Axios Markets

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February 25, 2021

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🧱 Trivia: Four times longer than the Great Wall of China and described by the Guinness Book of Records in its 1974 edition as the world’s largest earthworks carried out prior to the mechanical era, the great walls of this city “extended for some 16,000 km (9,942 miles) in all, in a mosaic of more than 500 interconnected settlement boundaries … and are perhaps the largest single archaeological phenomenon on the planet,” according to one writer.

1 big thing: The Fed is showing urgency for the digital dollar

Animated illustration of a hand holding a rotating glowing golden pixel coin.

Illustration: Aïda Amer/Axios

The U.S. is starting to get serious about a central-bank-backed digital currency, with recent comments from top officials laying out the strongest support yet.

Driving the news: On Tuesday Fed chair Jerome Powell told Congress that developing a digital dollar is a "high priority project for us," but added that there are "significant technical and policy questions."

Why it matters: More consumers and financial institutions are transitioning toward digital payments, putting greater pressure on policymakers to ensure the dollar's status as the world's reserve currency remains intact.

The big picture: Powell's "high priority" language and the ensuing report reflect a shift in rhetoric and action from the Fed, which had previously urged caution and patience on the development of a digital dollar.

  • Treasury Secretary and former Fed chair Janet Yellen had similar comments earlier this week, saying, “It makes sense for central banks to be looking at” the issue.
  • “Too many Americans don’t have access to easy payments systems and banking accounts, and I think this is something that a digital dollar, a central bank digital currency, could help with. It could result in faster, safer and cheaper payments, which I think are important goals.”

What's happening: Cash accounted for just 20.5% of all in-store payments globally, down by nearly a third from 2019, according to a new report from financial services company FIS. By 2024 FIS expects that to drop to 13%.

  • "The pandemic accelerated the decline of cash by over three years, exceeding in 2020 our previous projection for 2023," FIS analysts note in the report.

Between the lines: Perhaps more important than the decline in cash usage is the growing popularity of cryptocurrencies and the acceleration of real-world testing by China's central bank of its own digital currency.

  • Data analysis company MicroStrategy announced Wednesday it had purchased another $1 billion of bitcoin, while payment processor Square announced it had added another $170 million of the cryptocurrency.
  • China on Tuesday said that the People's Bank of China was extending testing of its digital renminbi to the city of Chengdu, which is home to 16 million.
  • And the PBOC announced it would be participating in a cross-border payment project with the central banks of Thailand, United Arab Emirates and Hong Kong that would explore distributed ledger technology.

2. Catch up quick

Federal Reserve systems that process millions of daily transactions for payroll, Social Security benefits, tax refunds, corporate payments to vendors and utility payments went offline because of an unidentified internal glitch. (Bloomberg)

Facebook announced plans to invest $1 billion to "support the news industry" over the next three years after admitting it "erred on the side of over-enforcement" by banning news links in Australia. (Axios)

Following the expected passage of a $1.9 trillion stimulus package, Senate Democrats will look to pass an infrastructure package through the budget reconciliation process. (Axios)

3. The meme stock rally returns

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

Shares of GameStop rose by more than 100% on Wednesday, with almost the entirety of the gain coming near the close of trading.

Details: Shares were halted less than 30 minutes before the market closed and the stock ended the day up 104%, the most since Jan. 29, when trading platform Robinhood restricted buying in it and 49 other stocks at the height of a market frenzy.

  • The company's stock continued its surge after the bell, rising to a high of $185 in after-hours trading.

The gang's all here: Other so-called meme stocks also came along for the ride, though their gains were considerably smaller than GameStop's.

  • AMC Entertainment rallied 18% capping a three-day gain of 59%.
  • Express surged 41%.
  • Koss Corp. jumped 55%.
  • BlackBerry added 9%.

4. Despite yields surging, Powell remains unbothered by inflation

Data:; Chart: Axios Visuals
Data:; Chart: Axios Visuals

U.S. Treasury yields rose to fresh highs on Wednesday, as Fed chair Jerome Powell made clear during his second day of Congressional testimony that the central bank had no plans to step in and put a lid on rising rates.

By the numbers: Yields on the benchmark 10-year note rose above 1.4% for the first time since February 2020 and the yield on the 30-year Treasury bond hit 2.28%, the highest since January 2020.

Why it matters: Higher U.S. interest rates and inflation expectations are already impacting the price of things like bank loans and mortgages, but Powell looks to be more focused on maintaining a positive outlook.

  • That could mean rates have much further to go.

What we're hearing: "It would be counterproductive if the Fed used its bond-buying program or increased it to keep yields down," Joseph Trevisani, senior analyst at FXStreet, tells Axios. "It would send a signal that they’re terrified about rates going up at all. That would be absolutely terrible."

Be smart: Though Treasury yields remain historically low, they have risen at a historically fast pace so far this month and in 2021 as markets price in more government stimulus and recovery for U.S. consumer spending in the second and third quarters.

  • Despite the clear move in markets, Powell reiterated that he does not expect to see materially high inflation in the near term and that he does not expect to take any policy action should inflation metrics move above 2% this year because that is likely to be "transitory."

One level deeper: Powell's laissez-faire outlook on inflation was backed up by Fed vice chair Richard Clarida during a speech in Australia.

  • “We to a person are going to be patient, we are going to be very careful, and we are going to be very, very transparent of our intentions well in advance of any decision we might make in the future,” Clarida said.

5. Wireless companies bid billions in massive 5G airwaves auction

Axios' Margaret Harding McGill writes: Verizon, AT&T, T-Mobile and other firms spent $81 billion on crucial airwaves for 5G service in the FCC's latest auction, according to results revealed Wednesday.

Why it matters: The carriers need these airwaves to deliver 5G service, and the U.S. has trailed other countries in making them available.

By the numbers: The so-called C-band auction, valuable for its ability to carry data at 5G speeds, raised $81 billion in bids, a new record for FCC airwave sales.

  • Verizon was the top bidder at $45 billion.
  • AT&T bid $23 billion.
  • T-Mobile bid $9 billion.

Absent from the winning bidders were cable companies Comcast and Charter, which have launched wireless offerings for their customers.

What they're saying: "I think the big takeaway is, real 5G is almost here," New Street Research analyst Philip Burnett told Axios. "This midband spectrum will increase wireless network speeds by tenfold. Given how much the carriers all spent, it makes it all the more likely that they deploy it as quickly as possible because they want to reap the rewards of this investment."

Thanks for reading!

Trivia: Four times longer than the Great Wall of China and described by the Guinness Book of Records in its 1974 edition as the world’s largest earthworks carried out prior to the mechanical era, the great walls of this city “extended for some 16,000 km (9,942 miles) in all, in a mosaic of more than 500 interconnected settlement boundaries … and are perhaps the largest single archaeological phenomenon on the planet,” according to the New Scientist’s Fred Pearce.

Answer: Benin City, which is located in present-day Nigeria.

  • Benin City was also one of the first cities in the world to have street lighting, featuring metal lamps fueled by palm oil.
  • The walls and city planning were completed long before the arrival of Europeans. When the Portuguese first “discovered” the city in 1485, they classified it as one of the most beautiful and best-planned cities in the world.