"Trump variable" disrupts financial reporting season! White House pressures credit card rates, Wall Street financial giants may trigger a bond frenzy and drain liquidity.

Just as the Trump administration is increasing pressure, Wall Street financial giants are about to embark on their routine borrowing frenzy. In order to cope with the recent significant operational pressures brought by the Trump administration, their bond issuance this time may be larger than in the past, thus drawing away a large part of the market liquidity - which also means that the current soaring corporate bond and stock markets, which have repeatedly hit record highs, may enter a correction trajectory due to the withdrawal of liquidity. Facing the pressure from the Trump administration on mortgage rates and credit card rates, major financial giants seem to be preparing to issue bonds on a large scale shortly after announcing their performance. The year 2026 has just begun, and the world's largest financial institutions are facing a major variable this year: U.S. President Donald Trump - who is becoming increasingly willing to pressure these Wall Street financial giants. Bond market traders generally expect overall investment-grade issuance to be very busy this week, with an estimated size of around $60 billion, led by the six largest U.S. financial giants. The bond trading team of European banking giant Barclays in the New York market previously noted in a December forecast report that around $35 billion in bond issuances this month could come from the "Big Six on Wall Street," and this number is likely to climb further by 50% before the end of the quarter. The issuance of high-rated bonds tends to absorb a large amount of funds in the primary market, which can easily tighten financial conditions in the short term, leading to a technical upward trend in credit spreads/risk-free rates, and premium for bond market liquidity, therefore the sudden large-scale concentration of bond issuance by Wall Street financial giants due to some pressure may become a "marginal headwind factor" for risk assets such as stock markets, cryptocurrencies, and high-yield corporate bonds. The so-called "Big Six on Wall Street" in the eyes of bond traders typically refer to the six most systemically important comprehensive commercial banks and investment banks in the U.S., namely: JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley. The US stock market earnings season is also about to kick off, with the largest Wall Street financial giants leading the way with their earnings releases. Therefore, this latest round of U.S. stock earnings season will be a major test for these Wall Street financial giants' consistent expectations for a bullish market in 2026 - Wall Street analysts generally expect the S&P 500 index to continue its bullish trend in 2026 and potentially break through the 8,000-point level, a major challenge for these Wall Street mega-banks that are already at historic highs due to the long bull market atmosphere in U.S. stocks, the recovery of investment banking business, and the continued surge in client stock trading volumes. Trump's call to cap credit card rates at 10%, targeting the "crown jewel" of banks According to the latest market dynamics, the White House's latest requests - to limit credit card interest rates by credit card issuers - could serve as a major driver for the bond issuances of the Wall Street Big Six financial giants, prompting them to issue bonds in large quantities to cover potential significant losses from the White House's forced interest rate pressures. President Donald Trump made a comprehensive call last weekend for all lending institutions in the U.S. to cap interest rates at 10% for a period of one year, causing significant sales pressure on the stock prices of financial institutions that have credit card operations. As of Monday's U.S. stock market close, First Capital fell nearly 8%, American Express fell over 4%, and even financial giant JPMorgan Chase's stock price briefly dropped over 2% during the day, ultimately closing down 1.43%, while both Wells Fargo and Bank of America's stock prices also fell over 1% at the close. Arnold Kakuda, a senior credit analyst at Bloomberg Intelligence, pointed out that the likelihood of the White House's proposed cap on interest rates taking effect is still uncertain, and he emphasized that the U.S. president does not have the unilateral authority to implement such a rate cap, as related measures would require legislative approval from the U.S. Congress. "It is not yet clear how much impact this will have on bank profits (if any). Other potential rule changes, such as the implementation of global capital rules by the U.S. government, are also still in flux," said Kakuda. The reason why the 10% cap is highly sensitive to investors in the market is that it is not targeting some minor fee, but rather forces a significant asset like credit cards, which is unsecured, higher in loss rates, and heavily reliant on risk pricing, to be forcibly pushed down to a yield level far below the current market pricing (e.g., from over 20% to just 10%). Credit card operations are typically one of the "fattest" profit pools in the retail financial landscape of Wall Street financial giants - high yields, many expense items, and often a more prominent capital return rate. Recent credit card plan interest rates for U.S. commercial banks have been hovering around 21%, which is higher for interest-bearing accounts at around 22%, significantly higher than most other retail loan types. Key reasons for the long-term high credit card interest rates include bad debt and write-off risks, operational and customer acquisition/fraud costs, and pricing needs to cover risk premiums; analysis from the New York Fed also emphasizes the "rigorous high" nature of credit card rates related to risk and cost structures. Therefore, if rates are rigidly capped, banks' common responses are likely to be to tighten credit, reduce credit limits, reduce/weaken cash back and points, raise annual fees or other fees, or even exit some high-risk customer segments, thus converting "profit pressure" into "supply contraction" and "benefits recapture." In this sense, Trump's call for a 10% cap for one year is seen as impacting the "crown jewel" because it directly and immediately compresses the most sensitive credit card business of banks to profit and valuation, and policy uncertainty itself will raise risk premiums. In addition, the large-scale purchase of MBS by the "two houses" to lower mortgage rates may also have a negative impact on the U.S. Big Six financial giants. The White House's push for the "two houses" (Fannie Mae, Freddie Mac) to buy a substantial amount of MBS for a period of time, with a target of around $200 billion, is to lower mortgage rates. Significant declines in mortgage rates would lower the asset-side yields of newly purchased MBS and newly originated mortgages, which is not naturally favorable for the overall net interest margin (NIM) of large commercial banks, especially when the liability side is relatively strong; rate declines often trigger higher prepayments/refinancing, causing changes in duration/convexity and hedging costs for entities holding MBS or mortgage-related assets. At the same time, for Wall Street's large commercial banks, borrowing costs are still relatively inexpensive. Since the beginning of this year, the average investment-grade bond spread has been only 0.78 percentage points, or 78 basis points, never exceeding 85 basis points since June 2025. Robert Smalley, Managing Director at MacKay Shields, said, "Given the current levels of spreads and overall yield, the vast majority of the Big Six are likely to consider issuing debt in benchmark sizes shortly after announcing their results." Major U.S. banks, such as Bank of America and JPMorgan Chase, typically kick off their financing process in the investment-grade bond market soon after announcing their earnings. It is expected that these six banking supergiants will collectively earn up to $157 billion in profits in 2025, making it one of their historically second-highest annual earnings. For 2026, Barclays Bank expects that the "Big Six on Wall Street" will issue approximately $188 billion in high-rated bonds across all currencies, representing a 7% increase from the previous year, and this increase is likely driven by the expiry and redemption of bonds increasing by 20% before the end of the quarter. JPMorgan Chase will be the first to announce quarterly earnings on Tuesday local time, followed by Bank of America, Citigroup, and Wells Fargo on Wednesday, and Goldman Sachs and Morgan Stanley on Thursday. Smalley said, "For the whole year, we expect that strong demand for bank credit assets due to economic activity and a stronger M&A environment will offset any market perception of reduced supply due to regulatory changes." JPMorgan Chase kicks off the earnings season for Wall Street financial giants As JPMorgan Chase announces its fourth-quarter earnings on Tuesday morning U.S. Eastern time, the latest round of U.S. stock earnings season will kick off. Wall Street analysts generally expect this week's large commercial banks on Wall Street to collectively show strong performance data for the financial industry. The new round of U.S. stock earnings season officially began this week, with high-profile Wall Street financial giants such as Goldman Sachs, Morgan Stanley, and JPMorgan Chase taking the lead. The earnings and outlook of these financial giants for future performance will have a major impact on the U.S. stock market, and even global stock markets. The market expects Wall Street giants to kick off the U.S. stock earnings season with better-than-expected growth performance and optimistic outlook. For the growth outlook of large Wall Street banks in 2026, the profit engines are still the NII repair cycle and asset repricing. Goldman Sachs analysts point out that the market consensus expectations may significantly underestimate the resilient growth of NII and investment banking, wealth management, and equity asset trading businesses. Goldman Sachs expects the NII repair cycle to continue until 2027, so the Wall Street giants leading the earnings season will add fuel to the U.S. stock market's bull market. As the major banks on Wall Street prepare to kick off the U.S. stock earnings season, Goldman Sachs released a report stating that the outlook for the U.S. banking sector in 2026 is "constructively positive," looking forward to the upcoming Q4 2025 earnings season, expecting strong performance from Wall Street financial giants such as JPMorgan Chase, to lay the foundation for the continued bullish performance of the U.S. stock market in 2026. Goldman Sachs analysts recommend investors to accumulate large-cap universal bank stocks on dips, such as Bank of America, JPMorgan Chase, and Citigroup. The Goldman Sachs analyst team said that entering 2026, the large bank sector of the U.S. stock market (i.e., the Wall Street financial giants) is on a "smoother and more sustainable" earnings path - NII is expected to continue recovering from its mid-2024 low until 2027; capital market and wealth management fees are resilient and will show a moderate growth trend; while revenue and profit significantly improve, costs remain steady, creating positive leverage on operations; capital and buybacks are key variables for Goldman Sachs in a phase of "potential regulatory capital reform and capital return rhythm." In terms of capital improvement, Goldman Sachs expects that regulatory reform measures following the easing of banking regulations by the Trump administration will significantly boost capital returns, particularly through excess capital with buybacks. The Trump administration has promised to reduce federal oversight of large companies, especially Wall Street financial giants, and has pledged further tax cuts, which is a major long-term positive for the fundamental prospects of large U.S. banks.