Fresh challenge for US Treasuries dominance

Good morning from the Financial Times. Today is Friday, April 17th, and this is your FT News briefing. There's been progress towards a longer-lasting truce in the Middle East. And there's something more appealing to investors than US Treasuries right now. Plus an FT exclusive on a Chinese satellite that helped Iran target American bases. I'm Sonia Hudson, and here's the news you need to start your day.

US President Donald Trump says Israel and Lebanon agreed to a ten day ceasefire yesterday. The two countries started negotiations in Washington earlier this week. They were the first direct talks between the neighboring nations in over 40 years. But many analysts thought it wouldn't really lead to anything. The truce raises hopes that a more lasting peace between Washington and Tehran could be on the way. Israel's bombardment of Lebanon has been a big sticking point in negotiations.

But the US and Iran have not resumed talks yet. Trump yesterday said they could restart over the weekend. And it's looking very good that we're gonna make a deal with Iran and it's gonna be a good deal. It's gonna be a deal with no nuclear weapons. Trump's comments come as his defense secretary said the Pentagon will restart military operations against Iran if they don't agree to a deal.

Development banks are giving the US Treasury a run for its money. The Treasury holds the title of the world's lowest cost dollar borrower. But dollar bonds issued by the World Bank, the European Investment Bank, and others are growing in popularity. And that's threatening the Treasury's status.

The Trump administration's erratic policy making has made these alternative safe haven assets look a whole lot safer and more appealing. I'm joined now by the FT's Electra Articino to explain. Hi, Electra. Hi Sonya So tell me about these dollar bonds that are issued by SSA institutions. And that stands for sovereign, supranational, and agency, basically large organizations like development banks. So SSAs aren't backed by tax revenues like governments.

But they are kind of implicitly backed by governments that participate in them. They're not quite sovereign borrowers though, and so although their credit rating is very high. Historically they have traded at a slight premium to government bonds and particularly to US treasuries. And what we've seen recently is that this is starting to change. That premium has shrunk very significantly over the past year.

Okay, so the premium on these SSA bonds has brought them closer to US treasuries, but why are these so attractive to investors right now? I guess there's three reasons why The first I would say is that investors are looking to diversify away from US policy risk. We've seen the Trump administration take quite unorthodox actions since coming into office. Liberation Day was an example, the Greenland threat.

are another example. Now there's a war in Iran. The second reason I would say is investors' perception of US credit risk is rising. The US is borrowing a lot on international markets. It's issuing a lot of debt. And that makes investors a bit more worried about the US's capacity to repay its obligations in the future. In that context, SSAs are very predictable.

Investors also want to remain in the US dollar. The US dollar is the world's most liquid currency, but they don't necessarily want to be in US Treasuries as much anymore. And that's where SSA bonds come in. So are investors selling US treasuries or are they just diversifying by buying more of these SSA bonds?

So we haven't really seen um investors sell treasuries in order to buy SSAs. What we've seen is that investors are no longer reinvesting their proceeds from their treasury maturities into uh US Treasuries as they have in the past. Eletra, how big of a threat is this really to the status of U.S. Treasuries as the kind of ultimate safe haven asset? Well, I would say it's important to put things in context. The rising popularity of SSAs is definitely not a threat to the dollar safe haven status.

It is important to remember the SSA's the total debt issuance of the highest rated issuers last year was only about 80 billion. In comparison, US Treasury assurance was around 4.5 trillion. That is a significant difference. And so you are not gonna get this asset class, which is still relatively niche.

um become a real credible alternative to US treasuries. That said, the rise of SSAs is just one piece of a bigger puzzle that altogether tells the story of declining global confidence in US government bonds. Death by a thousand cuts. Electra Articino is a reporter for the FT's monetary policy radar. Thanks, Electra. Thank you.

Netflix's founder and chair, Reed Hastings, is stepping down. He started the company in 1997 and built a DVD by mail service into a$450 billion streaming giant. Netflix made the announcement yesterday at the same time that it reported quarterly earnings. Its shares fell as much as 9% in after hours trading.

The sell-off was sparked by weaker than expected current quarter guidance, but the company still reported strong results for the first three months of the year. Its earnings came in well above Wall Street expectations. The results were boosted by a nearly$3 billion breakup fee it received from Paramount. You see, Netflix had inked a deal to buy Warner Brothers Discovery, but then Paramount Gate crashed it and Netflix ultimately backed out of the bidding war. Thank you.

China has been largely sitting on the sidelines of the Iran War, but an FT investigation shows a secretly acquired Chinese satellite in 2024 gave Iran a powerful tool to use in the conflict. It's allowed Iran to target US military bases across the Middle East. Miles Johnson is an investigative reporter for the FT who's been leading this reporting. He joins me now. Hi, Miles. Hi. So what do we know about this satellite?

until now, no one knew that it was actually under the control of the Iranian Revolutionary Guard. So this is a satellite that was launched from China by a Chinese company in 2024. And a couple of months later it was transferred over to be under the control of the IRGC, specifically the aerospace force part of the IRGC, which is Extremely influential in everything from its sort of military to economy and extremely important in the war with the United States and Israel at the moment.

And it is responsible for ballistic missiles and drones. And this satellite we've shown in our reporting was being used to surveil sort of the biggest and most important US military bases in the Middle East. So what do we know about how exactly this satellite's been used in this conflict? Our reporting found some pretty interesting stuff about the timing of this satellite being tasked to surveil particular important US military installations in the Middle East. And then the timing around

attacks on those bases, either with drones or missiles. And so in one instance around the middle of March, we saw the satellite taking a lot of imagery of the Prince Sultan uh airbase in Saudi Arabia. And around exactly the same time, that was when there were multiple reported attacks on that base.

And so it really does appear that this quite detailed satellite compared to what we believed Iran had as its capability was being used for some pretty important strikes on American assets in the region. Now, Miles, we should note that the Chinese Ministry of Commerce declined to comment for your story.

The White House didn't comment specifically on this satellite, but a spokesperson pointed to comments from Trump when he warned that China would face quote big problems if it provided Iran with air defense systems. How significant is your finding that China supplied this satellite, given Beijing's reluctance to wade into foreign wars?

I think although this satellite was being tasked by the IRGC it is going to be quite a controversial thing for a Chinese made and launched satellite to be used in this way because obviously China is the biggest trading partner of the Gulf countries. And also China gets most of its oil from the Gulf countries. And it was sort of largely assumed

that there was some sort of assistance occurring. But the fact that it was this satellite and the fact that this satellite has been secretly being used since twenty twenty four, I think is quite a significant thing. And I think it really does change our understanding of how Firstly, Iran has sort of um attempted to sort of diversify its so called space assets, where over the l sort of past year or so, in the conflicts it's had with Israel and the United States

its assets inside Iran relating to satellites have largely been destroyed. But if Iran is using Chinese ground stations, which are dispersed around the world, in places like in Latin America and Africa, That is a dispersion strategy where it makes it much, much harder uh for Iran's enemies to attack. It makes it much more resilient. Miles Johnson is an investigative reporter for the FT. Thanks, Miles. Thank you.

Before we go, shares in the world's biggest chocolate maker aren't too sweet these days. Switzerland's Barry Calibut cut its profit forecast yesterday, and that sent the stock down more than 15%. The group makes chocolate for things like Nestle Kit Kat bars and Magnum ice cream. It warned investors about falling cocoa prices and supply disruptions from the war in Iran.

But investors may not be left with a bitter taste in their mouths for too long. The company said it expects a return to growth next year. You can read more on Aldi's stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back next week for the latest business news. The FT News briefing was produced this week by Sophia Ahmed, Victoria Craig, Fiona Simon, and me, Sonia Hudson.

Our show is mixed this week by Alex Higgins, Kelly Gary, and Sam Giovanco. We had help this week from Michaela Tindera, Peter Barber, Michael Lelo, David DeSilva, and Gabin Callman. Our executive producer is Topher Forehead. The FT's global head of audio is Cheryl Brumley, and our theme song is by Metaphor Music. Thank you. Opus Day is a controversial Catholic group, known for its orthodoxy and discipline. There's always been an idea in Opus Day of trying to be near the elite of society.

I'm Antonia Cundi. I'm a journalist with the Financial Times, and I've been investigating how Opus Day has become central to the American conservative movement. We were the closest tabernacle to the White House. From the Financial Times, listen to Untold, Opus Day, wherever you get your podcast.