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Today's lone coupon auction, the sale of $16BN in 20Y notes, took place at 1pm, just an hour ahead of the FOMC Minutes release, and the auction was generally very strong, with maybe a one glitch. 

The sale stopped at a high yield of 5.122%, up from 4.883% in April, and the second highest in the history of the 20Y auction with just the 5.257% in October '23 printing higher. The yield stopped on the screws with the When Issued 5.122%, and followed two stopping through auctions, and 11 of the past 12). 

The bid to cover was 2.55, down from 2.68 in April and arguably the only weak spot in today's auction, as it was the lowest since February. 

The internals were solid, with Indirects awarded 67.67%, up from 67.39% and the 63.5% recent average. And with Directs taking 22.9%, unchanged from the previous month, Dealers were left with 9.4%, down from 9.7% and one of the lowest Dealer awards on record.

Overall, this was a solid 7Y auction and one which had no problem finding buyers despite, or perhaps because of the recent surge in yields which today has reversed modestly thanks to lower oil prices.

Today's FOMC minutes, released at 2pm ET, will be closely watched for further details surrounding the increasingly hawkish split within the Committee following the April meeting, Jerome Powell's last as Fed Chair. With three voters dissenting against retaining the easing bias - and Fed's Collins later suggesting she would have supported removing it too - markets will look to see how broad support was for removing the easing bias, particularly after Powell said more officials now view a hike just as likely as a cut, according to Newsquawk.

Discussions around inflation risks and the labor market will also be in focus given the current macro backdrop, with the jobs market viewed as stable while inflation remains above target and faces upside risks from the Middle East conflict. Traders will also watch for any early signs of debate surrounding future balance sheet policy with Warsh set to take over as Chair from Powell. 

The April FOMC statement and vote split leaned hawkish. While outgoing Governor Miran's dissent in favor of a 25bps rate cut was widely expected, three voting members (plotted below) dissented against retaining the easing bias in the statement (Hammack, Kashkari, Logan).

As a reminder:

• Hammack said the easing bias was no longer appropriate given broad-based inflation pressures, higher energy prices, resilient growth and a labour market near full employment.
• Kashkari said he wanted to signal growing rate hike risks, warning that a large price shock could unanchor inflation expectations and require tighter policy to defend the Fed's 2% target.
• Logan dissented because she believed the Fed should not imply easing given uncertainty around the outlook, stable employment and concern about getting inflation back to 2%.

Elsewhere, the statement shifted inflation language, replacing “somewhat elevated” with “elevated”, while also attributing the move to higher global energy prices. On the Middle East, the Fed dropped the prior “uncertain implications” wording, instead stating directly that developments are “contributing to a high level of uncertainty”. Growth and labor market language was otherwise largely unchanged, with activity continuing to expand at a “solid pace” and unemployment “little changed”. 

However, given energy prices have continued to rise in the wake of the meeting, and money markets are no longer pricing rate cuts this year (with markets currently discounting roughly a 60% probability of a hike by year-end), traders will look for evidence of how widespread inflation concerns were within the Committee and what conditions could push the Fed towards hikes. That said, the minutes reflect discussions held at the time of the meeting, meaning the recent hot CPI and PPI reports will not yet be incorporated. 

Powell said policy remains in a “good place” to wait and see, but acknowledged the Committee is moving closer to dropping its easing bias, with more officials now viewing hikes just as likely as cuts. While he stressed no one is actively calling for hikes at present, analysts noted that the threshold for future easing has risen, with the Fed wanting more confidence around tariffs and energy prices before considering cuts. Powell also warned that core inflation risks are “real”. He added that, beyond the three official dissenters, several non-voters also favored removing the easing bias but ultimately supported the decision to hold rates.

That dynamic may create challenges for incoming Chair Warsh, whose first meeting will be in June. While Warsh has advocated lower rates, he may find limited support for a more dovish stance within the current Committee. Bowman and Waller remain among the more dovish officials, though neither has backed immediate easing in the way Miran did. Note, the latest reports suggest Kevin Warsh will be sworn in as Fed Chair this Friday at a White House event. 

Additionally, Warsh has advocated for a tighter balance sheet policy. Last week, Fed Governor Barr argued that easing bank liquidity requirements to shrink the Fed's balance sheet would undermine financial stability and increase the Fed's market footprint. Barr said the 2023 banking stresses suggest liquidity requirements should rise, not fall. As such, traders will also watch the minutes for any discussion surrounding future balance sheet strategy alongside the debate over the easing bias.

Standard Chartered CEO Bill Winters and his team spent Wednesday in damage-control mode after the head of the London-based international bank told investors on Tuesday that artificial intelligence would be used to replace "lower-value human capital," sparking a backlash online.

"Many of you will have seen media coverage following the Investor Event in Hong Kong, particularly the reporting around automation, AI, and workforce changes," Winters wrote in an internal memo to employees on Wednesday that was seen by Bloomberg.

He continued, "I know this may be unsettling when reduced to simple headlines or a quote out of context."

The outrage stems from STAN's Tuesday announcement to cut 15% of its corporate roles (about 7,800 jobs) by 2030 as part of a broader efficiency push amid the adoption of AI.

During the investor event, Winters said, "It's not cost-cutting, it's replacing low-value human capital with financial and investment capital." The substitution of workers in favor of machines "will accelerate as we go forward into AI."

Bloomberg noted that Winters' memo sent to workers earlier today "adopted a more empathetic tone, emphasizing the bank's commitment to supporting its workforce during the transition."

That memo read, "We will continue to invest in technology, platforms, and automation to improve how we operate, serve clients and position the Bank for long-term growth. I want to be absolutely clear that the future of Standard Chartered depends on the talent, judgment, relationships, and commitment of you, our colleagues."

“It’s not cost cutting; it’s replacing in some cases lower-value human capital”

Standard Chartered CEO Bill Winters delivered a blunt message on the future of the bank’s workforce. @aishagani explains the growing trend among finance leaders acknowledging the realities of AI… pic.twitter.com/j55u4uPdZR

— Bloomberg (@business) May 19, 2026

Socialists were not thrilled with Winters' "lower-value human capital" comment:

"Angry? You should be! This is how the employer described its staff: "lower-value human capital."

Angry? You should be! This is how this employer described its staff “lower-value human capital”.

“Standard Chartered bank could cut more than 7,500 jobs as it seeks to replace "lower-value human capital" under a technology and artificial intelligence (AI) drive”.…

— Socialist Labour Party (@soclp_uk) May 20, 2026

Beyond StanChart, corporate America is losing engineers and other white-collar workers who are burdened by insurmountable student and credit card debt as AI adoption accelerates. This era will likely be remembered as the great "white-collar purge," and the response may be continued backlash toward data centers.

Earlier today, Meta began cutting 8,000 jobs, while leaked audio of CEO Mark Zuckerberg described how AI is monitoring high-skilled employees. According to X user Official Layoff, who leaked the audio: "AI is replacing the contractor. Then the employee trains the AI. Then the AI replaces the employee."

Three commercial supertankers carrying a combined 6 million barrels of Middle East crude oil have successfully exited the Strait of Hormuz, according to Reuters.

The vessels departed the strategic waterway on Wednesday, after being stranded inside the Persian Gulf for over two months, lending hope to an end to the closure of the strait.

The crude cargoes were split evenly among three Very Large Crude Carriers (VLCCs) heading to Asian refining hubs. The first was Universal Winner, a South Korean-flagged supertanker carrying 2 million barrels of Kuwaiti crude oil. Shipping data on LSEG and Kpler showed that the vessel is currently en route to Ulsan, South Korea, to discharge at an SK Energy facility by June 9.

The second VLCC was Yuan Gui Yang, a Chinese-flagged vessel hauling 2 million barrels of Iraqi Basrah crude. Chartered by Unipec (the trading arm of Sinopec), the supertanker is heading toward Guangdong province with an expected arrival on June 4.

Finally there was Ocean Lily, a Hong Kong-flagged tanker loaded with 2 million barrels split evenly between Qatari al-Shaheen and Iraqi Basrah crude. Owned by Sinochem, the vessel is tracking toward Fujian province for a June 5 arrival.

Combined, the trio have about 6 million barrels of crude on board — one of the biggest oil flows in a single 24 hour period in over a month.

All three vessels switched off their digital transponders before exiting. Two have since transited the strait and were sighted near Oman while the status of the third is unclear. It also remains to be seen if they all can get past a seaparte US blockade. The supertanker heading to South Korea, the Universal Winner, is the first observed sailing by a VLCC to the Asian country since the war began.

Iran's state TV underscored that the country now appears to be in sole control over who crosses the strait and who doesn't. “Today other countries like South Korea, taking their example from the Chinese, coordinated with the IRGC navy and arranged the passage of their ships through the Strait of Hormuz,” the TV correspondent says in report from near the strait. “Coordination increased today and it’s expected to increase further tomorrow”

The correspondent said he witnessed five oil supertankers passing the strait with IRGC coordination, without giving further details

Meanwhile, following the footsteps of China and South Korea, India is preparing to send its own vessels through the Strait of Hormuz to load up energy cargoes from suppliers in the Middle East, Bloomberg reported; it would be the first time since the Iran conflict began that the country will do so.

State-owned Shipping Corp. of India is ready to go back to the Persian Gulf once it has approval from the Indian Navy and it has business from oil refiners, one of the people said. 

Shipping through Hormuz, which handles roughly a fifth of global oil flows, has been virtually halted since the Iran war began at the end of February, causing major disruptions and price shocks for countries like India, the world’s third-largest crude importer. It’s unclear whether Iran or the US, which are separately blockading the strait and surrounding waters amid the war, have given India a green light to send ships through the waterway. Their agreement will be critical for the plan to work. 

India’s External Affairs Minister Subrahmanyam Jaishankar met his Iranian counterpart Abbas Araghchi in New Delhi on the sidelines of a BRICS summit last week.

Recent White House briefings indicated potential progress toward an agreement to de-escalate hostilities, giving energy markets hope for a more permanent reopening of the chokepoint. Details on permanent enforcement or full reopening conditions remain sparse despite reports of Washington and Tehran having allegedly engaged in productive conversations via mediators, often with contradictory statements.

Few ships have so far managed to break through the Strait of Hormuz, with regional oil exports currently well below pre-war baselines.

Energy analysts emphasize that even if the conflict ends immediately, a backlog of structural damages and shuttered upstream infrastructure means market normalization will likely take three to four months and high oil prices are likely to persist.

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

The US economy’s curb appeal looks great. Consider that gasoline prices are nearly $5, crude oil is trading above $100, consumer sentiment is at historically low levels, and mortgage and other interest rates have remained relatively high. Yet, despite the worrisome headwinds, the US consumer-driven economy continues to expand. However, as with a house’s curb appeal, it’s not just the headline data that defines an economy. Equally important is its supporting structure. Let’s open the door to our economy to better appreciate how AI is currently impacting it and how it may change in the future.  

The question we explore here is whether the AI investment boom is genuinely broadening this country’s economic footing or weakening the labor force, the foundation of the economy.

We separate the article into two parts. Part one is the optimistic case: an AI-induced, productivity-led economic boom in which the benefits spread quickly to society.  Part Two will address a more bearish outlook: the possibility of a large gap in the distribution of AI’s productivity benefits, accruing to corporations much more quickly than to employees.  

AI Spending Drives GDP

The amount of capital flowing into AI infrastructure development and thus GDP is enormous. As shown in the graph below, the capital expenditures (Capex) of just four companies, Amazon, Google, Microsoft, and Meta, are now over $700 billion annually, roughly 7x what they were five years ago. Based on the 2026 Capex expectations, a third of GDP growth could come from the four companies.

The AI buildout extends well beyond the four balance sheets noted above. Every dollar of Capex spent by the large hyperscalers creates demand across a wide supply chain. For example, construction firms are building data center campuses the size of small cities, utility companies are scrambling to add generation capacity, domestic semiconductor producers are ramping up output, and fiber optic and networking suppliers have multi-year order backlogs. The electrical grid is facing its first sustained demand growth in two decades, driven almost entirely by data center power requirements, which are projected to more than double by 2030.

Historical Context

The scale of today’s AI buildout has historical precedent. For instance, the railroad expansion of the mid-1800s involved more extreme infrastructure investment, with railway Capex estimated to have consumed as much as 10-20% of GDP at its peak. A more recent and appropriate comparison is the telecom buildout of the late 1990s, when Capex peaked at roughly 1.0-1.2% of US GDP. Today’s AI infrastructure spending by just the four companies has recently surpassed that telecom figure.

But unlike the debt-fueled telecom boom, today’s AI spending has thus far been funded almost entirely by the cash and cash flows of extremely profitable corporations. While the composition of funding is shifting from cash and free cash flow to debt, the companies noted above have debt-to-equity ratios well below the S&P 500 average and significantly lower than during the telecom buildout. Moreover, earnings from other highly profitable business lines will continue to provide them with substantial cash for investment.

The Consumer Is Resilient But Running Thin

While AI spending is tremendous and boosting the economy, some argue that it is masking weaknesses in consumer spending, which is the most important contributor to economic growth.  The graph below shows that consumer spending accounts for about 67% of GDP, as it has since 2001. There has been no discernible change over the last few years since the advent of AI.

While the recent contribution of consumer spending has not changed meaningfully, its sustainability is a key factor driving future growth. While consumption is holding, there are signs that the means to spend are deteriorating. For instance, the personal savings rate has fallen to near its lowest level since 1960, as shown below. This suggests that a growing share of personal consumption is being funded by drawing down savings rather than by current earnings.

Such behavior is not unusual during periods of strong employment, as consumers spend more when they are confident about their job and wage prospects. That said, a low savings rate is a yellow flag, but it has coexisted with healthy economic expansions before.

The more important gauge of future consumption is wages, which leads us to the labor market

A Churning Labor Market

AI will swallow up jobs, some pessimists say. Thus far, that is not the case. For instance, in 2025, nearly 55,000 of 1.17 million layoffs were directly attributed to AI, according to Challenger, Gray & Christmas. Other estimates peg the number higher at 200,000–300,000 positions in 2025. While that estimate is more concerning, it is only about 0.15–0.20% of total nonfarm employment.

Looking forward, the outlook gets murky. Goldman Sachs has a dire outlook with 300 million jobs globally at risk. But that only tells half the story. The World Economic Forum (WEF) estimates that AI will create 170 million jobs globally.

There is no doubt that AI will have significant impacts on the economy, labor market, and many individuals. Prior innovations are proof. To wit, about two-thirds of US jobs in the 1940s no longer exist. The replacement jobs were enabled by new innovations.

While the future remains uncertain, the past relationship between job growth, wages, and productivity is encouraging. As we share below, PwC claims “wages are rising 2x faster in industries most vs least exposed to AI.”

Productivity Gains Will Spread

Economic growth and wage growth are a direct function of productivity. Productivity measures the amount of leverage an economy can generate from its two primary inputs, labor and capital. Without productivity, an economy is solely reliant on two limited inputs. Thus, without productivity growth, economic growth is unlikely over the long run.

Therefore, it’s critical to discuss how much productivity AI will generate and how it will be distributed.  The first part, how much, is nearly impossible to assess today. That said, PwC estimates that productivity growth has nearly quadrupled in AI-exposed industries since 2022. Further:

Is AI really the cause of this surge in productivity? We can’t prove causation with certainty, but we do know that revenue growth in AI-exposed industries accelerated sharply in 2022, the year that the launch of ChatGPT 3.5 awakened the world to AI’s power. Since then, as companies have raced to leverage this technology, the value created in industries best positioned to use AI has skyrocketed. In the space of two years, industries most able to use AI have changed from productivity laggards to leaders, suggesting that investments in AI are paying off. AI’s promise is proving to be real, and we are only in the early days of AI adoption.  

Regarding the distribution of productivity, some pessimists argue that AI’s productivity gains are flowing overwhelmingly to high-income knowledge workers. While that is currently true, that has also been the case with every major technology wave in its early phase. Factory automation initially benefited capital owners. Personal computers initially benefited white-collar workers. The internet initially benefited the educated and connected. But over time, prices fall, adoption rates grow, and the benefits spread across the entire workforce.

History’s verdict is consistent: the benefits start narrow and ultimately spread wide across the economy. As we share in the graphic below, as a result of the US being a global leader in innovation, our poorest states, Mississippi, West Virginia, and Arkansas, have a similar or higher GDP per capita than other large nations.

Summary

While still early in the AI revolution, the economic data points to genuine economic momentum. Whether AI productivity benefits can become more broadly based across the economy is the question that Part Two of this article addresses.

Before we present the other side, we will leave you with a PwC table that addresses concerns about productivity and the labor market.