Worldwide Bond Selloff Accelerates

ABC is suing the FCC over the challenge to its broadcast licenses. Plus, yields for long-term government bonds are reaching levels not seen in decades. Could that be here to stay? It's almost like the bond market is normalizing to this pre-financial crisis world where interest rates are higher for longer. And the squeeze on federal grant money is pushing scientists to find new ways to fund their research. It's Tuesday, August 18th. I'm Alex Oseleff for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Disney is stepping up its fight with the Federal Communications Commission. The company's broadcaster ABC today sued the agency in federal court in Washington, D.C. ABC says the FCC's challenges to its broadcast licenses and its push to regulate its talk show The View are illegal. The company says it's an effort to stop speech the Trump administration doesn't like. It's the latest front in a battle between ABC and the FCC that began last year when FCC Chairman Brendan Carr launched a probe into Disney's DEI initiatives. ABC executives felt the probe was really a response to criticism of President Trump on some of the network's shows. WSJ media reporter Joe Flint says things have only escalated from there. The FCC launched what's known as an early license renewal process for ABC and the eight TV stations it owns, including stations in New York and Los Angeles. And that is typically done when the agency is looking to challenge a broadcaster's license or perhaps find the broadcaster. And ABC felt the deck was stacked against them, that the FCC was going to come out with such a ruling and launch a hearing and a probe. And this is ABC's way to try to get in front of that. They filed for a request for a temporary restraining order in district. Court to stop this process from the FCC. Joe says that just that process itself at the FCC has already made things tough for Disney. As long as this is hanging over ABC's head, it makes just running their businesses all the harder. They said in their suit that it's already had a chilling effect on how they program the view and other things they're doing and the cost of the investigation and the time it's taking to answer FCC requests and documents. So all of this. Ultimately is impacting ABC's ability to operate, they say. And ultimately, yes, it's a very high bar to take away the licenses, but it would drag on for years. And it still may. FCC Chairman Carr has said that the license renewal review isn't about speech. He says it's about DEI. In response to the lawsuit, the FCC said it would continue to follow the facts and law. In other corporate news, American Airlines plans to install screens on the back of every seat on more than 800 planes that fly most domestic routes. It's part of a cabin overhaul that includes adding more rows in first class and extra legroom, all in an effort to catch up to Americans' more profitable rivals, Delta and United. There's been a slow-moving sell-off in the bond market ever since the Iran war started, and yields on long-term government bonds are now at their highest levels in almost two decades. In the U.S., the 30-year Treasury yield hit a 19-year high today. Other countries, including Germany, France, and Japan, are also seeing yields for long-dated bonds at decade-plus highs. Markets reporter Sam Goldfarb covers bonds for the journal, and he joins us now. Sam, why is this happening? Because it's not just happening in the U.S., it's across other developed nations as well. It's a little bit of a mystery and probably like 10 different factors, and that just add up to people not wanting to buy bonds, and then they don't want to buy bonds because other people aren't buying bonds. One factor that people have talked about is potentially pushing yields higher is just like there's large U.S. deficits, that means the U.S. government has to issue lots of bonds. And if there's a lot of bonds that can push down prices of bonds and push yields higher, but then U.S. Treasuries are not the only highly rated bonds out there. Corporate bonds add to that supply problem. And so when companies like Alphabet and Meta are issuing $25 billion bonds at a time, the investors that buy Treasuries are also the same investors that buy those bonds. And so they're getting a little bit overwhelmed potentially. If you take a step back, what might be happening is that interest rates don't look like they're going lower. And so it's almost like the bond market is normalizing to this pre-financial crisis world where interest rates are higher for longer. And what are some of the real world implications of this, especially if it's sustained, as you're saying? This just means higher borrowing costs for everybody. It means higher borrowing costs for the U.S. government. It means higher rates on corporate bonds. It means higher rates on mortgage rates. The good news is that because this has been sort of a slow, gradual climb in yields, it hasn't really spread to other assets like stocks. A sharp increase in borrowing costs could upend the stock market. That hasn't really happened. But if we continue to see yields just sort of continuing to grind higher, maybe that could change and stocks could be affected as well. Journal of Markets reporter Sam Goldfarb. Thank you, Sam. Thank you. And in other markets today, stocks traded lower. The Nasdaq led the losses in the major indexes. There was a sell-off in chip stocks weighing things down, and the Nasdaq dropped 1.3 percent. Coming up, the secret word game that the Bank of America CEO plays that can sometimes confuse analysts. More after the break. The Trump administration has been upending how the government gives money to scientists. Last year, the administration cut off hundreds of grants for the National Institutes of Health, for example. And now it's planning even more changes. That's creating some turbulence for university researchers who rely on federal funding for their work. So many scientists are trying to diversify where their funding is coming from. Chao Deng covers the U.S. economy and has been digging into this, and she joins me now. Chao, what is the extent of this shortfall for researchers? How much funding used to be available and no longer is? So it's a tricky question because government organizations like the U.S. have been trying to diversify where their funding is coming from. And they're trying to diversify where their funding is coming from. And they're like the NIH have said that they are still increasing funding or on track at least to match funding from prior years. Independent analysts like a group, watchdog group called Grant Witness have estimated that billions of dollars already have been cut in federal funds to universities. And their point is that even if organizations like the NIH are increasing funding on a year-to-year basis recently, they're not going to be able to diversify where their funding is coming from. to universities. And their point is that even if organizations like the NIH are increasing funding or on track at least to match funding from prior years, that it's the funds that were promised from prior years, prior to 2025 specifically, that are being cut. So what are scientists doing to try to boost their chances to better fund their research? Some scientists are applying for more grants in the hopes that they can increase their chances of getting government funding. Other scientists are applying to foundation groups or even companies. I talked to a researcher who works at the intersection of robotics and auto. And he's had an opportunity to engage more with companies like Honda. But it doesn't make sense for all lines of research. And funding across the board is getting tight, not just that the government. And a lot of the researchers have had to cut back their research and also lay off staffs. And how about conflicts of interest? Are there more concerns about how that could play out? Yeah, absolutely. The White House is pushing for a new rule that would give political appointees more power over grants and try to align research with Trump priorities, AI, quantum computing and such. And so there is this broad concern in the research community that research and science are going to become increasingly politicized. Analysts have pointed out that seeking funding from companies carries its own risks, that corporations have their own interests for what should be researched. And it's not always basic science. That was WSJ economics reporter, Chow Dang. Thank you, Chow. Thank you. Thank you. Separately today, OpenAI rolled out ChatGPT for teens. Its homework helper study mode will, for example, help students come up with a thesis for an essay but won't write it for them. And it's intended to be harder for teens to find workarounds. ChatGPT for teens will include stronger safety settings by default, such as interventions when teens talk about self-harm, eating disorders or violence. And we've been talking about some of these issues on our special series, The AI Therapist. We'll leave a link to it in the show notes. And finally, for Wall Street analysts covering Bank of America, it's not enough to have a grasp of complex financial metrics and regulatory ratios. They apparently also need a high score on their verbal SATs because CEO Brian Moynihan packs his comments with obscure words or, should I say, abstruse words. Welcome to the coverage of our company. A court like this is salubrious in that, you know, it shows you the court has not met the gainsay that consumers are wary of the cost of living. You catch that? Concomitant. Salubrious. Gainsay. The Journal has learned that this is just part of a game Moynihan plays, to choose arcane words and then insert them into his prepared script at the last minute. But this game can sometimes lead to miscommunications. On a call last month, Moynihan told analysts the Iran war. was "anfractuous," which, according to Merriam-Webster, means fully of windings and intricate turnings. The Bloomberg terminal recorded it as intractable or hard to control, and S&P Global Market Intelligence logged the sentence as, the Iran war is in fractures. Think these words are really perspicuous? WSJ's story on this has a little quiz at the end, and I am only slightly ashamed to tell you that I got three out of five right. We'll leave a link to it in the show notes so you can try to beat my score, and we'd love to know what you got in the Spotify comments. And that's what's news for this Tuesday afternoon. Today's show was produced by Anthony Bansi with supervising producer Tali Arbel. I'm Alex Osola for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.