We’re Feeling Wordy this Week
Authors: Faith Spalding, Lucy Cox
Editors: Faith Spalding, Lucy Cox
Intro:
Welcome to the Weekly BluRB, a newsletter catered to students and professionals to get the latest news and insights on global markets. Get prepared for the week by reading four weekly stories circulating around equity markets, macro trends, geopolitics, and new business developments. And the best part: we’ll give you an informed view about where we think prices, policy, and trends are going in the near future. The content in these writings is for informational purposes only and does not constitute financial or investing advice.
US Macro: Credit Markets are Warmer — By: Faith Spalding
Credit markets are running warm, if not hot. Borrowing costs may be easing for credit cards, auto loans, and home-equity lines of credit, but mortgage rates are still incredibly high. After the Federal Reserve cut interest rates by a quarter point last week, the 30-year fixed rate of mortgage rates averaged 6.39%, compared to 6.3% the previous week, according to Bankrate. Still, a larger issue is looming: the private debt crisis.
Wall Street is concerned that high corporate debt evaluations are masking market excesses, failing to properly reward investors for the risks they assume. On September 18th, corporate-bond spreads fell to 73 basis points, (the lowest levels since 1998), driven by a strong demand by investors for high yields among interest rate cuts. The spreads reveal that investors favor riskier, corporate bonds over “ultrasafe” US treasuries. The spread for junk bonds also fell to a low not seen since 2007, now sitting at 2.75 percentage points.
Figure 1: Private Credit Default Rates
These figures confirm that heat is brewing in private credit markets, further reflected by rising defaults. There is a three-pronged problem facing already borrowers right now: inflation is above the 2% benchmark, interest rates remain high, and growth is expected to slow. Although Q2 revisions reflect upward growth driven by stronger consumer spending, borrowers are having a hard time staying on top of their debt payments — rendering private credit markets risky in the eyes of analysts.
Emerging as a “dynamic” force, the value of assets under management in these markets is projected to exceed a value of three trillion dollars by 2028. Driven by strengthened regulatory practices for banks after the 2008 financial crisis, S&P global explains that non-bank financial institutions (NBFIs), including private credit funds and business development companies (BDCs), have filled in the gap for traditional lenders. As a result, the credit market has rapidly expanded, with US bank lending to NBFIs surpassing more than one trillion dollars. Selective defaults have been surging, occurring when borrowers fail to make certain payments but fulfill some commitments. A mid-2025 report from S&P Global Market Intelligence reveals that selective defaults greatly outweighed conventional defaults in 2024, meaning that the true level of risk in the market may be unknown and could be much worse than presumed. There’s no clear fallout, (yet), but these private debt concerns are adding fuel to a growing economic kerfuffle. From the devaluation of the US dollar to Fed worries, US economic stressers aren’t going away.
Global Macro: China, Japan, and Singapore — By: Faith Spalding
China: Stability is a Sticky Situation
Despite China’s stock market rally, the economy is sputtering as tariff tensions continue. The Chinese Communist Party is set to convene in October to outline the country’s five-year-plan, a key decision maker in the government’s economic maneuvers. The October meeting especially stands out as Beijing tries to revert toward an environment of domestic growth and away from an export-centered economy.
Deflationary pressures have been hitting the country fairly hard; China’s Consumer Price Index (CPI) dropped 0.4% in August compared to the year before, 0.2% worse than a Reuters forecast of economic contraction. Deflation in consumer durables reached 3.7%, up 0.2% from July. According to economist Zichun Huang in a note from Capital Economics, the level of deflation for August was more severe than figures seen during the 2008 financial crisis. To make matters worse, August’s core CPI (which leaves out volatile food and energy prices), rose 0.9% from a year earlier, the highest since February 2024. In line with economic expectations, China’s producer price index dropped 2.9% on the year.
Pressures can be partially attributed to the ongoing consequences of the Trump Administration’s trade war, where average tariffs levied by the U.S. on all imported goods from China sits at 57.5%. Amidst growth concerns, China’s central bank seems increasingly likely to ease its monetary stance during the fourth quarter. This accompanies an important shift in tone in rhetoric coming straight from the top; in a recent note, Goldman Sachs analysts observed that the People’s Bank of China replaced its description of the economy as “showing positive momentum” with “making strides while maintaining stability”.
No longer optimistic, “stability” in China has long been a top-down strategy for ensuring public security, with resources concentrated to avoid civil unrest. Often resulting in the squashing of political protest (sometimes before it can even start), stability-maintenance slightly pivots when it comes to economic development: research shows that Beijing focuses on the restoration and expansion of aggregate growth. As such, we expect the PBC to follow suit with stability-forward fiscal policy, especially as the global economic landscape remains tumultuous.
Japan has its own Fed-Rate Debate
It’s good to be writing about Japan again. Modest gains from the Nikkei 225 this Tuesday are being overshadowed by weak economic data. Retail sales in August fell by 1.1%, with industrial output dropping by 1.2%. While economists expect economic output to increase by 4.1% in September and 1.2% in October, overall growth expectations will remain low if production continues to fall or remain stagnant.
The Bank of Japan is also weighing raising interest rates, though has not offered a clear path forward about its maneuvers ahead of its October meeting. In a brief note from one of nine Bank of Japan board members, the bank said that “it may be time to consider raising the policy interest rate again.” However, there’s a bit of a cat-and-mouse game being played, considering that “since the degree of slowdown in the US economy remains uncertain, it is appropriate for the bank to maintain its current stance.” The BOJ left its benchmark rate of 0.5% untouched at its September meeting, instead offering outlined plans for economic stimulus.
To add some drama, two board members made dissenting calls for a quarter-point hike, with BOJ watcher Mari Iwashita remarking that this may have been a “nudge Ueda to move faster and get a rate hike done, given it was something that would happen sooner or later.” Now, swaps traders are betting 60% odds that the BOJ will hike rates on October 29-30, though some are calling for caution to avoid shocking Japan’s vulnerable domestic demand. While the odds aren’t perfectly in our favor, we expect the BOJ to hike rates if Japanese economic recovery remains untouched by U.S. tariff turbulence. However, if price pressure overtakes the concern of the board, we expect the BOJ to avoid a near-term rate hike. We have some time to see how it all plays out.
Singapore: IPO Wins, Tariff Woes
IPO fever is the name of the game in Singapore, even as the nation’s billion-dollar pharma industry remains threatened by US tariffs. Singapore debuted its second-largest stock listing of the year, with Centurion Accommodation REIT rising 9.1% last Thursday from its initial offering price of $0.88/share. Centurion Accommodation REIT is a spin-off of housing provider Centurion, and is making waves throughout Singapore with proceeds worth over $1.4 billion USD this year. Compared to $34 million USD in 2024, this is a win for investors so far. According to Reuters, Tay Hwee Ling, Deloitte’s Southeast Asia transactions accounting support leader, remarked, “The successful REIT IPO, as the second-largest listing of 2025 to date, signals the return of REIT IPOs to the market and is expected to boost sponsor confidence in tapping SGX to realise capital gains and expand portfolios.”
Figure 2: Centurion’s REIT Brings Singapore Listings to Six-Year High
Let’s not misplace our optimism; Singapore still faces challenges as the US continues to level its reciprocal tariffs. For starters, the Trump Administration announced a flurry of new levies, including a 100% tariff on foreign brand-name drugs. In a Truth Social post last Thursday, President Trump wrote, “Starting October 1st, 2025, we will be imposing a 100% Tariff on any branded or patented Pharmaceutical Product, unless a Company IS BUILDING their Pharmaceutical Manufacturing Plant in America. ” This wide-reaching new policy has many potential damning implications, and drugmakers are unclear about what exactly counts as an exemption.
According to the IMARC group, Singapore’s pharmaceutical industry was valued at $7.40 billion USD in 2024, estimated to reach 12.19 billion USD by 2033. Moreover, pharmaceuticals account for 13% of exports to the US, and big-name drugmakers like Pfizer Inc boast manufacturing facilities in Singapore. Such wide-ranging tariffs thus risk to tip the industry into disarray, but Deputy Prime Minister Gan Kim Yong remains hopeful that these new levies won’t have an “immediate impact,” especially considering that many pharmaceutical companies in Singapore have US manufacturing facilities. This may be wishful thinking, but for now, there are simply far too many unknowns to make any calls. Let’s hope we get some clarity in the coming days.
Story of the Week: German Defense Revs Up With Rheinmetall — By: Lucy Cox
The Summer of 1945 was a transformative summer in European history: Nazi Germany had surrendered in early May, and the allied powers had agreed upon dividing up Germany into east and west territories with the Potsdam Conference — kickstarting the new frontier of the Cold War. It was a painstaking meeting attempting to appease the differing powers, but one thing was widely agreed upon by all the powers: Germany was to be demilitarized and disarmed. Under the four ally-occupied zones, Germany was to undergo a complete disarmament and demilitarization, an elimination of all German military and paramilitary forces, and a ban on the production of all military hardware.
However, as the Cold War began to ramp up with conflicts seen in Korea, the allies in Western Germany began to reintroduce arms production in Germany. One of the companies that saw a revival during this period: Rheinmetall. In what began as a German ammunition manufacturer in 1889, the company’s armaments production was largely controlled by the Reich during WWII, yet faced massive destruction to its facilities as a result of the war. Hamstrung by the disarmament conditions of the Potsdam Conference and under allied control, the company briefly shifted to civilian production in the immediate aftermath of the war. It wasn’t until the majority stake of the company was sold off from the state to Rochling Group and West Germany began reintroducing defense spending that the company began as a leader in the German and European defense industry once again.
Post-Cold War and into the unipolar moment led by America throughout the 1990s and early 2000s, German defense companies, including Rheinmetall, faded into the background of the German industrial psyche. American companies dominated defense, while European nations, including Germany, backed off from increasing investment in the defense industry. Everything changed with the Russian invasion of Ukraine in February 2022.
Before the outbreak of war in Ukraine, Rheinmetall was not even in the group of 40 members of the DAX, the stock market index consisting of the major German blue chip companies trading on the Frankfurt Stock Exchange. However, the outbreak of the war in Ukraine and the pressure put on NATO allies by President Trump to meet defense spending obligations has been a boost to European defense companies, with Rheinmetall being a notable beneficiary. Today, Rheinmetall is Germany’s fifth largest company by market cap. According to Defense News, Rheinmetall is now ranked 18th in the world’s top defence companies, ahead of big names like SpaceX, Palantir, and Rolls-Royce.
Rheinmetall, led by the ambitious Armin Papperger, has seized this unique moment to grow their company, and prospects are looking up for the German defense giant. It is not only the Ukraine War that is providing a boost to Rheinmetall. Papperger is looking even more bullish after a March decision by the German government to exempt defense spending from the debt brake (a strict provision in the German Constitution), leading to a virtually unlimited prospective budget for defense. In addition, a recent European Commission decision to exempt defense spending from debt limits and establish a €150 billion fund for defense, as well as an expression by Ursula Von Der Leyen, President of the European Commission, to buy more European defense products have given Rheinmetall positive signals that further growth as a company is coming.
Papperger has big goals, and has stated that he wants to make defense the most dynamic sector in German industry, as well as put Rheinmetall on par with prominent American defense companies, like Lockheed Martin and RTX. He has pursued this goal in unorthodox and conventional ways alike. To reach goals of putting Rheinmetall on par with American defense primes, he set a target of around 40% growth per year. Papperger has gotten close to this number, with sales growing 36% (to a value of around €10.6 billion) in 2024 and projected to grow around 30% in 2025. Papperger has expressed he wants the firm to reach €20 billion in sales by 2027 and eventually hit €40 billion in sales. In comparison, Lockheed Martin’s total revenue for 2024 was around $71 billion.
On the more uncommon side, Papperger has prioritized company engagement with the product at all levels, and has made it so every member of the board of Rheinmetall is trained in using the company’s weapons (Papperger himself knows how to drive a tank).
To achieve this rapid growth Rheinmetall has continued to expand production capacity, in Germany and abroad, setting up shop in places like Australia, Britain, and Hungary, and is expected to continue expansion across Germany, Ukraine, Lithuania, and Romania. With it, they have added at least 1000 new members to their staff per year for the past few years and have even partnered with Continental AG to offer jobs at its ammunition factories to around 900 workers set to be laid off from a plant in Gifhorn. This has accompanied increasing negotiations to take over factories from other flailing industrial firms, mainly car parts manufacturers, to make weapons and ammunition. The expansion of infrastructure and personnel has served Rheinmetall well with a tenfold increase of annual production of artillery shells, expected to reach 1.1 million rounds by 2027.
All of this revenue growth, production expansion, and increasing prospects for investment in defense manufacturing in Europe has led many to characterize Rheinmetall as the “Hottest Stock in Europe.” Since February 2022 (the beginning of the Ukraine War), Rheinmetall’s stock has climbed more than 2000%, besting all of its European defense peers. Additionally, earnings per share are expected to double from €17.38 in 2024, to €39.78 in 2026.
Rheinmetall has seemingly overcome the German aversion to armament which swept the country after the evils of Nazi Germany. Years of allied occupation, pressure from the Cold War, and the Soviets in their backyard helped plant the seeds for Rheinmetall’s return. But it wasn’t until war became an immediate concern for Germany that Rheinmetall truly entered the defense and industrial scene as a star player. Will this last? An end to the conflict in Ukraine could halt growth for the German defense company, but as the end of the conflict still looks far ahead, it looks as if Rheinmetall will continue to muscle through an ever-adapting defense industrial environment.