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Move Fast And Break The Bonds
New week, same concerns.
The bear steepener was back in the Treasury curve, the dollar was lower, C
https://www.wsj.com/opinion/wall-street-stages-a-weird-tax-bill-freakout-35a4f6fe?mod=hp_opin_pos_1
The Wall Street Journal writes that there is an exception for treasuries. Quoting the relevant paragraph.
“Nor is the provision a backdoor attempt to impose a new withholding tax on foreign stockpiles of U.S. Treasury debt. Some economists in Mr. Trump’s orbit have flirted with such a tax as, they think, a way to reduce America’s trade deficit. It’s a terrible idea.
It’s also not in the bill. The Budget Committee’s report specifies that Section 899 preserves the portfolio-interest exemption that excludes from U.S. taxation the income that foreign investors earn on Treasurys and other American debt. Only taxes that the U.S. currently imposes on foreigners can have the retaliatory surcharge added. Love the One Big Beautiful Bill or hate it, you should at least know what’s in it before you decide.”
I wouldn’t necessarily assume the Journal‘s Editorial Board has done the leg work necessary here, where that means sitting down with a team of people accustomed to parsing the legalese in legislation for every conceivable interpretation.
The implication from that Editorial is that the portfolio interest exemption means no foreign investors would see a de facto surcharge on their UST holdings regardless of whether those investors are deemed “applicable persons” under the bill. Maybe that’s true, maybe it isn’t, but it seems a bit odd that of all the people who’ve parsed that section of the bill since last week, only the Journal was willing to make such a sweeping claim, or sweeping suggestion.
I think the better way for the Journal to make the (exact same) point would be to say, as I alluded to over the weekend, that ultimately USTs will be exempted one way or another, whether via the portfolio interest exemption, or some even more specific language that gets inserted by the Senate now that the mainstream media and Wall Street have made such a big deal of this.
Also, it’s a bit rich for the Journal to write “love the One Big Beautiful Bill or hate it, you should at least know what’s in it before you decide.” As if the Editorial Board has read every word of that bill. It’s 1,000 pages. So, I agree with the Journal‘s assessment re: you shouldn’t criticize something unless you know what’s in it. But I don’t think they know what’s in it either. They may know what’s in that part of it (or maybe not, as alluded to in my other comment), but I don’t think the Journal wants to start throwing stones from that particular glass house. The number of people who read every word in every piece of legislation is vanishingly small, and I doubt any of them work at the Journal.
https://www.mayerbrown.com/en/insights/publications/2025/05/us-house-passes-bill-targeting-unfair-foreign-taxes
Details here. Not enough coffee to wade through it yet.
You’ve talked about how everything effectively revolves around the mad king at length and here we are: another Monday where there really is no other story than what Trump is doing or his take on current events. Even when I try to think of something relevant or interesting to add, it all comes back to Trump. How can anything else compete with a president who thinks his predecessor was executed and replaced by a robot?
To be clear, this isn’t aimed at you as I continue to be impressed at your ability to keep the conversation going despite the circumstances. This is just me shouting into the wind and hoping for a day where our politicians are boring again and a scandal is a scandal.
It all comes back to the guy who thinks orange makeup makes him look good, although I’ve never heard anyone else, MAGA or not, agree with that. I mean, has nobody in his camp ever said to him that looking like you have a tan is not a bad idea but you really ought to change the shade. This can’t be the person any sane country puts in charge of anything. It also demonstrates that Trump will never change is mind on anything. Apparently from the White House itself, we’ve learned that Trump doesn’t read (not a surprise) and that they are considering making the president’s daily briefing a Fox type news show.
Re WSJ – fair points, H.
Yeah, and read the following from Joe and Tracy (at BBG):
“[S]ome analysts are playing down the whole Section 899 saga. In the case of Treasuries specifically, they point to carve-outs under the existing Portfolio Interest Exemption (PIE), which, under certain circumstances, exempts bonds where the foreign investor owns less than 10% of the voting power of the issuer. That would probably mean trillions of dollars in both US Treasuries and corporate debt held by foreign investors could escape the tax. [But] that raises the question of why bother with Section 899 in the first place if you’re only going to simultaneously exempt a majority of US bond holdings? As Michael McNair put it yesterday: ‘Congress wouldn’t draft a ‘retaliatory surtax’ that raises only a few billion unless they expected the portfolio interest base to re-enter the tax net.’ Section 899 only really makes sense, he argues, if PIE is simultaneously repealed.”
There’s the nuance.
Interesting, I guess I was asking for too much, thinking they would play it straight.
No, I mean you’re right to point it out. And the House Ways and Means Committee spokesman reiterated today it wouldn’t cover portfolio interest, but I just think there’s too much interpretational leeway here, and I think it’s dangerous to hand Trump that leeway. I think if they’re going to pass a version of the bill with that discriminatory tax provision in it, the Senate needs to add language that’s ironclad-specific that it doesn’t and can’t, under any circumstances, apply to portfolio interest.
Maybe I’ll try this strategy next time I need a loan for something. I’ll tell all prospective lenders that I’ll be charging them a fee should they decide to let me barrow from them. I’m sure they’ll be jumping at the opportunity.
Sadly, there are few sources of news to trust any longer. I first subscribed to WSJ in 1967 and have been a continuous reader until three months ago. For three straight days I faced articles that were provably trash and propaganda from MAGA and I quit. Haven’t missed it too much. I do read the NYT and find little of actual value. I’ve been thinking of the Financial Times but I’m not convinced it will inform me sufficiently. I’m willing to be convinced of any trustworthy alternatives. TV news offers nothing. Anywhere.
I have always assumed this is a proper source.
ever since Murdoch’s News Corp purchased the WSJ I knew it would gradually and suddenly lose its credibility…
In his collection of media criticism, “The Press”, the great A.J. Liebling proposed a daily paper that would collect, parse, compare, sift, and distill the previous day’s stories from New York’s several daily papers of his time. He posited that by filtering each paper’s editorial biases and assembling the bits of fact in their respective versions of the story, the perspicacious reader could actually get the complete and unvarnished picture.
Alas Liebling is all but forgotten today, but his insight remains as golden as the light on Napoleon’s Tomb, to use an image from another of his works.
Read WSJ, BBG, FT, Economist, and the foreign media of your choice – SMCP or Caixin aren’t bad for China – and a reliable enough story can usually be mosiac’ed together.
For just one source, I probably would pick Bloomberg.
I have been reading the London Times recently. Another Murdoch center right paper, but better writing and investigative journalism (my opinion) than the WSJ.
Plus, Jeremy Clarkson is a regular contributor on random and often hilarious subjects.
+1