as it’s unhelpful to be a perma-bear and constantly expect a recession, it also doesn’t make sense to assume there will be no recession at all. As I have described, one can only have a reasonably accurate view on a downturn occurring over the next 3-4 months, and that view by its nature is likely to change abruptly, not smoothly.

Adding to the difficulty in forecasting recessions, the goods and services economies have fallen out of sync in this cycle. Normally the goods sector leads the rest of the economy into a downturn, which is why so many traditional recession indicators over-emphasized the risk of one last year. But at some point, the economy is likely to resynchronize.

Why it’s particularly important to be more vigilant now is that services might also be notably slowing, as flagged by the services ISM also slipping below 50 in April; it has only done so twice before outside of a recession.

The usual caveats apply. The ISM is quite volatile, and the PMI services survey is still above 50, even though it is also turning lower. But this drop in important soft-data points comes at a time when hard data is showing signs of fragility too.

Recessions occur when both hard and soft data are contracting at the same time. Using the inputs to the Conference Board’s Leading Index, growth in leading hard-data has been turning higher, but is still contracting, while leading soft-data is close to slipping into the contraction zone. That would be ominous for recession risk.

Revisions will also be key to monitor. Typically data sees its biggest revisions before and after the occurrence of a recession. Data can be revised lower very quickly which is why recessions can happen faster in revised time than in real time.

What does all this mean practically for investors?

It leaves stocks more vulnerable. As the chart below shows, even though equities see a sharp drawdown after a recession begins (which, remember, we don’t know when that is until after the fact when the NBER announces it), they begin selling off beforehand. Moving to the right of the S curve means more volatile stock prices with a bias lower, even if it does not ultimately mean a full recession-like decline and an end to the bull market.

It also means bond yields are more likely to see some retrenchment in the coming months. But with elevated inflation in the background, bonds are primed to not rally as much as in non-inflationary recessions (see chart below). Moreover, yields are still structurally biased higher due to waning interest in owning USTs at current prices, and an inundation of supply.

Investing is about gauging forward probabilities. The probability of a near-term recession is currently low, but in a month’s time it could be much higher. That would be a lot of new information asset prices would have to quickly digest. A more nimble investment stance is advised at this trickier part of the cycle.

Via SchiffGold.com,

In 2009, 140 banks failed, and a recent report from financial consulting firm Klaros Group says that hundreds of banks are at risk of going under this year. It’s being billed mostly as a danger for individuals and communities than for the broader economy, but for stressed lenders across America, a string of small bank failures could quite quickly spread into a larger bloodbath — especially in an economy with hot inflation and a feverish addiction to ultra-low interest rates.

Data Source: FDIC.gov

Most at-risk firms are smaller banks representing assets under $10 billion, with a handful of larger regional ones. Some might be able to avoid closing by halting expansion plans or offering fewer services. Others might save themselves by merging with larger banks. But with inflation too high for the Fed to cut now, “higher for longer” interest rate policy is looking increasingly likely, and banks with high exposure to troubled commercial real estate are at particular risk of starting a domino effect of small collapses that lead to bigger ones and bleed into becoming a real estate crisis.

The Klaros report looked at troubled community banks with a large proportion of troubled commercial real estate loans, uninsured deposits, and massive losses on other loans and bonds. These banks are held hostage by higher interest rate policy, and Jerome Powell has already acknowledged that not all of the Fed’s hostages will make it. Fear not, however — as he said at a recent hearing on monetary policy in the Senate Banking, Housing, and Urban Affairs Committee, a few failures won’t turn into an uncontrolled downward spiral:

“There will be bank failures…I think it’s manageable, is the word I would use.”

In other words, banks will fail, but it won’t be enough to trigger a large banking crisis or blow up the broader commercial real estate sector. Powell says the Fed is “working” with these troubled smaller banks that are sitting on loans for empty office and retail buildings, but it’s up to you whether you find his words reassuring:

“There are empty buildings in many major and minor cities…thousands and thousands of people who worked in those buildings are under pressure too…we’re just trying to stay ahead of it on a bank-by-bank basis.”

But interpreting Fed doublespeak is always a delicate endeavor. After all, if he did think 2024-2025 bank failures would be enough to start a domino effect, he wouldn’t say so, or it would cause markets to panic, and the collapse could quickly become a self-fulfilling prophecy.

But don’t worry — Powell promises that in any event, the Fed will use taxpayer money to protect the megabanks deemed “systemically important” if its economic meddling leads to a banking crisis. The first bank failure of 2024, First Republic Bank, doesn’t fall into this “too big to fail” category and was absorbed by the larger Fulton Financial. Almost 50% of First Republic’s loans were in commercial real estate.

In all its hubris, the Fed is stuck between preventing a banking crisis and preventing inflation from getting even more out of control. It needs higher rates to reduce inflation, but crucial sectors of the economy that are heavily dependent on lending can’t survive in a higher-rate environment, even if they don’t appear insolvent at first glance.

In a free market, interest rates would be much higher — and “too-big-to-fail” banks wouldn’t exist. Parts of the economy that couldn’t handle higher rates would be cleaned out of the system. Without the free market’s unforgiving but self-regulating mechanisms, where losers are allowed to lose no matter their size, Federal Reserve wizardry locks America into a seemingly endless cycle of death and reincarnation. Recession and bubble, boom and bust. But every cycle coils the spring more tightly as the Fed kicks the can down the road to prevent an all-out failure of the system, and the dollar itself, in the longer term.

Illegal immigrants at a Denver, Colorado encampment that is set to be removed are refusing to leave until the city meets a list of 13 demands, which include access to “fresh, culturally appropriate ingredients” for food, unlimited showers, “the same housing support that has been offered to others,” legal services, and fair warning before kicking them out.

The group, which had been staying at an encampment under busy Central Park Boulevard in northeast Denver, before relocating under a bridge near the Denver Airport, sent their demands to Mayor Mike Johnson (D) on Wednesday, according to the nonprofit Housekeys Action Network Denver, which posted them to Facebook and said the demands were “incredibly reasonable and doable” and would ensure “long-term stability and opportunities for all.”

The nonprofit also criticized the city for “poor conditions and lack of accountability that resulted in many of these same individuals finding themselves on the streets after having gone thru [sic] the system.”

The full list of demands is as follows;

1. Migrants will cook their own food with fresh, culturally appropriate ingredients provided by the City instead of premade meals – rice, chicken, flour, oil, butter, tomatoes, onions, etc… Also people will not be punished for bringing in & eating outside food.
2. Shower access will be available without time limits & can be accessed whenever – we are not in the military, we’re civilians.
3. Medical professional visits will happen regularly & referrals/connections for specialty care will be made as needed.
4. All will receive the same housing support that has been offered to others. They cannot kick people out in 30 days without something stable established.
5. There needs to be a clear, just process before exiting someone for any reason – including verbal, written, & final warnings.
6. All shelter residents will receive connection to employment support, including work permit applications for those who qualify.
7. Consultations for each person/family with a free immigration lawyer must be arranged to discuss/progress their cases, & then the City will provide on-going legal support in the form of immigration document clinics, & including transportation to relevant court dates.
8. The City will provide privacy for families/individuals within the shelter.
9. No more verbal or physical or mental abuse will be permitted from the staff, including no sheriff sleeping inside & monitoring 24/7 – we are not criminals & won’t be treated as such.
10. Transportation for all children to & from their schools will be provided until they finish in 3 weeks.
11. No separating families, regardless of if family members have children or not. The camp will stay together.
12. The City must schedule a meeting with the Mayor & those directly involved in running the Newcomer program ASAP to discuss further improvements & ways to support migrants.
13. The City must provide all residents with a document signed by a City official in English & Spanish with all of these demands that includes a number to call to report mistreatment of if they aren’t

In response, Johnson’s office offered the migrants the ability to stay in a city shelter for seven days instead of the initial three.

“We’ve been offering time and shelter, basically just trying to get families to leave that camp and come inside,” Denver Human Services spokesperson Jon Ewing told 9News.

As the Epoch Times notes further, the migrant crisis is costing Denver bigly, as the group’s refusal to leave the encampment comes as Denver is battling with a $180 million budget gap as the illegal immigrant crisis continues to weigh heavily on the city.

In February, Mr. Johnston told reporters the city needs to slash roughly $18 million per month from public services throughout 2024 in order to fund the costs of providing services to illegal immigrants arriving in the city.

At the time, the Democrat called the cuts a “plan for shared sacrifice” that would help both “newcomers” illegally crossing the border and taxpayers who expected certain services in the city.

“This is what good people do in hard situations as you try to manage your way to serve all of your values. Our values are: we want to continue to be a city that does not have women and children out on the street in intense and 20-degree weather,” he said.

In its post on Facebook, Housekeys Action Network Denver said it was not up to Mr. Johnston to “accept and support the very migrants he says he appreciates and defends in his speeches.”

“Now is the time to support these individuals with sustainable, stable plans that also provide them with the autonomy and self-determination they want!!!” the organization said.

The Epoch Times reached out to Denver Human Services for further comment but did not receive a response by press time.

Authored by Simon White, Bloomberg macro strategist,

Stocks and bonds have been rising together again, with investors getting longer of both assets. Inflation fears are taking a backseat for now, allowing lower yields to boost stock prices.

Positioning data for equities shows that investors have been getting longer US stocks all year and are now net long as they have been since late 2021.

This was not long before the market peaked at the start of 2022, but the backdrop was worse then than it is now. CPI was 7% and still rising and excess liquidity was falling quite sharply.

Equities had a good week last week, retracing three-quarters of their recent down move. As discussed last week, they have seen a change of leadership, which has recently been consistent with a bottom in prices being near.

Stocks have rallied as yields have fallen from their recent high of ~4.70%. Bonds had become somewhat oversold, and we also saw some weaker than expected economic prints, e.g. payrolls, that pushed inflation concerns into the backseat and allowed USTs to bounce. Investors appear to have been dipping their toe back in, as positioning data shows an uptick in net long bond positioning.

Yet the longer-term outlook for bonds is still poor. Inflation will linger and leading indicators point to higher price growth to come. Stocks and bonds are rising together at the moment, but the flipside of that positive correlation is that they can fall together too, negating one of the main reasons multi-asset managers own them.

Banks have also been on net divesting themselves of Treasuries and agency securities over the last two years from 33% of assets to 30%. There was little to suggest that is about to start rising again from the latest Senior Loan Officer Survey, released on Monday for the three months to the end of April. The net percent of banks tightening standards for C&I loans remained steady, after rising in the quarters since SVB’s bankruptcy. That leads C&I loan growth by about six-to-nine months.

As the chart below shows, banks tend to reduce their holdings of less profitable Treasuries when they make more commercial loans.

That continues to make it more likely the household sector will be the buyer of last resort for Treasuries, and if inflation continues to be a problem, demand a higher yield premium to do so.

Shares of Airbnb stumbled in premarket trading in New York on Thursday after the home rental company beat earnings expectations for the first quarter but provided weaker-than-expected guidance. This comes after Bank of America analysts identified other travel companies missing earnings, leaving them with new fears that a consumer travel spending downturn nears. 

Here’s how the company reported in the first quarter, compared with consensus expectations from Bloomberg: 

• Revenue $2.14 billion, +18% y/y, estimate $2.06 billion

• Gross booking value $22.9 billion, +12% y/y, estimate $22.32 billion

•  Adjusted Ebitda $424 million, +62% y/y, estimate $326.3 million

• Adjusted Ebitda margin 20% vs. 33% q/q, estimate 15.9%

• EPS 41c vs. 18c y/y, estimate 30c

• Nights and experiences booked 132.6 million, +9.5% y/y, estimate 131.81 million

• Gross booking value per nights and experiences booked $172.88, +2.6% y/y, estimate $169.38

• Free cash flow $1.91 billion, +21% y/y, estimate $1.07 billion

Despite the revenue beat in the quarter, nights and experiences booked, a key metric in the industry, posted 9.5%, falling short of expectations of a 12% increase. “It also represents the slowest rate of growth since 2020, suggesting that overall demand has normalized after an initial post-pandemic travel boom,” Bloomberg said. 

Wall Street analysts were more focused on Airbnb’s second-quarter guidance. The company now expects revenue for the quarter ending in June to be between $2.68 billion and $2.74 billion, down from $2.74 billion. 

• Sees revenue $2.68 billion to $2.74 billion, estimate $2.74 billion (Bloomberg Consensus)

In a statement, Airbnb noted that the Easter holiday and currency headwinds were some factors in the travel spending slowdown – ahead of the peak travel season in July. 

Wall Street analysts were focused on the “underwhelming” room nights metric and weak quarter-two guidance that overshadowed better-than-expected first-quarter earnings (list courtesy of Bloomberg):

Bloomberg Intelligence analyst Mandeep Singh

• “Airbnb’s expectations of 8-10% top-line growth for 2Q suggests a further deceleration in room-night growth, with average daily rates likely to remain a slight tailwind”

RBC Capital Markets analyst Brad Erickson (sector perform, PT $150)

• “The Q2 revenue guide was slightly below consensus, and importantly, the shareholder letter called for Nights & Experiences y/y growth similar to Q1’s 9% vs. consensus looking for 12%”

Morgan Stanley analyst Brian Nowak (underweight, PT $120)

• While Airbnb is a unique travel platform, room nights continue to underwhelm
• Expect “stable-to-slowing room night growth” and more use of marketing to drive growth “weighing on the multiple investors are willing to pay”

JPMorgan analyst Doug Anmuth (neutral, PT $145 from $140)

• Airbnb reported a solid 1Q, expect 2Q to be stable and acceleration in 3Q
• “ABNB’s work on making hosting mainstream & perfecting the core service continued in 1Q”

Citi analyst Ronald Josey (buy, PT to $167 from $170)

• The results are better than expected, but the outlook is below the consensus

Evercore ISI analyst Mark Mahaney (in line, PT $140)

• Revenue and adjusted Ebitda are highlights of the report, but the revenue forecast “bracketed the Street”

Airbnb shares are puking in premarket trading, down 9.3% to $143 handle. 

The slowdown in travel spending has hit other companies in the industry. 

Last week, Booking Holdings posted worse-than-expected guidance, and Expedia Group reported disappointing results.

On Wednesday, this led Bank of America’s trading desk to ask: “Theme Alert? Consumer Travel Spending easing?” 

They pointed out a list of disappointing earnings across the travel industry: 

• $EXPE miss/guide

• $TRIP miss

• $CMCSA parks commentary

• $DIS parks’ moderation’ or normalization

• $UBER slight bookings miss

Taking a deeper dive into markets, the Dow Jones US Travel & Leisure Index peaked in late March and fell 7.5%. The index is up against heavy resistance. 

Also, during earnings calls, McDonald’s, Starbucks, and Tyson Foods have recently warned about mounting headwinds hitting low-income consumers amid the failure of Bidenomics, which has left the economy plagued with elevated inflation. 

To sum up, revenge travel originating from the end of the pandemic could fade here. 

Authored by Andrew Korybko via Substack,

Many observers from the Mainstream Media and the Alt-Media Community alike were shocked when Defense Secretary Austin confirmed on Wednesday during a congressional testimony that the US had withheld “one shipment of high payload munitions” on the pretext that they could be used in Rafah. Biden then expanded on this newfound policy later in the day when declaring that “We’re not going to supply the weapons and artillery shells” if the IDF goes into Rafah’s population centers.

Nobody should have been surprised, however, since this piece here from mid-March about why Biden endorsed Schumer’s call for regime change in Israel explained the double game that his administration is playing. In brief, domestic electoral considerations influenced his team into ramping up last spring’s pressure campaign against Bibi, which was initially meant to punish him for ideological reasons but is now also aimed at pressuring Israel into the regional peace deal that it’s reportedly trying to broker.

Interested readers can learn more about it here, with the pertinence being that the US envisages Saudi Arabia recognizing Israel in exchange for Israel agreeing to Palestinian statehood. In furtherance of that grand strategic goal, which would reshape West Asian geopolitics, the US is dangling privileged nuclear energy and military partnerships in front of Saudi Arabia while gradually increasing its pressure on Israel. It also reportedly told Qatar to expel Hamas’ political wing if it doesn’t agree to a ceasefire.

There’ll be those activist-minded members of the Mainstream Media and the Alt-Media Community who’ll pick and choose which element of this policy to focus on in advance of their ideological agenda but the fact of the matter is that the entire whole represents a comprehensive diplomatic push. The US sees an opportunity to restore some of its lost regional influence through these means, which its policymakers believe will decelerate the recent expansion of Sino-Russo influence in West Asia.

Withholding a single arms shipment from Israel is a purely symbolic gesture that comes way too late to prevent the humanitarian catastrophe that unfolded in Gaza over the past eight months of total war, but it still signals that more forthcoming shipments might be withheld if Israel continues its Rafah operation. In that event, bilateral relations would worsen if Bibi doesn’t accept a compromise solution, which he’d be reluctant to do since that would discredit him after he promised to completely destroy Hamas.

Therein lies the problem, however, since that objective can only be achieved through military means that would perpetuate the Palestinians’ suffering and thus delay the deal that the US hopes to broker with the Saudis. The Kingdom won’t recognize Israel so long as the conflict continues, and a greater civilian death toll than the already presently high one could make it even more difficult to do so once the war finally ends. That deal is integral to Israel’s interests, but so too is Hamas’ destruction, ergo the dilemma.

Nevertheless, provided that Israel has adequate stockpiles to continue its campaign, then Bibi might gamble that he can destroy Hamas’ military wing at least and then play on the Saudis’ equal interest in the previously mentioned deal to eventually make it happen sometime after the war ends. That can’t be taken for granted though since the US wouldn’t have symbolically withheld is recent shipment nor would Biden have threatened to withhold all offensive arms if it thought this was truly the case.

It therefore remains to be seen what’ll happen, but the US expects that Bibi will indeed be pressured by this newfound policy into compromising on Gaza, which could discredit his leadership among the ultra-nationalist members of his coalition on whom his government depends. Basically, the US wants to kill three birds with one stone by bringing an end to this war for domestic electoral reasons, facilitating Bibi’s departure from office, and brokering an Israeli-Saudi peace deal for restoring its lost regional influence.