| | | | | | | Presented By OurCrowd | | | | Axios Markets | | By Emily Peck and Matt Phillips ·Feb 11, 2022 | | 🏈🥑🍺 Oh, hey folks, we have all the TGIF feels today. Might head out early to grab supplies for Sunday's game — never mind those beer market monopolies. - Before you dip your chips, though, we've got some Markets snackage: lawyers and bond yields and Forbes, oh my!
Today's newsletter is 1,130 words, 4.5 minutes. | | | | | | 1 big thing: Bond market zooms ahead of Fed |  Data: FactSet; Chart: Axios Visuals The bond market went nuts yesterday, sending interest rates surging. But the market looks to have gotten ahead of itself, Axios' Neil Irwin writes. Why it matters: The extraordinary run-up in rates makes sense if you believe the Federal Reserve is going to react to the somewhat higher-than-expected January inflation figures with a sense of panic. - But that's not the pattern the central bank's leaders, and particularly chair Jerome Powell, have displayed throughout the last year — so the shift in expectations looks to be overblown.
- Fed policy leaders are near certain to raise the target interest rate next month, but it's still no sure thing they'll move as aggressively as markets now expect — and unlikely they'd move before their regularly scheduled meeting, as some market chatter discussed yesterday.
State of play: The yield on two-year Treasury securities rose an extraordinary 0.24 percentage points yesterday, to 1.58%. Futures markets now price in a near certainty that the Fed will raise rates a half percentage point next month, which would be the first such move in two decades. - The swing was driven initially by a Consumer Price Index report for January showing 0.6% inflation, higher than the 0.4% expected, and the highest year-over-year number (7.5%) in four decades.
- Later in the day, James Bullard, president of the Federal Reserve Bank of St. Louis, told Bloomberg that he favors raising rates half a percent at the March meeting and a full percentage point by July.
The big picture: It is true that the hot inflation number tilts the Fed toward more aggressive monetary tightening. But it was not so far out of the range of expectations that Fed leaders would be likely to toss out their playbook as dramatically as the market moves suggest. - Bullard has a vote on monetary policy this year, but historically his policy views have been more reactive to the latest data point than the typical Fed official, and certainly more so than Powell and other core leaders.
- The inflation numbers overshooting expectations by two-tenths of a percentage point for a single month are not enough to radically change those views.
Powell and his colleagues have been pushing toward higher rates in a gradual, step-by-step process, keeping options open and aiming to tighten financial conditions without breaking the economy. - They're more likely to be open to large, abrupt interest rate hikes only after the rate-rising campaign has begun and it's clearer whether inflationary pressures are subsiding or not.
The bottom line: Fed leaders are loath to seem panicky, and believe that moving too abruptly could introduce unhelpful volatility to markets and the economy. Based on that mindset, a single month's CPI reading won't be enough to radically change the trajectory of policy — even if it created a hairy day in the markets. |     | | | | | | 2. Catch up quick | | 🏡 Mortgage rates jump to a two-year high. (Reuters) 🍪 🙈 Supply chain woes come for Girl Scout cookies. (WSJ) 🚨 Copycat convoy protests are spreading. (Axios) | | | | | | | | 3. Secretive courts still popular with companies |  | | | Illustration: Annelise Capossela/Axios | | | | Congress passed landmark workplace legislation yesterday, prohibiting companies from forcing certain kinds of employee lawsuits into arbitration, or private courtrooms outside public view, Emily writes. - But don't expect companies to abandon this practice — widely criticized for favoring employers, and for depriving workers and consumers of their right to a jury trial. The bill, which President Biden is expected to sign, leaves a lot out.
Why it matters: The legislation is a big deal — the first significant Congressional action stemming from the #MeToo movement, as Sophia Cai and I reported. But it's also not a big deal: It only covers sexual harassment and sexual assault cases. - Companies send all kinds of matters to these secretive courts — including civil rights claims like race discrimination, pregnancy discrimination and wage theft.
How it works: Simply put, companies use private arbitration to stay out of the public court system. That keeps these cases — often public relations nightmares — out of the public's view and away from sympathetic juries. - Typically, clauses prohibit employers or customers from joining together in class actions, which discourages individuals from even coming forward with complaints.
- Many workers don't even know they agreed to forced arbitration as it's often baked into employment contracts.
- You'll also find these agreements buried in the fine print of your credit card paperwork, cellphone contract, student loan documents and more.
State of play: Most cases never even make it in front of an arbitrator. If the cases do, employers are more likely to win, according to widely cited research. For two big reasons: - The discovery process is far more constrained than in public court, so plaintiffs have less ability to gather evidence.
- Cases are heard by arbitrators who are often retired lawyers who've spent their careers defending employers. They're hired by the two main private arbitration companies, which are paid by employers (repeat customers) for their services. (These companies say the process is unbiased.)
- Damages are typically lower, so employees aren't able to always find a lawyer working on retainer to represent them — and so can't afford the process.
Go deeper. | | | | | | | | A message from OurCrowd | | Nobel Prize-winning tech unlocks greater cancer treatment | | |  | | | | Using cutting-edge laser-based tech, HIL Applied Medical is reducing proton therapy costs by 65% –– potentially expanding treatment to over 1 million cancer patients annually. HIL has a signed agreement with global leader Proton International. Now, you can invest. Explore HIL's investment potential. | | | | | | 4. A most unusual SPAC deal |  | | | Illustration: Annelise Capossela/Axios | | | | By investing $200 million in Forbes, Binance — the world's largest cryptocurrency exchange — is allowing Forbes' majority Chinese investor to pull a lot of its money just weeks before it's expected to go public via a special purpose acquisition company, Axios' Sara Fischer writes. Why it matters: In a typical SPAC merger, the principal investors of the firm being taken public don't extract their cash at this stage while simultaneously asking institutional investors to back the new entity. Taking money out now sends a signal from the majority investor, Chinese investment firm Integrated Whale Media, that it doesn't have confidence in the company. Zoom out: SPACs became a popular alternative for businesses looking to go public without having to go through a traditional, more cumbersome, IPO process. - But investors have grown wary of SPACs in recent months, as evidenced by the increasing level of SPAC redemptions — which is when shareholders sell before the merger closes.
- Several digital media companies eyed SPACs as a way to go public, but BuzzFeed's SPAC woes could prompt some to think twice.
Go deeper. | | | | |  | | | | If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. | | | | | | | | 5. Charted: Senate traders |  Note: Trades do not include non-public stocks or exchanges Data: Senate Stock Watcher; Note: Excludes senators no longer in Congress; Table: Thomas Oide/Axios Sen. Tom Carper (D-Del.) disclosed 417 stock purchases and sales since January 2020 — more than any other current senator, according to an Axios analysis of data from the Senate Stock Watcher, Axios' Stef Kight writes. - Sen. Rick Scott (R-Fla.) had the most trades of $500,000 or more — 35.
Why it matters: Rare bipartisan support is building around efforts to ban lawmakers from owning and trading individual stocks — as well as their spouses or immediate family members, in some cases. - Two out of three trades disclosed by the top 10 senators involved assets marked as owned by only the senator's spouse or children.
Go deeper. | | | | | | | | A message from OurCrowd | | New cancer treatment leverages Nobel Prize-winning tech | | |  | | | | HIL Applied Medical is expanding access to cancer treatment with a cutting-edge laser-based proton therapy system. With a working prototype that leverages Nobel Prize-winning tech, HIL has earned millions in grants from the EU and Israeli governments. Invest today at OurCrowd. | | |  | Bring the strength of Smart Brevity® to your team — more effective communications, powered by Axios HQ. | | | | | | Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here.
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