Treasuries In Focus
Friday, Sept 5th, 2025
World News — US and Taiwan Hold Secret Security Talk
FT
US and Taiwanese defense officials quietly met in Alaska last week, with Pentagon Indo-Pacific official Jed Royal holding talks with Hsu Szu-chien, then Taiwan’s deputy national security adviser, just days before Xi Jinping showcased China’s military power at a Beijing parade. The meeting, held discreetly after a more high-profile Washington session was cancelled over concerns of jeopardizing Trump’s trade talks with Xi, highlights the Trump administration’s balancing act between reassuring Taipei and pursuing a deal with Beijing. Analysts noted the Alaska venue and lower-level delegation were designed to downplay the talks, reflecting Trump’s reluctance to antagonize China as trade negotiations continue. Still, Taiwan’s record defense spending proposals and Washington voices stressing strategic ties underscore the lasting importance of U.S.-Taiwan security cooperation, even as uncertainty over Trump’s priorities unnerves Taipei.
Tech — Broadcom’s Secret Customer?
OpenAI is preparing to begin mass production of its own custom AI chips next year in partnership with Broadcom, a move aimed at easing its heavy dependence on Nvidia and meeting soaring demand for computing power. The deal, reportedly valued at $10bn, positions OpenAI alongside tech giants like Google, Amazon and Meta, which have already developed in-house processors to handle intensive AI workloads. Broadcom confirmed it had secured a major new custom chip client, widely identified as OpenAI, boosting its growth outlook and helping its shares surge. Unlike Nvidia’s off-the-shelf GPUs, these new “XPUs” are designed for tailored AI needs and will be used internally by OpenAI to run and train models such as the upcoming GPT‑5. The development signals a broader industry shift towards custom semiconductor solutions in the fast-growing AI infrastructure market.
Business — Treasuries In Focus
Treasury and currency traders are on edge ahead of Friday’s US jobs report, which is expected to confirm a hiring slowdown but could prove decisive in shaping the Federal Reserve’s next moves on interest rates. Markets are already pricing in nearly a 100% chance of a quarter-point rate cut at the Fed’s September meeting, with expectations for several more reductions next year, pushing shorter-term yields lower even as fiscal concerns keep longer-dated yields elevated. Economists forecast a modest 75,000 payroll gain in August with unemployment rising to 4.3%, but a stronger-than-expected report could upend dovish bets, sending Treasury yields higher and boosting the dollar, where short positions remain heavy. Traders are bracing for volatility, with options pricing implying a bigger move than usual, underscoring how the data could either reinforce the Fed’s easing path or force investors to recalibrate their bets.
The Daily Spark
Demand for housing is slowing because of high home prices, high mortgage rates and declining immigration, see charts below.
Housing supply is steady because existing homeowners are reluctant to sell their homes, since they’re locked into lower mortgage rates and don’t want to take on higher ones. Housing supply of new homes is rising, see again charts below.
The bottom line is that there is downward pressure on home prices coming from falling demand and rising supply.
Quote of the Day
“If you ask me what I came to do in this world, I, an artist, will answer you: I am here to live out loud.” ― Émile Zola