TheChek News Flow

Investors slash Fed rate-cut bets as Iran war sends petrol prices surging

Traders expect central bank to remain on hold until next summer in blow to Trump’s hopes for lower borrowing costs

Investors are slashing bets that the Federal Reserve will cut interest rates this year, as the widening crisis in the Middle East sends petrol prices surging and threatens a fresh burst of inflation.

Markets are not anticipating a Fed rate cut until summer next year, according to trading in federal funds futures. It marks a dramatic shift from just weeks ago when traders were pricing in two quarter-point cuts in 2026.

The stark shift in Wall Street expectations highlights how the surge in energy prices caused by the war in Iran is prompting investors to rapidly rethink their outlook for inflation in the world’s biggest economy.

“This has been a wild shift. The market went completely mad today and decided to price out lots and lots of cuts,” said Gennadiy Goldberg, head of US interest rate strategy at TD Securities.

He added: “This enormous move . . . is a function of the market betting that it will be difficult for the Fed to cut rates while oil prices remain high.”

Petrol prices, which are a major cost for consumers, hit $3.60 a gallon on Thursday, compared with $2.94 a month ago, according to motor club AAA.

The dwindling rate-cut bets undercut US President Donald Trump’s hopes for the Fed to drastically cut rates to accelerate growth and lower borrowing costs for consumers. The Fed, which is due to meet next week, reduced rates by a quarter point three times last year.

Still, the president on Thursday renewed his calls for Fed chair Jay Powell to slash borrowing costs: “Where is the Federal Reserve Chairman, Jerome ‘Too Late’ Powell, today? He should be dropping Interest Rates, IMMEDIATELY, not waiting for the next meeting!” Trump wrote on Truth Social.

Investors have already moved to price out cuts, and price in rises, across a range of big economies, including the UK and the Eurozone, viewed as particularly vulnerable to energy-driven inflation.

Short-term US government debt, which is particularly sensitive to monetary policy expectations, fell sharply in price on Thursday, sending yields higher.

The two-year Treasury yield, which moves with interest rate expectations, rose as much as 0.1 percentage points to 3.76 per cent.

One popular trade in the market that has been put under pressure are so-called steepeners: bets that short-dated debt will outperform long-term bonds. Instead, the yield curve on Treasury debt has flattened, with the additional interest rate on 10-year debt over the two-year equivalent falling from 0.7 percentage points in early February to just above 0.5 percentage points.

John Stopford, head of multi-asset income at asset manager Ninety One, said the flattening represented the US bond market trying to price in “negative growth implications of higher oil prices and the likelihood of less accommodative monetary policy”.

Longer-term yields have also increased in recent days, something that has pushed mortgage rates higher after they hit the lowest level since 2022 late last month. The average 30-year fixed rate rose to 6.11 per cent this week, from less than 6 per cent in late February — denting one of the president’s flagship pledges to improve home affordability.

Despite market expectations that the Fed will refrain from rate cuts this year, some rate setters view the shock from higher energy prices as temporary.

Christopher Waller, a Fed governor who is one of the more dovish members of the Federal Open Market Committee, said last week: “You’re going to see a spike in gasoline prices, that’s what the American citizens are going to see at the pump, and they’re going to stare at it and be a little shocked . . . but, for us, thinking about policy going forward, it’s unlikely to cause sustained inflation.”

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HORMUZ / DAY 12 — NOTE UPDATED | LAURENT CHEKROUN

Sent you the Day 8 note last week. Here is what changed and what I added.

WHAT MOVED SINCE DAY 8
— Brent hit $119.48 intraday Day 10 (WTI same). Largest supply disruption in history per Rapidan. Back to ~$92 today on mixed Trump/Hegseth signals. 36% peak-to-trough swing in 2 sessions — biggest since Apr 2020.
— Trump said war "very complete, pretty much" on CBS → crude -19% in hours. Hegseth same day: "most intense strikes yet." Energy Sec Wright tweeted "tanker successfully escorted through Hormuz" → WTI cratered → tweet deleted → White House confirmed false. $84M ETF market cap evaporated in 10 minutes.
— Iran named Mojtaba Khamenei (hardliner son of Khamenei) as new Supreme Leader. Market pricing longer conflict.
— UNSC Resolution 2817 adopted 11 March: 135 co-sponsors, condemns Iran attacks on GCC, demands Hormuz access.
— Operation Maritime Shield (G7 naval escorts) launched Day 10. No confirmed commercial transit yet.
— IEA 400mb SPR release announced (US 172mb, Japan 80mb). Prices did not hold the bid.
— Iran struck all 6 GCC states. Ruwais refinery (UAE) fire. Ras Tanura (KSA) shut. Sitra refinery (Bahrain) hit. Camp Arifjan (Kuwait) targeted. Duqm and Salalah (Oman) struck — Lloyd's included Omani waters in high-risk zone.
— TTF peaked €64/MWh, currently ~€50. Iraq output -70% (4.3 → 1.3 mb/d). 8+ vessels hit.

WHAT I ADDED TO THE NOTE
— NEW SECTION: Bypass Infrastructure — full analysis of Petroline (KSA, 7mb/d Abqaiq-Yanbu, ramped to full 11 March, but Yanbu terminal cap 4.5mb/d, actual loadings 2.2-2.5mb/d) and ADCOP (UAE, 1.8mb/d Habshan-Fujairah). Combined max bypass ~6.5mb/d vs 20mb/d normal Hormuz flow. Gap of 13.5mb/d has zero alternative route. IEA 400mb SPR = ~20-27 days of missing volume only.
— Zero-bypass producers table: Kuwait (2.6mb/d, force majeure), Iraq (4.3→1.3mb/d, -70%), Qatar (77mtpa LNG, force majeure all output), Bahrain (Sitra struck).
— Scenarios recalibrated: Base Case now $88-100 / 3-6 weeks. Extended $100-120 / 8-10 weeks. Escalation $120-150+ / >3 months. Base Case upper bound was effectively hit Day 10.
— All dates, TTF figures, vessel counts updated to Day 12.

Full note attached — 14 sections, bypass infra, sector scorecard 15 names, FX matrix, ETF positioning table.

Laurent C.

Rise of the five-star jammy dodger as top hotels embrace ‘bakery tourism’

Croissants, cheese straws and iced buns are drawing queues round the block — and smart hotels are taking note

When I worked as a trainee at an ad agency in Mayfair in the early 2000s, hotel bars were the last word in glamour. The velvet ropes, the theatrical furniture, the diaphanous floor-to-ceiling curtains — I ​c​ouldn’t get enough of it​ all. I never thought about the people paying hundreds to stay in the rooms upstairs: I was there for the just-about-affordable cocktails, the vibes, the possible Kate Moss sightings. Cosmopolitans at St Martins Lane, martinis at The Sanderson: these were my gateway drugs to luxury hotels.

But tastes have changed. For today’s twentysomethings, cocktails are out and pastries are in. Alcohol consumption is plummeting and “treat culture” — the practice, in periods of economic uncertainty, of rewarding oneself with small, inexpensive indulgences like a cinnamon bun — is on the up. It’s not just about popping to your local Gail’s: Gen Zs are building whole holidays around pastries.

“Every day, we serve people who have travelled to Scotland ​from as far as New Zealand and Japan specifically to come to the bakery,” ​says Darcie Maher, the 28-year-old founder of Edinburgh’s Lannan Bakery, which had queues around the block at 5am when it first opened in 2023. “I’m planning to put a guidebook together because so many customers ask us what else to do while they’re here.”

Hotels, always on the lookout for new ways to lure younger customers through their revolving doors, are taking note. Rooms at Claridge’s start at £930, but since January, when the hotel opened an artisanal bakery, you can go there for a Marmite cheese straw that will cost you just £3.50. “We pride ourselves on excellence at Claridge’s,” the hotel’s managing director Thomas Kochs tells me. “But that doesn’t have to mean lobster and caviar or Dom Pérignon. It can also be executed in a benchmark bread or a little pastry.”

So is the ​b​aked good the new five-star hotel diffusion line, the pain au chocolat the new Negroni? And are the treats at the grand hotels as delectable as the ones at the destination bakeries that inspired them? I went to find out.

My first stop ​​was the Cedric Grolet café at The Berkeley hotel in Knightsbridge. The French patissier, who also has an outpost at Le Meurice, is famed for his intricate laminated pastries and tropical fruit desserts so perfect they could be AI — his demos have earned him 14mn ​Instagram followers. As I waited to be seated, I watched a young couple snap the stripy croissants, trompe l’oeil apples and cakes piped with daisy petals ​that ​s​at alluringly on the counter. I ordered what looked like a miniature mango, with a white chocolate shell ​and a sublime ganache and creamy purée inside, all the more mind boggling considering ​it was entirely vegan.

At Nicolas Rouzaud’s outpost ​a​t The Connaught, ​I ate a laminated “Trio au Chocolat” threaded with dark, hazelnut and white chocolate that I worry will ruin me for the humble pain au chocolat​ forever. Rouzaud has just opened a second London outpost in Piccadilly’s posh Burlington Arcade, a 15-minute walk away: a can’t-miss-it vision in glossy scarlet and pink, its windows piled with cake boxes and brioches à tête, another Rouzaud signature, displayed under glass cloches inside. 

If Grolet and Rouzaud are creating sugary haute couture, Claridge’s is erring on the side of the traditional bakery. ​Its executive chef and creative director is ​London-born sourdough ​l​egend Richard Hart​, who was head baker at pioneering San Francisco bakery Tartine and worked with Noma’s René Redzepi in Copenhagen​.​ He is now based in Mexico City, where he launched Green Rhino bakery last summer.

​Claridge’s bakery is at the back of the hotel on an unassuming mews crowded with Lime bikes. When I visited on a sunny Wednesday morning, a poodle was tied to the black velvet rope outside. ​Through the windows, I could see head baker Frédéric Doncel-Latorre and members of his team moulding baguettes and slicing long strips of pastry into triangles for croissants, like tailors cutting fabric.

I joined the queue and chatted to a couple from Cornwall, sourdough hobbyists on their second visit to the bakery in as many days. They raved about the ham and cheddar cheese swirl and the sourdough, which they thought was remarkably good value at £6 for a kilo, and ordered a loaf and two Belgian buns. “The nicest thing about the bakery is it’s good old British stuff,” a customer in his forties who lives a five-minute walk away told me; he discovered the bakery on a run and now comes at least once a week. 

My selection of sweet treats included a raspberry iced ​f​inger, a joyful-looking jammy dodger and a French fancy — versions of which I enjoyed courtesy of Mr Kipling in the 1980s. “There are a lot of things on the menu that I grew up eating,” ​H​art tells me over the phone from Mexico, where he’s just returned after six weeks at Claridge’s. “They were full of additives and preservatives back then — we make them with the best ingredients.” 

The smorgasbord at Claridge’s remind​ed me of the offerings at Pump Street Bakery in Orford, Suffolk, which was one of the UK’s first to become a destination in its own right and where I cut my teeth as a bakery tourist. “We’re at the end of a long road, eight miles from the nearest intersection,” sa​y​s Joanna Brennan, who founded the bakery with her father Chris in 2010. “No one comes here by accident.” Pump Street opened just after the financial crisis and a decade before lockdowns found us stacking our fridges with sourdough starters. “We were hugely affected by ‘treat culture’,” Brennan says. “It’s the lipstick effect — people buy small luxuries in times of recession, which in our case meant spending a couple of pounds extra to upgrade their Saturday morning pastry and have an experience at the same time.” 

Fifteen years later, there’s still a queue at the weekend for Pump Street’s sourdough loaves, almond croissants, doughnuts and (my favourite) Eccles cakes, displayed in a long glass case like museum objects. Pump Street’s customers are a mix of villagers, regulars from as far away as Cambridge, and bakery pilgrims who take selfies in front of the bakery’s Suffolk pink facade. The odd celebrity drops by too: I’ve rubbed shoulders with Keira Knightley. In 2021, a second destination on the baked-goods-bagging trail appeared in Suffolk, when Alice Norman opened Pinch at Maple Farm, 12 miles north of Orford. Its prize pastry is the cruller, an airy doughnut made from choux pastry and flavoured with ingredients such as maple syrup, bacon and hazelnuts — about 200 are sold each day in peak season. 

Lannan’s Darcie Maher says that while the cost-of-living crisis might have made baked goods more attractive than that old foodie trophy, the £150 tasting menu, she also credits a newfound appreciation for the artistry of baking after all those pandemic-era saggy sourdoughs and floppy croissants. “We put as much care and time into a pastry as a chef would into a dish in a restaurant, but at £6 or £7, they’re far more accessible.”

Back at Claridge’s, I resist the merch — a stylish white baseball cap with “BAKER” printed on it in pale yellow — and take my bounty home on the Tube. The moist, springy sourdough is the best I’ve ever tasted; my son loves the spongy iced finger with its tangy raspberry topping. My favourite nostalgic treat is the jammy dodger, a crunchy shortbread biscuit with a smiley face and a generous filling of raspberry jam that’s a closer relation to the tarts my mother used to buy from our local bakery than the supermarket biscuits. “I would never have put a smiley face on a pastry a few years ago,” Hart admits when I ask him about them, “but I think it’s kind of cute.”

My Gen Alpha daughter agreed​, and requested another ​“emoji biscuit” the next day. ​I expect Claridge’s will have launched a different diffusion line by the time she reaches her twenties but after that first, tasty entree, I’m sure she’ll be back for more.

Battle for weight-loss supremacy shifts from jabs to pills

Novo Nordisk’s Wegovy tablet offers Danish drugmaker window to win back market share from Eli Lilly

The latest entrant to the booming global market for weight-loss drugs has taken off more quickly than almost any previous pharmaceutical product.

Novo Nordisk’s once-daily Wegovy pill was approved by US regulators in late December. By the end of February, US doctors had written more than 300,000 prescriptions for the drug, according to data provider IQVIA. The US is the only country where it has been launched so far.

For the Danish drugmaker, it is welcome respite. The pioneer behind the Ozempic brand that is synonymous with blockbuster weight-loss drugs had a commanding position until 18 months ago.

Since then, it has fallen behind rival Eli Lilly in the crucial US market, its share price hit hard by intensifying competition, disappointing clinical results and worries about its pipeline, future sales and profits.

The strong early demand for the Wegovy pill, which led to average weight loss of 17 per cent in trials, offers Novo a chance to regain ground. Brian Lian, chief executive of Viking Therapeutics, a San Diego biotech working on weight-loss drugs, called it “the fastest drug launch in history”. It was accompanied by a multimedia blizzard of publicity that included Novo’s first Super Bowl commercial.

“It certainly shows there’s extraordinary demand out there for these therapies,” Lian said.

Just as Apple and Samsung have long competed for dominance in the smartphone market, Novo and Lilly are vying for leadership in weight-loss drugs.

Lilly is ahead on market share but the next battleground is pills. The shift to oral treatments is widely seen as key to expanding the market: until the arrival of the Wegovy pill, these hugely popular new drugs had to be taken as an injection.

Novo has made it to US medicine cabinets first but Lilly’s weight-loss pill orforglipron, which produced average weight loss of 12.4 per cent in trials, is expected to win regulatory approval in April.

There is a lot riding on the choices of US doctors and consumers.

Once Europe’s most valuable company by market capitalisation thanks to the runaway success of Ozempic, Novo is now smaller than European rivals AstraZeneca, Roche and Novartis by that measure.

Its shares are down more than 50 per cent over the past 12 months and trade two-thirds below their peak of June 2024.

Lilly meanwhile has become a $1tn company thanks to the success of its weight-loss drugs which, as with Novo, stemmed from its expertise in diabetes.

Having struggled to replace sales lost when patents on some of its most profitable drugs expired in the 2010s, Lilly’s tirzepatide — sold as Zepbound for weight loss and Mounjaro for diabetes — is now the world’s second-biggest drug by sales.

But Evan Seigerman, an analyst at BMO Capital Markets, believes that the successful US launch of Wegovy demonstrates Novo has “learned from its mistakes”. It previously struggled to adjust its supply chain to meet huge demand but has now increased manufacturing capacity and also has a programme to sell the drug directly to consumers and bypass pharmacy companies.

The pill was “probably one of the fastest launches we have seen” in the pharmaceutical sector, he said. “I don’t think I have seen anything like this. But again, [the pill] is a product that is widely available, widely popular and easy to access.”

Novo had “an opportunity to claw back some market share with the pill,” he added, “but only until Orforglipron is approved.”

Still, the Danish drugmaker has a number of challenges to contend with. Semaglutide, the active ingredient in Wegovy and Ozempic, its respective weight-loss and diabetes treatments, will lose patent protection in India, China, Brazil and Turkey this year.

It has already lost patent protection in Canada, the world’s second-largest market for weight loss and diabetes drugs.

In Brazil, 11 manufacturers have filed for regulatory approval to make generic weight-loss drugs when Novo loses its patent protection in the country next month, according to Jefferies. In India, about 40 local manufacturers are expected to compete and cut the price of weight-loss drugs in half, the investment bank said.

While Novo’s Wegovy pill must be taken on an empty stomach and patients have to wait at least 30 minutes before eating, drinking or taking other oral medications to give it time to be absorbed, Lilly’s pill does not have the same restrictions.

Mike Doustdar, chief executive of Novo, acknowledged that Novo’s pill was “limited” because it could not be taken with food, but said this had not proved a major concern for patients. “[People] go to the shower, get dressed and go downstairs or wherever they are having their breakfast and before you know it the half an hour is finished,” he said.

Lilly’s dominant position in the US market is clear from prescription data. Its portfolio of weight-loss drugs, including diabetes treatments, accounted for 1.4mn prescriptions as at the end of February, according to IQVIA.

Novo’s weight-loss drugs — including pills and injections — accounted for 924,000 prescriptions.

These figures do not include all of the companies’ online sales. Doustdar told the FT that more than 600,000 prescriptions have been written for the Wegovy pill alone since its launch.

Michael Nedelcovych, director of equity research at TD Cowen, said the Wegovy pill could offer Novo a way to compete. “If Novo can successfully navigate the launch . . . [and] access that market, that’s one way to fight,” he said. The company could also benefit if some patients prefer taking a pill rather than an injection, at least until Lilly launches its own version.

There is also the all-important question of price. Some patients using Lilly weight-loss injections switched to Novo’s Wegovy pill “because it was cheaper”, according to Daniela Hurtado Andrade, a doctor in Jacksonville, Florida.

Novo is selling the lowest 1.5mg and 4mg doses of its Wegovy pill for $149 for a month’s supply in the US until April, when the 4mg dose will rise to $199 a month. Patients with insurance can pay as little as $25 a month for the lowest doses. Higher 9mg and 25mg doses are priced at $299 a month.

“If it is cheaper than the injectable options, that could be a reason to consider [the pill],” Hurtado Andrade said.

For weight-loss injections, the list price, paid by people without insurance, can be as much as $1,300 a month. With insurance and discounts, the cost is substantially lower.

Lilly has said it will sell orforglipron for $149 a month with higher doses costing up to $399.

Pricing could also help determine how quickly the pills expand the market, with early signs that oral weight-loss drugs are drawing in new patients.

In a report last month, Goldman Sachs said the “unprecedented” uptake of the pill had come from new users rather than people switching away from injections.

Lian of Viking Therapeutics agreed that people who had not previously taken weight-loss drugs were now buying the pill, suggesting there was little “cannibalisation” of injectable treatments.

But expansion in the market does not mean competition will ease. New entrants will still need a clear point of differentiation, said Marek Poszepczynski, co-manager of Schroders’ biotech investment fund.

“You need to have an edge otherwise there’s no point fighting in this market.”

Partners Group sounds alarm on private credit default rates

Chair of Swiss private capital group warns pace could double to above 5% in coming years

The chair of Partners Group has warned that private credit default rates could double in the next few years, with lenders exposed to the full downside of AI-driven economic upheaval and only limited upside.

Steffen Meister, whose firm manages $185bn across asset classes including private equity, debt, infrastructure and real estate, said annual defaults in private credit averaged 2.6 per cent over the past decade.

“There’s a good chance that we see default rates double in the next few years,” he said.

The comments from one of Europe’s largest private capital groups come as investors have rushed to pull money from US private credit funds.

Funds managed by Blackstone, BlackRock and Blue Owl have been hit by fears about credit quality and AI’s impact on software companies that make up a large share of private credit borrowers.

Private credit would be disproportionately affected by the AI-driven “economic transformation” relative to private equity, Meister said, because it would lead to a bifurcation of outcomes with more companies performing particularly well or badly.

“Credit has this issue that if a business does really well, your upside is capped, you just get your interest. Then you have the full downside — and this is where this becomes a problem.”

He added that default rates had been “so low” that private credit lenders had coped by managing diversified portfolios of loans that they then levered again.

“But that . . . will not quite work any more if you see more defaults, lower net spreads.”

Meister predicted that spreads would rise in the coming years in middle-market direct lending where there was limited capital available and said there was still room for strong credit returns with stringent “private equity-style” underwriting.

Private credit default rates have been materially lower than in public markets.

However, some in the industry argue they would be higher if the narrow definition of defaults typically used in private credit was expanded to match those in public markets.

In public markets, defaults tend to include events such as conversions of loans to payment-in-kind where interest rate payments can be deferred, or maturity extensions without adequate compensation.

The recent exodus from private credit funds was partly sparked by the failures of two US borrowers last year, Tricolor and First Brands, which raised questions about due diligence by lenders. That was compounded by rate cuts from the US Federal Reserve and more recently by writedowns at funds managed by KKR, Apollo and Blackstone.

Earlier this week, Partners Group reported SFr1.7bn ($2.18bn) in management fees, other revenues and operating income in 2025 and SFr819mn in performance fees. That was better than analysts had expected, as some exits of holdings were completed earlier than anticipated.