The Australian Federal Police has commenced a criminal investigation into PwC over the tax leaks scandal. The AFP are also investigating former PwC partner Peter ‘Colander’ Collins, who failed to keep the Australian government’s tax policy confidential. It is hard to know how Colander Collins would fare in prison. He may find popularity by following fellow accountant Andy Dufresne’s lead and providing tax advice to prison guards. But it is far more likely he will be shanked in the shower on his first day given inmates’ well-known distaste for those that cannot keep secrets.

The lowdown

• 👮🏻‍♂️ Australian Government refers PwC to federal police over the tax leaks scandal.

• 🎈 UK inflation came in at 8.7%, significantly higher than the 8.2% expected and making further rate rises more likely.

• 👗 Fast fashion giant Shein explores plans to build factory in Mexico.

Flex your finance muscle

The carry trade

The carry trade is a strategy in which an investor borrows cheaply (in the form of a currency or short-term bond) to invest in an asset that is likely to provide a higher return (a different currency or longer maturity instrument.

In an FX carry trade, an investor borrows money in a currency with a low interest rate, then uses that money to buy a different currency yielding a higher interest rate. The investor profits from the difference in interest rates, known as the "carry."

Banking is really just another example of the carry trade. Banks borrow in the form of short-term deposits and then provide longer term loans or buy longer term debt instruments. In this sense, the collapse of SVB was really just a carry trade blowing up ($).

Featured stories

Gilt yields soar again after inflation numbers

Gilt yields have surged with the two-year yield reaching 4.38% ($). We haven’t seen these levels since last September’s infamous mini-Budget. The guilty/gilty culprit this time is the inflation number of 8.7%, which was worse than the expected 8.2%, and has led to concerns about the severity of future interest rate rise.

The market now expects an interest rate hike to 4.75% next month, peaking around 5.5%, and staying above 5% for most of next year. In reaction, the sterling appreciated against the dollar to $1.2426 (perhaps some carry trade action as mentioned above).

Even if gilt yields continue to rise, we are unlikely to see the return of the alternative candidate, the undefeated iceberg lettuce. That’s because no one can afford to buy fresh produce anymore.

The content we're consuming today

• Variety: Jeffrey Katzenberg on Quibi’s Spectacular Rise and Fall: ‘I’m Proud to Own the Failure’.

• NY Times: Semafor Raises $19 Million, Replacing Money From Sam Bankman-Fried ($).

• FT: Meet the pizza-loving diplomat behind Antigua News’s big Credit Suisse scoop.

Off-balance sheet items

• Last week, my second favorite 90s Britpop band Blur announced a new album coming in July. Revisit the brilliance of Blur in this NY Times article ($) that goes through 12 of their best songs. Now, we just need the Gallagher brothers to reunite.

The bottom line