US Aims to Throttle Iran's Economy; Bessent Flags Bigger Debt Buyback Potential

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1:30Bloomberg Audio Studios. Podcasts. Radio. News. Good morning. I'm Nathan Hager. And I'm Alexis Christophorus. Here are the stories we're following today. Alexis, we begin with the latest developments in the Middle East. Iran is dismissing U.S. threats of economic pain and isolation. Treasury Secretary Scott Besson says the Trump administration will give details of an initiative on Monday that President Trump describes as an economic D-Day. We get the very latest from Bloomberg News Director Will Kennedy. There aren't that many added things the U.S. can do. There are sanctions that have been in place for many, many years.

2:09There's this blockade of oil tankers, which is, of course, having an impact. Iranian oil exports are very close to zero. It would really take an effort to persuade other countries like China not to trade with Iran to make a big further difference, one presumes. And putting secondary sanctions on China would be a very big step for lots of reasons, given the broader context on the China-US relationship, not least because Donald Trump is about to have a meeting with Xi Jinping. And Bloomberg's Will Kennedy says China will provide the biggest test of Washington's determination to follow through. Beijing is the main buyer of Iranian oil.

2:48And Nathan, there may be new tensions in the Asia-Pacific. The U.S., Japan and South Korea held a three-way call to coordinate their response after North Korea fired a barrage of short-range ballistic missiles yesterday. The volley came after President Trump stunned South Korea by abruptly canceling decades-old joint military exercises. and the North rejected the president's bid to resume dialogue with leader Kim Jong-un. North Korea says the two leaders may have an excellent relationship, but America's hostile policies haven't changed. Still, South Korea's president says he supports President Trump's decision to curtail the drills and reopen diplomacy.

3:25Alexis, new trade deadlines coming up for the U.S. and Canada. The two sides have till midnight to reach a broader trade deal after President Trump announced a tentative agreement to avert 50 % tariffs on billions of dollars in Canadian goods. Sources tell Bloomberg the current deal would lower tariffs on certain Canadian steel and aluminum exports to 25 % and Canadian car duties would fall to 15%. Chrystia Freeland is a former Canadian deputy prime minister. She says both sides need a better outcome. I think that is a bad outcome for Canada to have permanent tariffs on our steel, aluminum cars and car parts.

4:00Really harmful for those sectors. but I think it's a bad outcome for the United States as well. It's really important for people to recognize that you can lose by winning. Former Canadian Deputy Prime Minister Chrystia Freeland, and you can catch more of her remarks on Bloomberg Wall Street Week tonight at 6 Eastern on Bloomberg Radio, Bloomberg Television, and the Bloomberg Business App. Well, we have a winner in this week's special runoff in California to serve the rest of former Congressman Eric Swalwell's term. With 95 % of votes counted, the Associated Press projects State Senator Ayesha Wahab will beat fellow Democrat Bay Area Rapid Transit Board President Melissa Hernandez 53 to 47%.

4:44Wahab will become the first Afghan American to serve in Congress, and her campaign was backed by the Congressional Progressive Caucus. The result comes as Swalwell remains under investigation for sexual assault allegations. Federal agents seized electronic devices from the former congressman at San Francisco Airport over the weekend and later searched his home in Washington, D.C. Alexis, the midterm elections are now less than 80 days away and Republicans have a huge war chest sitting on the sidelines. The latest federal filings show President Trump's Super PAC MAGA Inc. has a nearly$404 million cash pile.

5:18The committee received another$3 million in donations last month, including from private prison operator Geo Group and sugar producer Florida Crystals. At the same time, MAGA Inc. spent just$132 ,000 in July, mostly on operating costs. President Trump has said he plans to use MAGA Inc. to support Republicans. So far, though, he hasn't signed off on a plan. And Treasury Secretary Scott Besson says he's prepared to ramp up buybacks of costly U.S. government debt. That's despite the short-lived impact so far on long-term borrowing costs. Besson also hinted at a new fiscal plan to address the highest Treasury yields in decades.

5:55Once the market understands that we are focusing on fiscal consolidation and that we are trying to bring the market back into equilibrium in a thinly traded market, I think I'm confident that bonds will continue declining. Treasury Secretary Scott Besson added the expanded buyback could be more than the$4 billion currently planned for next month. There's a warning this morning from former New York Fed Bank President Bill Dudley. The current Bloomberg opinion columnist says the U.S. equity market is in bubble territory. Look, the railroads and the Internet, telecom boom, all those things did great things for the economy.

6:34So two things can be true at the same time. The technological innovation can be really transformative. But at the same time, you can have an investment boom and bust. And in fact, if you look at history, it tells you that that's usually the case. So the question here is really just really not whether it's going to be a term from a boom to a plus. It's really a question of timing and magnitude. That's former New York Fed President Bill Dudley. He says the stock market bubble will likely burst before the end of 2027. You can hear his full remarks on the Bloomberg Video Hub at Bloomberg.com and the Bloomberg Business app.

7:06And Nathan, as warnings grow of an artificial intelligence-fueled stock market bubble, word this morning that Anthropic is preparing for a potentially record-breaking IPO. Sources say the claw developer expects to match or beat the record$75 billion raised in SpaceX's listing. Mandeep Singh is Bloomberg Intelligence's global head of tech research. This kind of growth rate is phenomenal at the scale Anthropic is at. And that's where when you compare to SpaceX, which IPO'd with about 18 to 19 billion dollar revenue run rate growth rate much slower than Anthropics and still managed to get close to that two trillion dollar mark.

7:44So from that perspective, clearly Anthropic with its growth rate should be at least over where SpaceX traded initially. Bloomberg Intelligence's Mandeep Singh says Anthropic may file publicly for its IPO by the end of this month. Meanwhile, Alexis Broadcom's in talks with lenders to raise more than$60 billion in debt for an AI chip financing deal that would benefit Anthropic and other companies. The potential deal would help those firms access chips and other key AI infrastructure. Ryan Gould covers the chip sector for Bloomberg. This would be among the largest that we've seen of this type of deal.

8:16I want to just throw us back a little bit to June when we saw Broadcom announce that partnership with Blackstone and Apollo, where essentially they were looking to strike an agreement to provide sort of 20 gigawatts of compute globally for AI deployment. I mean, I think you could probably see this as some kind of extension of that agreement. This would essentially see Blackstone and Apollo participate again per our sourcing and reporting. Bloomberg's Ryan Gould says Broadcom forecast back in March it would have AI chip sales topping$100 billion next year. And Bloomberg News has learned NVIDIA is in early discussions with the Korean AI chip designer Rebellions about possible collaborations.

8:53Sources say the talks include a technical partnership, an investment, or perhaps even an acquisition. Founded during the pandemic in 2020, Rebellions is among a group of semiconductor startups designing and deploying their own chips to rival market leader NVIDIA. And South Korean chip giant Samsung Electronics plans to return as much as$79 billion to its shareholders. Alexis joining rival SK Hynix in handing investors a chunk of the windfall generated by the AI rush. The world's biggest memory maker is set to hold a board meeting to discuss shareholder returns.

9:29509 on Wall Street. Time now for a look at some of the other stories making news in New York and around the world. For that, we're joined by Bloomberg's Michael Barr. Good morning, Michael. Good morning, Alexis. Authorities say a woman who had been plotting to bomb the New York State Capitol building in Albany has been arrested in an FBI sting. Jessica Bowie allegedly believed laws were being passed that were a front to Islam. She is now facing a federal terrorism charge. Authorities say Bowie had been under surveillance for more than a month as she communicated with at least one confidential informant posing as ISIS.

10:03First assistant, U.S. Attorney John Sarkone. The charge against Bowie carries a statutory maximum prison term of 20 years, a fine of up to$250 ,000 and a lifetime term of supervised release. New York Governor Kathy Hochul. Political violence has no place in our state. And I believe this suspect should be prosecuted to the fullest extent of the law. According to a criminal complaint after her arrest, Bowie told FBI agents that she expected to go to prison saying, there's no helping me, you guys know enough. In Massachusetts, Representative Seth Moulton and Senator Ed Markey held their final Democratic Senate primary debate.

10:44At one point, the argument for generational change came up on artificial intelligence. I don't know what companies my iPad might be using. If you don't even know what you're using on your phone or your iPad, this is why we need a new generation of leaders. Audio courtesy of WCVB, both candidates brought up affordability issues while linking domestic prices to the war in Iran. The primary is set for September 1st. In New York, two tornadoes touched down in Queens and on Long Island last evening. Officials say both started as water spouts and then made landfall. No one was hurt. Democratic Congresswoman Joyce Beattie accused the Trump administration of violating a federal court order barring the Kennedy Center's board from renaming the performing arts venue for President Donald Trump.

11:33Attorneys for Beattie said the representative means it was a new breathtaking act of defiance of Congress and of this court. Global News 24 hours a day and whenever you want it with the Bloomberg News Now. I'm Michael Barr and this is Bloomberg Alexis. Thanks Michael. Time now for our Bloomberg Sports Update and for that we bring in Dan Schwartzman. Baseball scoreboard, the Yankees finish off a sweep of the Orioles 6-1. The Rays fall to the Blue Jays 5-1, while the Braves one-hit the White Sox in a 2-0 win. Elsewhere, Jacob deGrom becomes the second-fastest pitcher in baseball history to reach 2 ,000 strikeouts, as the Rangers ace does it in the fewest innings pitched outside of Chris Sale.

12:13DeGrom and Texas shut out the Nationals 2-0. NFL preseason week two began Thursday night, as the Raiders got past the Texans 22-20, but No. 1 overall draft pick Heisman Trophy winner Fernando Mendoza struggled, completing just 8 of 15 passes for 86 yards and an interception, while the 49ers dominated the Chargers 41-17. That's your Bloomberg Sports Update. Stay with us. More from Bloomberg Daybreak coming up after this. Bloomberg Daybreak U.S. Edition is brought to you by OTC Markets Group. Thinking about joining the exploding overnight market space, but unsure where to start? designed to meet the needs of a growing international investor base.

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13:39I speak with CEOs, Nobel laureates, market innovators, and legendary investors. Whether you own stocks, bonds, real estate, commodities, even crypto, These are discussions you absolutely need to hear. Subscribe to the Masters in Business podcast on Apple, Spotify, or anywhere you listen. Coast to coast on Bloomberg Radio, nationwide on Sirius XM, and around the world on Bloomberg.com and the Bloomberg Business app. This is Bloomberg Daybreak. Good morning. I'm Nathan Hager. Treasury Secretary Scott Besson says he is prepared to go even further to bring down yields on long-dated debt. He's teasing a new fiscal initiative after this week's announcement from the Treasury of expanded bond buybacks.

14:26Besson says any initial moves in the market ahead of all this are just noise. Our announcement is for economic action, and I think that the economic action will mean that oil prices will come down sooner. That was Treasury Secretary Scott Besson at the White House. And for more, we're joined by Bloomberg News FX and rates reporter, Alice Gledhill. Good to have you back with us, Alice. Of course, we saw the big purchase after the initial announcement, but the reversal, of course, on yesterday's session. Should Besant be concerned that this is more than just noise? Good morning. Good morning. Thanks for having me back.

15:09Yeah, I mean, Besant might say he's not concerned, but I think he is concerned, and I think he probably should be concerned. And I think, you know, coming into this job, he had a KPI, Key Performance Indicator, and that was get yields down sustainably. And it just doesn't seem like he's succeeding at that so far. The problem is well known. The US has too much debt. It's growing. It has this almost$2 trillion budget deficit. And crucially, you know, the debt is growing at a time when interest rates are high. So, borrowing costs are high. Your debt servicing costs are high. And that's money that you can't spend on other things.

15:45And of course, high US Treasury yields also push up things like interest bills on mortgages, other loans. And that's unpalatable, I think, from a political perspective, certainly ahead of the midterms. So, yeah, I think there's a widespread view of markets that the US can't keep going on like this. It's not sustainable. And does it all end with some sort of crisis? And I think that's what the U.S. administration is trying to avoid. So what kind of fiscal initiative could the Treasury Secretary announce here? They could really take a bite out of these rising debt costs. We heard the Secretary talk about going after fraud.

16:28I mean, would that be enough? Yeah, I think that's the key question for investors certainly heading into the weekend. And I mean, obviously, we had Besant come back on screens yesterday and talk a little bit more about the measures that he's announced this week. So, he sort of talked up the size of these potential buybacks in the longer-dated bonds. That had a very small impact on yields, but it was pretty fleeting, to be honest. And then he sort of flags this upcoming fiscal initiative. But yeah, I mean, details are pretty unclear. I think, yeah, you mentioned the potential sort of fraud task force there.

17:05But I mean, I'm not sure the market is really buying this all that much at the moment. I think these are kind of seen as sort of stopgap measures and the issue, you know, the things we were just talking about, the enormous deficit and so on. That's the big problem and that's what needs to be tackled. And I'm not quite sure that sort of Besson kind of dancing around these issues this week with these sort of kind of piecemeal ideas is really sort of convincing anyone in the market. To that point, I mean, we heard strategist at JPMorgan Chase come right out and say that expanded bond buybacks could test the Treasury's credibility.

17:40I mean, what's the risk that this could all backfire on the department? I think that absolutely is the risk. Yeah, I agree with JPMorgan. And I think, you know, if you come out and say, you know, we've got this tool, you know, it's going to help liquidity in a part of the market where I think some people doubt there is actually a liquidity problem. I think, yeah, it just feels like the Treasury is maybe flailing a little bit here. And that, you know, I think that's damaging to its credibility. And that's sort of why you saw the decline in yields earlier this week reverse pretty quickly. I had an interesting conversation actually with one big investor here in Europe yesterday who was saying there's not much that Besson can do kind of right now.

18:23Like what the long end really needs is a hike actually from the Fed and that will sort of shore up its inflation fighting credentials. And that's going to help sort of restore confidence at the long end of the curve. So, yeah, an interesting response from him. He said, Basin can only signal so much, but the Fed needs to be involved here as well. An interesting point, considering we just heard from San Francisco Fed President Mary Daly on Bloomberg just yesterday, saying that she's more focused on the short end of the curve as opposed to the long end. But we've also seen, throughout all this, AI companies coming out with massive debt offerings as well.

19:01I mean, is that the kind of thing that can have an impact on what we're seeing in the government bond space? Yeah, for sure. I mean, I think it's very hard to quantify the extent to which that mega issuance in the AI and tech space particularly is impacting government bonds. But, you know, Betten himself sort of mentioned this as being a factor in the rise in U.S. bond yields in his comments yesterday. I think, I guess the point is that you have a lot of this corporate issuance is long dated. A lot of it is highly rated. So, you get a bit because it's a credit, you get a bit more pickup in yield over the comparable US Treasury.

19:39So, you know, if you're an investor hunting for yield, like why wouldn't you buy that stuff? And of course, you know, it's not just the US government that's issuing an enormous amount of debt. It's governments everywhere, whether that's, well, certainly in Europe, it's the UK, it's Germany, it's France. It's, you know, Japan is increasing issuance. There's just more debt everywhere. And I think that's another deep structural force that's driving up yields on Treasuries and other sovereign debt everywhere. So, at our last minute, Alice, from the people that you're speaking with, what are they telling you when it comes to what they would like to hear from the Treasury Department in terms of a credible move to bring these borrowing costs down?

20:17So, I think it's kind of back to that point about tackling the underlying issue on a sort of serious fundamental level. And that's kind of, I suppose, a significant fiscal program that starts to bring down that deficit significantly. But I think from a political point of view, that's not easy. And I think that's why the market is going to keep on testing the US administration here. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify, or anywhere else you listen.

20:55You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM channel 121. Plus, listen coast to coast on the Bloomberg Business app now with Apple CarPlay and Android Auto interfaces. And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Alexis Christophorus. And I'm Nathan Hager. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

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