{"id":68351,"date":"2025-05-27T16:03:14","date_gmt":"2025-05-27T08:03:14","guid":{"rendered":"https:\/\/www.kgieworld.sg\/research\/?p=68351"},"modified":"2025-05-27T16:03:15","modified_gmt":"2025-05-27T08:03:15","slug":"weekly-securities-newsletter-seeking-the-golden-parachute","status":"publish","type":"post","link":"https:\/\/www.kgieworld.sg\/research\/weekly-securities-newsletter-seeking-the-golden-parachute\/","title":{"rendered":"Weekly Securities Newsletter: Seeking the Golden Parachute"},"content":{"rendered":"\n
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Seeking the Golden Parachute<\/strong><\/p>\n\n\n\n

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Chart of the Week:
U.S. Credit Downgrade Weighs on Treasury Auctions Amid Demand Concerns<\/h2>\n\n\n\n

On May 17, 2025, Moody\u2019s downgraded the United States\u2019 credit rating from the top-tier Aaa to Aa1, while revising its outlook from negative to stable. Moody\u2019s had been the last of the major rating agencies to maintain the U.S. at the highest rating tier. Following this move, all three major credit rating agencies now assign the same rating to the U.S., with a stable outlook.<\/p>\n\n\n\n

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Market Recap 1:
U.S. Tax Reform Narrowly Passes House Vote; Debt Risk Concerns Weigh on Equity Valuations<\/h2>\n\n\n\n

Following the recent U.S. credit downgrade and a weaker-than-expected 20-year Treasury auction earlier in the week, markets turned cautious again on Thursday as former President Trump\u2019s \u201cOne Big Beautiful Bill\u201d tax reform narrowly passed the House by a vote of 215 to 214. The outcome intensified concerns over U.S. fiscal risks, sending long-dated Treasury yields sharply higher. The rise in yields pressured all four major U.S. equity indices, with the Philadelphia Semiconductor Index (SOX) posting the steepest losses. Elevated Treasury yields lifted the risk-free rate, prompting a significant valuation reset in growth-heavy tech stocks and dampening the month\u2019s earlier optimism around the sector. At the industry level, nearly all sectors closed lower, with the exception of Communication Services and Consumer Staples. Energy stocks led the decline, driven by OPEC+ discussions around a potential three-month production increase plan.<\/p>\n\n\n\n

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Market Recap 2:
Long-Term Yields Surge; U.S. Credit Risk Boosts Demand for Gold and Bitcoin<\/h2>\n\n\n\n

Weaker-than-expected demand in the U.S. 20-year Treasury auction sent long-term yields sharply higher, leading to a steepening of the yield curve. U.S. 10-year Treasuries and investment-grade bonds underperformed. However, with the Federal Reserve\u2019s rate cut trajectory unchanged, short-term U.S. Treasury yields remained relatively stable. The weak auction highlighted mounting investor concerns over U.S. creditworthiness, triggering capital outflows from U.S. dollar-denominated assets. The dollar index softened, and emerging market local currency bonds benefited from favorable currency movements.<\/p>\n\n\n\n

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What\u2019s Trending:
Computex Highlights \u201cAI NEXT\u201d Theme, Underscores Taiwan\u2019s Critical Role in the Supply Chain<\/h2>\n\n\n\n

AI demand remains robust, according to market expectations. A recent global capital expenditure survey by J.P. Morgan revealed particularly strong investment intentions in AI-related industries. Capital expenditures among internet media and service providers are expected to rise 39% in 2025, up another 0.29 percentage points from last year\u2019s estimate. Other AI-linked sectors such as utilities infrastructure and semiconductors also show YoY capex growth exceeding 10%, well above the all-industry average of 8%.<\/p>\n\n\n\n

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In Focus 1:
Weak U.S. Treasury Auction Highlights Deficit Fears \u2013 Treasuries Losing Safe-Haven Status<\/h2>\n\n\n\n

The first U.S. Treasury auction following Moody\u2019s downgrade of the U.S. credit rating showed notably weak demand. A lack of enthusiasm from both domestic and foreign investors (Direct and Indirect Bidders) led to the highest share in three years being allocated to Primary Dealers. The bid-to-cover ratio came in at just 2.46\u2014below the three-year average, indicating soft demand. As a result, the yield on the 20-year Treasury rose to 5.05%, well above the 4.61% average of the past six auctions.<\/p>\n\n\n\n

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In Focus 2:
U.S. Treasuries Face Credibility Test as Gold\u2019s Safe-Haven Demand Supports Long-Term Bull Trend<\/h2>\n\n\n\n

Historically, U.S. Treasuries have served as a safe-haven asset, with yields falling and gold prices rising during times of market stress. However, this relationship has reversed twice in 2025. In early April, following former President Trump\u2019s reciprocal tariff announcement, rumors emerged that China was selling U.S. Treasuries. This week, poor auction demand has once again raised doubts over U.S. creditworthiness, triggering a simultaneous sell-off in equities, bonds, and the U.S. dollar. Amid these concerns, gold\u2014recognized for its store-of-value characteristics, has reemerged as the market\u2019s preferred hedge, driving continued strength in its long-term price trend.<\/p>\n\n\n\n

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China Sunsine Chemical Holdings is a leading specialty rubber chemicals producer selling accelerators, anti-oxidant, vulcanizing agent<\/p>\n","protected":false},"author":16,"featured_media":68353,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_eb_attr":"","_uag_custom_page_level_css":"","footnotes":""},"categories":[35],"tags":[],"class_list":["post-68351","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-global-markets-weekly-updates"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t