A sombre outlook for the US economy is encouraging investors to ditch bets on the US dollar, one of the most prominent consensus trades since Donald Trump’s reelection as US president in November, while tentatively embracing the euro amid a brightening growth picture across the Atlantic. A broad-based gauge of foreign exchange market positioning shows investors are slightly bearish on the US dollar for the first time since October, according to BNP Paribas, as uncertainty over tariffs starts to dent growth expectations for the world's largest economy. Bank of America strategists said bullish greenback bets have been cut by about 40% this year, with investors selling all the US dollars that were bought in the fourth quarter around the time of Trump's election win. That comes as investors have begun unwinding negative euro wagers in anticipation of a reversal in fortunes for the beaten-down single currency following Germany's shock announcement that it plans to increase spending by almost €1trn in the coming years. The news from Germany has driven the sharpest jump ever in euro positioning in BofA's client survey on rates and FX market sentiment, the bank said on Friday. “We’ve seen a huge unwinding of these long dollar positions,” said Francesco Pesole, FX strategist at ING. “Sentiment within the FX market has definitely shifted from the long dollar trade, which was previously justified by the notion of the US remaining relatively strong compared to the rest of the world, to Europe." Betting on a stronger US dollar had been a favourite "Trump trade" given expectations of looser regulations and fiscal policy. Citigroup said hedge funds bought US dollars from the bank for 19 consecutive trading days from October 2 in the run-up to Trump's victory on November 5, the most consistent period of hedge funds buying US dollars the bank has ever seen. The US Dollar Index hit its highest point in more than two years in mid-January but has since slid nearly 6% to levels last seen around election day. That slump has coincided with mounting concerns among investors about the effect of Trump's tariff plans on the US economy and a sharp downturn in US stock markets. Goldman Sachs recently lowered its US growth projections for 2025 from 2.4% at the beginning of the year to 1.7% following another round of tariff policy whipsawing from the president. That included Trump threatening 50% tariffs on Canadian steel and aluminium – only to walk that back a matter of hours later – and escalating trade tensions with the European Union. “The market has bought hook, line and sinker into the idea that all of this tariff talk and the sheer pace of policy change coming from the US is going to hurt economic growth,” said Kit Juckes, chief global FX strategist at Societe Generale. “The market is seeing all this news and is interpreting it as something that is going to significantly change [the] growth trajectory for the US given volatile policymaking.” MEGA Those growth expectations contrast sharply with improving investor sentiment on Europe following German chancellor-elect Friedrich Merz declaring Europe would do “whatever it takes” to beef up its defence and infrastructure spending. The potential €1trn in increased fiscal stimulus over the coming years should lead to “significantly more growth”, according to economists at Morgan Stanley, who projected it would increase German GDP by 70bp in 2026. The single currency has rallied in response to this newfound optimism. After flirting with parity against the US dollar earlier this year, the euro is now up 6.5% since its mid-January low to about US$1.09. BNPP's broad-based FX market gauge suggests investors have been unwinding their negative euro bets and that options traders are now long the currency. Despite this bounce, analysts say investors haven't yet reached peak euro exposure as they wait and see whether

The Trump administration’s plans to shake up a key US agency leave an uncertain outlook over sovereign debt-for-development swaps after a record 2024. But a revised mandate for the US International Development Finance Corp could broaden the market while moving the agency away from the nature conservation deals it has enabled previously. The DFC has been a pivotal player in the emergence of the sovereign DFD market. Its political risk insurance has enabled the bulk of completed deals, including those for Belize, El Salvador, Ecuador and Gabon. “Obviously, DFC hitherto has done some incredible work. Whatever happens in terms of their priorities, the experience and learning that has come from those deals will always be an anchor to future transactions,” said Deborah Zandstra, head of sovereign debt advisory and restructuring at law firm Clifford Chance. “The most likely outcome is that they will continue to support these types of transactions. But there may be differences in their priorities,” said a source with experience of deals involving DFC. Some market participants expect a recast DFC to focus on deals in which sovereigns would apply swap savings to novel areas that the administration sees as better aligned with US strategic interests, which could include infrastructure, energy and food security. The agency highlights these as its top sector priorities. At the same time, the administration – which in January published a “Putting America First In International Environmental Agreements” executive order – has signalled that it disapproves of the DFC’s focus on climate change. Even before it took office, efficiency czar Elon Musk criticised DFC executives with climate roles. Ben Black, the administration’s nominee as DFC chief executive, recently dismissed its commitment to 40% of new lending being climate-related as “virtue signalling” in an online post entitled “How to DOGE US Foreign Aid”, a reference to Musk's department of government efficiency initiative. The agency “is working to review all executive orders in coordination with the administration”, according to a DFC official, who said it will “faithfully execute and comply with all executive orders”. Three senior Trump cabinet members (including treasury secretary Scott Bessent) sit on the agency’s seven-strong board. The CEO’s seat will remain vacant until the US Senate Committee on Foreign Relations confirms Black in the position. US-centric As part of his opposition to what his post described as the US aid budget’s “absurd mission drift”, Black has proposed that funding of the DFC “and other market-oriented investments” be increased. Congress may be asked to double the agency’s US$60bn investment capacity when it considers reauthorising the DFC at the end of this year. Even so, it remains unclear whether Black’s “long-term US-centric development strategy” will include the DFC continuing to underpin sovereign debt swaps. The DFC says only that it “remains committed to advancing development finance initiatives that align with US foreign policy and national security objectives of the Trump administration”, according to the official. Although some judge its PRI more expensive than other forms of risk mitigation such as guarantees, market participants would prefer the agency to maintain its key role. “It’d be a net negative to see the DFC exit," said one. Zandstra said: “This market segment has benefited greatly from DFC participation, and I hope they continue to be an active participant." But market participants point to last year’s pickup in sources of risk capital – including multilateral development banks, private sector insurers and family offices – in arguing that the market could overcome DFC's withdrawal. “Scalability does mean divers

Canada's deteriorating relations with the US didn't deter investors from jumping into the sovereign's annual US dollar issuance on Tuesday, with the deal seeing record demand even as US president Donald Trump threatened to tighten the screws with further tariffs. An hour before the syndicated bond priced, Trump announced he would double levies on Canadian steel and aluminium imports to 50% in the latest clash of a trade war that the president has fomented since he returned to the White House in January. He rowed back on that threat hours later, though the initial 25% rate still took effect on Wednesday. Canada subsequently retaliated with its own measures against US goods. While the headlines make life tough for economists and analysts, bond investors have become acclimatised to Trump's volatile nature, said a banker away from Canada's deal, with issuers still able to clear deals in the US dollar market despite the risks. Canada (Aaa/AAA/AA+), moreover, is one of the highest-rated sovereigns in the world, with even better ratings than the US. "Whatever noise there is in the press, Canada is an extremely strong country with obvious institutional strength," said a lead banker. Its status meant that neither a weaker market tone nor the tariff tantrums stopped Canada from scoring its largest US dollar order book yet, according to IFR data, with demand reaching US$13.9bn thanks to a yield of 4.075%. The scale of demand supported a US$3.5bn five-year issuance via BMO, Barclays, CIBC, JP Morgan and RBC, which landed at 11bp over Treasuries, 3bp inside initial price thoughts. That looked tight on a relative value basis – the five-year point of one of the US dollar market's best-followed SSAs, the European Investment Bank, was trading around 17bp over Treasuries on the day of the deal, according to LSEG data. "Its business as usual for them," the lead said. "They borrow US dollars for their foreign exchange reserves." Canada has done one US dollar benchmark, always a five-year, nearly every year since 2020. The only exception was 2022. Canada's regular issuance in the currency was one reason it got the demand it did, the lead said. "Everybody knows they're coming; they like the name; you know you can roll over your investment." Despite the noise, the country is in a relatively solid position, said BeiChen Lin, head of Canadian strategy at Russell Investments. “We do think recession risks in Canada are elevated," Lin said. "But if a recession does materialise, the Bank of Canada may actually cut rates aggressively to bolster the economy. For that reason, government bonds could be a powerful diversifying investment." Lin also said Canada's fiscal position inspires confidence. "Canada’s debt-to-GDP ratio stood at 32% in the third quarter of 2024, lower than that of several of its G7 peers." Not everyone, though, is as positive about Canada's situation. "Trade wars require fiscal loosening – and that’s bad for bonds," said Malin Rosengren, a portfolio manager at RBC BlueBay Asset Management. Resolving Canada's dispute with the US will be at the top of former Bank of England governor Mark Carney's in-tray after he is sworn in as prime minister on Friday to replace Justin Trudeau.

Lebanon’s international bondholders are close to appointing a financial adviser as restructuring talks with the authorities finally look set to resume five years after the Middle East country defaulted. Negotiations faltered in 2022 after the Lebanese government refused to accept proposals by the International Monetary Fund. That saw the US$29bn of defaulted Eurobonds by value mostly fall to a cash price of just six cents in the dollar as the country descended into economic chaos. The situation was exacerbated by irregularities at the central bank, culminating in long-serving governor Riad Salameh stepping down in 2023. The banking system has since been in stasis, with deposits mostly frozen and banks having to accept they will need to be recapitalised as part of the restructuring. But after two years of caretaker government and following last year's partial collapse of Iranian-backed paramilitary organisation Hezbollah, a new technocratic government has taken control, led by an ex-army chief and a member of the judiciary. It is seemingly prepared to restart negotiations with the IMF, which could lead to talks with Lebanon’s creditors. Since the ceasefire was agreed between Israel and Hezbollah in November, bond prices have tripled to 18 cents. Over the past week, IMF staff have visited Beirut. Ernesto Ramirez Rigo, IMF mission chief, said he met president Joseph Aoun, as well as prime minister Nawaf Salam, cabinet ministers and representatives from the Banque du Liban and welcomed their request for a new programme. “Lebanon’s economy remains severely depressed, and poverty and unemployment have been exceptionally high since the 2019 crisis,” Ramirez Rigo said. "The banking sector collapse continues to hamper economic activity and provision of credit, with depositors unable to access their funds. “A comprehensive strategy for economic rehabilitation is critical to restore growth, reduce unemployment, and improve social conditions. The IMF stands ready, together with the international community, to support the authorities’ efforts in addressing these challenges.” Ramirez Rigo said that financial sector restructuring was an essential part of reviving the economy, alongside making Lebanon’s debt sustainable. New model? One financial restructuring adviser said it was important for bondholders to make sure they are a central part of the reform process. Previously, banking was a significant part of Lebanon’s economy, but it was not clear what the focus would be in future. “What is the new economic model? Banks will still be needed, of course, so the big question is how to restructure the banking sector,” he said, noting that banks no longer hold as many government bonds as they once did. Traditionally, major banks have been dominated by different political factions in Lebanon, making their restructuring unusually sensitive. Elections are due next year giving an incentive for an IMF programme and accompanying debt restructuring proposals to be agreed by then, said the adviser. Once that is underway then pledges of money by Saudi Arabia and other bilateral lenders could be released. “If the situation normalises a bit, then the economy could come back quickly,” he said. New members Six firms – Rothschild, Newstate, Alvarez & Marsal, Houlihan Lokey, GSA and Centerview – are understood to have been invited to pitch to the ad hoc bondholders group, which has added four members to the original five institutions that previously made up the group. The new investors are Greylock, GMO, Morgan Stanley Investment Management and Neuberger. Law firm White & Case is advising the bondholders, with Lazard and Cleary Gottlieb advising the government. Lebanon’s last IMF assessment for 2019, the year before default, put its debt-to-GDP ratio at an eye-watering 178%. Since then, GDP is estimated by the World Bank to have fallen by 40%, increasing

The first tentative signs are emerging that securitisations backed by UK shopping centres are once again investable, as footfall rebounds and owners realign properties with post-pandemic realities – including by letting out vacant units to Peppa Pig. Bank of America is offering CMBS investors their first opportunity in years to gain meaningful exposure to retail parks with Taurus 2025-2 UK, which is backed in part by a loan secured on Silverburn Shopping Centre on the outskirts of Glasgow, Scotland. It is not a fully fledged shopping centre CMBS, as exposure to Silverburn through a £111.6m loan to owner Henderson Park is balanced by a £247.8m loan to Lone Star Funds on a portfolio of urban logistics and light industrial sites (63% of market value), London office buildings (19%) and retail parks (9%). Still, it is the first time a major shopping centre has appeared in a new UK CMBS offering since before the outbreak of Covid-19, according to IFR's archives, which show that the last such deal was in August 2019 in a transaction backed by Intu Derby, now known as Derbion. The intervening period has been a rough one for operators such as Intu Properties, which went into administration in 2020. But there are signs that shopping malls are turning a corner, albeit under new ownership. Bonds secured on another former Intu property, Manchester's Trafford Centre, were upgraded by Fitch on March 5, and another erstwhile Intu asset, Metrocentre in Gateshead, is on track to secure a £70m bank loan to refinance payment-in-kind notes after extensive work to adapt it to the post-pandemic environment. Footfall at Metrocentre rebounded strongly in 2024 to 15.8 million visitors, up 9.6% year on year, although it remains 11.6% below 2019 levels, according to a business plan shared with investors. Initial price thoughts released on Wednesday for Taurus 2025-2 UK show another reason why property owners are being drawn back to the CMBS market: the £225m Class A notes of the £375.8m deal are being marketed at 140bp–150bp over Sonia, much more attractive for a borrower than the 235bp margin that Blackstone achieved with a logistics CMBS in July 2023. “Spreads have come down significantly so economically it makes sense to bring deals to the CMBS market, more so than last year," said Vesselina Koleva, a CMBS analyst at S&P. "And in terms of fundamentals, the value declines we saw are tapering and we are even seeing some property value increases.” Less 'bond-like' Investors should nonetheless be cautious about jumping back into the market, said Simon Cooke, founding shareholder of commercial real estate investor Catella APAM, who notes that shopping centres have become much more operationally intensive in recent years, a trend exacerbated by the pandemic. "You can’t just sit and collect the rental income like you used to when real estate was more bond-like," he said. "The change is exponential with all the factors brought in by Covid and technology. Tenants want to anticipate growing out of their space, anticipate the ability to change their business model through technology, and then you’ve got the wellbeing and the green agendas, work from home and online shopping.” Those changes are reflected in the repositioning of Metrocentre, which now has fewer retail units as part of a pivot to leisure and other uses. New tenants include escape room business The Escapologist and an immersive experience called "Peppa Pig: Surprise Party", which occupies three units. An NHS community diagnostic centre occupies 40,000 square feet of former department store space. Given the upheaval in the sector, some observers are sceptical about valuations, especially when they are based on an appraisal rather than a sale. In the marketing for Taurus 2025-2, the Silverburn centre has been given a value of £194.5m. It last changed hands in 2022, when Henderson Park paid £140m. "I don’t thi