Edward Conard

Top Ten New York Times Bestselling Author

  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
Upside of Inequality Oxford Unintended Consequences
Buy the Books
  • Macro Roundup
  • About Roundup
  • About Ed Conard
  • Highlights
  • Topics
  • Subscribe
Edward Conard
  • twitter
  • facebook
  • linkedin
  • youtube
  • Email
  • Text Message (SMS)
  • Twitter/X
  • LinkedIn
  • Facebook
  • WhatsApp Message
Subscribe to Macro Roundup Emails
  • Mentions 499
  • Primary focus 242
Showing 242 database articles primarily about Financial Markets
Currently filtering by:
  • Remove Financial Markets
  • Remove "primary topics only" restriction
  • Remove 'Database'
Show all 7,223 articles
For whatever topics you select (currently: Financial Markets):
Choose search scope

Your importance filter 'Database' shows fewer articles.

Remove filters to see full article counts

Europe is now a corporate also-ran. Can it recover its footing?

Economist Staff The Economist
Date Posted:
July 6, 2021
Is Database:
Database

Europe’s corporate influence has waned significantly over the past two decades. In 2000, 41 of the top 100 global firms were European, but by 2021, this number had dropped to 15.

Europe's corporate influence has waned significantly over the past two decades. In 2000, 41 of the top 100 global firms were European, but by 2021, this number had dropped to 15. Similarly, Europe's share of the combined value of the world's 1,000 largest listed firms and their profits has halved since 2000. While Europe's top 100 firms increased in value from $4.6tn to $8.9tn, American counterparts surged from $7.4tn to $26tn. This decline is attributed to factors such as mismanagement, a focus on slower-growing industries, and a lack of new firms in dynamic sectors. The rise of China and the dominance of American firms have further marginalized Europe, challenging its ability to shape global business norms and maintain strategic autonomy.

The Economiston Europe's anemic economic performance relative to the United States, "...In recent decades companies such as Nokia, Nestlé or bp have been among the world’s ten biggest firms by market capitalisation. Now only on occasion does Europe have a firm in the top 20 globally. In 2000 nearly a third of the combined value of the world’s 1,000 biggest listed firms was in Europe, and a quarter of their profits. In just 20 years those figures have fallen by almost half.... At the start of the 21st century 41 of the world’s 100 most valuable companies were based in Europe (including Britain and Switzerland but excluding Russia and Turkey). Today only 15 are...American firms have reinforced their position at the vanguard of global business. European ones, alongside those from Japan, have not. In 2000 Europe had a share of corporate wealth commensurate with its roughly one-third of the world economy. That is no longer true...In 2000 the 100 biggest firms in Europe were worth $4.6trn, rising to $8.9trn now. America’s equivalent companies started at $7.4trn but are now worth $26trn. (China’s top 100 firms are worth $8.8trn....In the past 20 years, in absolute terms Europe has added as much additional economic output as America—roughly $10trn each. (China added $14trn by growing at a faster rate but from a smaller base.)That is partly because of Europe’s larger population. European gdp per head is about two-thirds that of America...."

Europe is now a corporate also-ran. Can it recover its footing?: Extended Excerpt Image 1


Economist Staff, "Europe is now a corporate also-ran. Can it recover its footing?The Economist, June 5, 2021, https://www.economist.com/briefing/2021/06/05/once-a-corporate-heavyweight-europe-is-now-an-also-ran-can-it-recover-its-footing

In 1984 a besuited 20-something American executive on a visit to France offered Europeans a few tips for corporate success. Entrepreneurs needed to be given a second chance if they failed and government bureaucrats made for lousy investors, he told a television interviewer. His advice was sage. But European companies ruled the global corporate roost alongside those of America and, occasionally, Japan. Why should they take advice from this uppity Californian newcomer?

Nearly four decades later the company founded by that young upstart, Steve Jobs, is worth more than the 30 firms in the German blue-chip dax index combined. Its value is not far off that of all 40 companies in France’s cac index. Apple’s success has been notable, but it is the decline of corporate Europe that is truly striking. At the start of the 21st century 41 of the world’s 100 most valuable companies were based in Europe (including Britain and Switzerland but excluding Russia and Turkey). Today only 15 are (see chart 1).

Europe is now a corporate also-ran. Can it recover its footing?: Extended Excerpt Image 2


When it comes to business, Europe used to pack a punch. In recent decades companies such as Nokia, Nestlé or bp have been among the world’s ten biggest firms by market capitalisation. Now only on occasion does Europe have a firm in the top 20 globally. In 2000 nearly a third of the combined value of the world’s 1,000 biggest listed firms was in Europe, and a quarter of their profits. In just 20 years those figures have fallen by almost half. Europe is a place for companies such as Amazon and TikTok to find customers, not a base for local firms to conquer the world.

Some of Europe's lost stature is down to the rise of China. But American firms have reinforced their position at the vanguard of global business. European ones, alongside those from Japan, have not. In 2000 Europe had a share of corporate wealth commensurate with its roughly one-third of the world economy. That is no longer true (see chart 2).

Europe is now a corporate also-ran. Can it recover its footing?: Extended Excerpt Image 3


Some Europeans might ask: et alors? Many on the continent are ambivalent about big business, preferring a dense collection of midsized firms, such as the German Mittelstand, to corporate goliaths. But if it continues, the waning of Europe’s business will bring consequences. Big firms invest in innovation, which boosts economic growth. Left to regulate only foreign groups, Europe’s ability to shape global business norms—on privacy, say, or the uses of artificial intelligence—will look weak. European policymakers’ cries for “strategic autonomy” will come to nothing without corporate backing.

Plenty of European companies still make consumers swoon. lvmh of France flogs Louis Vuitton handbags from Beijing to Buenos Aires; German cars and Swiss pharmaceuticals are sought-after around the world; and homes are stocked with products made by Unilever, an Anglo-Dutch giant, and ikea, a Swedish forest-feller. But look at who dominates the global corporate economy, and Europe’s geopolitical rivals now prevail.

When it comes to big business, America, the spiritual home of free-market capitalism, has been on top for decades. It is the ascent of Asia that has rejigged the global corporate landscape. China’s rapid economic growth has spawned corporate titans to match. Over 160 of the world’s 1,000 most valuable firms are now Chinese, a fourfold rise in two decades.

Ne me quitte pas

Assuming that Chinese firms would have gate-crashed the Fortune Global 500, which ranks the world’s biggest companies by revenue, in relative terms it was inevitable that some Western firms would be nudged out of the global elite. That left European firms vying with American ones to stay dominant. It is in this tussle that Europe has fallen by the wayside. In 2000 the 100 biggest firms in Europe were worth $4.6trn, rising to $8.9trn now. America’s equivalent companies started at $7.4trn but are now worth $26trn. (China’s top 100 firms are worth $8.8trn.)

How did European companies fall behind their American competitors? The first reason is that its firms seem to have been outmanaged. Look at firms competing in the same sector over the past 20 years, and incumbent American companies more often than not went on to churn out bigger profits and are better positioned for future success than their European counterparts.

There are many exceptions to this rule: Siemens of Germany has outshone its industrial rival General Electric, for example, and Airbus, based in France, has had fewer problems of late putting jets together than Boeing, its American foe. But by and large it has been better to bet on Nike of America over Adidas of Germany; JPMorgan Chase in New York over Credit Suisse in Zurich, or America’s Walmart over France’s Carrefour. Their advantage in terms of profits and sales growth is often small, but compounds over time.

A second reason Europe fell behind in recent decades is that its biggest firms are in the wrong industries. The sectors European firms dominated 20 years ago, such as insurance or telecoms, have grown at a glacial pace. Even if European firms did well, as many did, they mattered less as the world moved on. America, by contrast, had already made significant inroads into software and e-commerce, industries that would soon redefine the global economy and generate trillion-dollar valuations.

The third, and most striking, reason Europe has fallen behind is the lack of newly created firms in its blue-chip indices. Many of the biggest companies in America, such as Amazon, Netflix, Tesla or Facebook, are young enough to be run by their founders. In Europe old names prevail.

Of the world’s 142 listed firms worth over $100bn, 43 were set up from scratch in the past half-century, 27 in America and ten in China. Only one was in Europe: sap, a German software group founded in 1972. Half of Europe’s richest ten billionaires inherited fortunes spawned long ago; in America nine of the top ten are wealthy solely because of companies they founded.

Many—but by no means all—of the American newcomers are in tech. That has led policymakers and business leaders in Europe to make light of the problem. The failure by France or Germany to build big new firms is regrettable, they concede, but America has merely stolen a march in the consumer-internet realm. Silicon Valley was the right place to be at the right time to build this new generation of firms: a felicitous nexus of universities and research institutes, venture capital and America’s consumer-first reflexes. When that bubble bursts, new business models will emerge that Europe will be ready to seize.

It’s more fun to compute

In fact, the absence of European tech giants is symptomatic of an entrepreneurial deficiency that transcends the world of apps and clicks. America’s nous at creating new companies—and Europe’s failure to match it—extends beyond Silicon Valley, argues Thomas Philippon of New York University.

A global chain of cafés might have been expected to hail from Italy, home of the espresso and barista. Instead Starbucks has overrun the world, despite America’s reputation for insipid coffee. A green car giant should have emerged from Europe, which has a proud engineering tradition and is at the forefront of environmental regulation. Yet it is an American newcomer, Tesla, that is now worth roughly as much as every other American and European carmaker combined. Why could Britain’s or Switzerland’s storied financiers not have created an asset-management giant to dominate the markets? Today it is BlackRock, set up in 1988, which manages $9trn of global investments from New York.

Each of these has found success in its own way. But a combination of factors helped propel them to global corporate superstardom. The ability to raise ample capital, from private investors to large pension funds, is a recurring theme in America that is all too often missing in Europe. So too is the belief that a company that develops a better product will, eventually, displace incumbents, however powerful.

The balance is unlikely to shift in Europe’s favour any time soon. The pipeline to become the world’s next trillion-dollar company is stuffed with firms from America and China, not Britain or Spain. According to PitchBook, a data provider, in the past decade venture capitalists have backed 661 companies that went on to be worth over $1bn. Only 78 of these “unicorns” are in Europe, worth 8% of the 661 firms’ over-$2.5trn total.

Disentangling the cause of Europe’s corporate malaise from its consequences is tricky. One reason frequently cited is the economy: how could European companies be expected to do well when the European economy fared so poorly since 2000? And indeed its share of global gdp has trended down (see chart 3) as emerging markets have grown faster. But that offers only a partial explanation.

Europe is now a corporate also-ran. Can it recover its footing?: Extended Excerpt Image 4


In the past 20 years, in absolute terms Europe has added as much additional economic output as America—roughly $10trn each. (China added $14trn by growing at a faster rate but from a smaller base.) That is partly because of Europe’s larger population. European gdp per head is about two-thirds that of America. The figure has not fallen in the past 20 years thanks mostly to poorer eastern Europeans getting closer to Western income levels.

Looking at European gdp as a whole assumes firms there have access to the entire economic zone. Too often they do not. In theory the eu offers its firms and citizens a “single market” stretching across much of the continent (though no longer to Britain, one of the biggest economies). In practice it is a part-built edifice. It is still fiddly for a bank in Portugal to offer services in Finland—much harder than for a Californian bank to expand to Texas.

Beyond linguistic and cultural differences, legal complexities often get in the way. “When companies think of their home market, they usually think of their home country, not of Europe,” says Carl-Henric Svanberg, chairman of Volvo, a Swedish lorry maker, and of the European Round Table for Industry, which represents large companies.

These internal barriers mean Europe has many smaller firms operating at national, not continental, scale. Each country tends to have its own banks, utilities, airlines and supermarkets. (Europe has over 100 mobile operators, compared with a handful in America or China.) These lack the economies of scale and opportunities to grow quickly enjoyed by firms plying the American or Chinese markets.

In the absence of easy opportunities at home, European firms have expanded overseas more zealously than their American counterparts. Firms in richer countries in Europe, the source of most of its multinationals, now generate over half their income elsewhere, up from just over a quarter in 1997, according to Morgan Stanley, a bank. That includes around a third from poor countries; large German firms now sell more to emerging markets than they do domestically. American groups generate over 70% of their income locally. That can make managing European companies a case of constantly putting out fires in far-flung subsidiaries.

At home, European companies complain that they face a less favourable business environment. Europe’s brand of capitalism is often softened by a stronger role for unions. That has its allure, as workers toil shorter hours and enjoy greater job security. It also means higher labour costs. The political protection afforded businesses—from hostile takeovers, say, which are rare in mainland Europe—is one reason their financial results are underwhelming.

Europe’s smaller firms now find themselves competing against global behemoths with inbuilt advantages. Large firms can afford to buy and try new technology, borrow at cheaper rates and absorb fixed costs more efficiently. They tend to spend relatively more on research and development. The dearth of big companies helps explain why European spending on research, at 2.1% of gdp, is below the average of the oecd, a group of mostly rich nations.

Que reste-t-il de nos amours?

Even as Europe has fallen out of business league tables, it has continued to play a role as a global regulator. Sometimes that has seemed its main contribution to the global business landscape: look at rules on privacy or combating climate change. Because standards set by the European Commission are often the most stringent in the world, and businesses want to build a single set of products for all markets globally, they often end up applying across the world. But eu rulemaking that applies in effect only to foreign firms—as does much of the tech regulation devised in Brussels—has increasingly been attacked as covert protectionism. Currently a rulemaker, Europe may risk losing that position.

European policymakers are well aware of Europe’s relative decline. They point to mitigating factors. Some corporate giants in America profit from areas which in Europe are the responsibility of the state—running hospitals or railways. Others such as airlines and mobile carriers are monopolies that bilk customers. And can profits or market capitalisation truly reflect the value of a company to society?

There has also been a return to European dirigiste reflexes. If the private sector has proved unable to grow firms that are a match for global titans, perhaps politicians can help? More overt intervention by the public sector in the economy—both helping European firms and stymieing their competitors—was increasing before covid-19. The pandemic has turbocharged it.

Under the banner of promoting Europe’s “strategic autonomy”, rules preventing takeovers of some European firms by foreign rivals have been bolstered. Proposals are being developed to hamper foreign companies backed by non-eu governments who wish to do business in Europe—a measure plainly aimed at China. Talk has grown of a “carbon border tax” to ensure European firms are not at a disadvantage when competing against challengers from places with less ambitious climate-protection policies.

France and Germany are among those who have demanded the eu stop blocking favoured mergers of big European firms into pan-continental champions, despite the scepticism of antitrust regulators. Politicians are willing to shovel public money into industry in the hope of guiding its priorities—the idea of “picking winners”, popular in the 1970s, has made a comeback. Myriad state-backed investments are happening in green technologies. France has revived the position of “high commissioner for planning”. Across the continent public funds are being invested in everything from startups to large listed firms.

Hast du etwas Zeit für mich?

Europe’s boosters see plenty of corporate life left there. From utilities to power majors, firms in Europe have gone further than others in greening themselves. Those in other parts of the world will have to follow suit at some point. European universities remain world-class. But Europe also has unique challenges. One is demography: the old continent is living up to its name. There are more over-65s than under-15s nowadays and populists across the eu make it hard to boost immigration.

That leaves few levers to pull to help Europe’s firms compete globally. The most obvious, deepening the single market, has fallen off the political agenda. Helping law firms and software designers sell across the continent seamlessly lacks the pizzazz of picking industrial winners. But stiffening competition in Europe is key to creating firms fit for corporate glory. The path to global business begins at home.

  • Financial Markets
  • Comparisons
    • Cross-country
    • Historical
  • GDP
    • Growth
  • Productivity
    • Incentives/Risk-Taking
    • Innovation/Research
    • Institutional Capabilities
    • Investment
    • Startups
Previous articleJuly 6, 2021Is Facebook a monopolist?Facebook holds 25% of US online ad share & 60% of social media ad share, raising questions about its monopolistic status.Next articleJuly 6, 2021Work Matters@TheGregorLetter: 24% of total US jobs are low paying against an OECD average of 15.3%.
Showing 241 database articles primarily about Financial Markets

World’s Unusually High Dollar Exposure Risks Fueling Selloff

AI Summary. Global institutional investors hedge only 41% of their foreign-currency exposure — the lowest rate since at least 2015 — leaving portfolios heavily exposed to dollar depreciation. A sudden shift in sentiment could trigger a self-reinforcing dollar selloff as unhedged holders rush to reduce exposure simultaneously.

Ruth Carson, Masaki Kondo, and Anya Andrianova Bloomberg
Date Posted:
September 3, 2026
Is Database:
Database

A Bloomberg analysis finds only 41% of global investors’ foreign-currency exposure is hedged in six major markets, the lowest level since 2015. Foreigners now hold almost $40T of American assets.

Are unhedged dollar positions setting up a market crash?

Core argument: Global institutional investors hedged just 41% of their foreign-currency exposure as of June 30—the lowest share since at least 2015—leaving dollar-denominated assets acutely vulnerable to a sentiment-driven selloff.

Sift through the filings of pension funds and insurers around the world and one thing stands out: some of the biggest holders of US assets have little protection against a weaker dollar, leaving the currency at risk of steeper declines if sentiment suddenly turns. Across markets [Canada, Denmark, Australia, Taiwan, Japan and Finland for which data is available] investors hedged just 41% of their foreign-currency exposure as of June 30 — the lowest since at least 2015. While not a complete picture, it offers a glimpse into how the sudden rush last year to hedge against dollar losses triggered by President Donald Trump’s global tariff rollout has faded as the US currency slowly stabilized.

Takeaways by Macro Roundup® AI

  1. Global institutional investors hedged just 41% of their foreign-currency exposure as of June 30—the lowest share since at least 2015—leaving dollar-denominated assets acutely vulnerable to a sentiment-driven selloff.
  2. The retreat from peak hedging activity reflects fading demand for dollar-loss protection after the U.S. currency stabilized following the tariff-driven shock, compressing a key buffer against renewed depreciation.

Related Articles:

  • Financial Innovation and the International Monetary System — The U.S. dollar accounts for 59% of international payment values routed through SWIFT and ~90% of global foreign exchange turnover, while the Chinese renminbi has risen to 9% of foreign exchange turnover by displacing other major currencies, not the dollar.
  • The Global Balance Sheet 2026: Imbalance And Divergence — Paper wealth — asset price gains detached from real investment — drove nearly 60% of global household wealth growth in 2025, up from one-third historically. Only 20% came from net new real investment, compared to a 30% historical average.
  • Momentum, Rotation and the Value in Growth — Noting US underperformance relative to the world since the start of 2025, and the fact that the 5 largest US stocks now have a P/E only marginally above that…
  • Financial Markets
  • GDP

What Are U.S. Treasury Markets Really Telling Us? Part II

AI Summary. Two-thirds of the 2.54 percentage point rise in the 10-year Treasury yield since early 2022 reflects a higher term premium rather than higher expected short rates. The term premium had turned negative by 2015 as the Federal Reserve absorbed large volumes of long-term Treasury and mortgage-backed securities, suppressing interest rate risk pricing.

Hanno Lustig The Two Cents
Date Posted:
September 1, 2026
Is Database:
Database

Lustig presents a decomposition that attributes 156bp of the 254bp rise in the 10-year yield since March 2022 to an increase in the term premium, which he associates with the additional duration risk borne by investors as the Fed reduced its balance sheet.

Is the Treasury market pricing structural change or temporary Fed policy reversal?

Core argument: Term premium accounts for 1.56 percentage points — nearly two-thirds — of the 2.54-point rise in the 10-year Treasury yield since March 2022, dwarfing the 98-basis-point contribution from rising expected short rates.

I plot a decomposition of the increase in the 10-year yield into a term premium component and a future short rate component. According to this measure, a big chunk —1.56 pps (or nearly 2/3 rds)— of the 2.54 pps increase in the 10-year yield since March 2022 is actually due to an increase in the term premium. That premium (the red line in the figure) turned negative around 2015, and [when] it bottomed out in 2020, yields (black line) were trading 135 bps below the path of future short rates (blue line). That’s not entirely surprising: The Fed was absorbing a large share of Treasury issuance at the long end of the yield curve —as well as MBS issuance— effectively removing a great deal of interest rate risk from the market.

Takeaways by Macro Roundup® AI

  1. Term premium accounts for 1.56 percentage points — nearly two-thirds — of the 2.54-point rise in the 10-year Treasury yield since March 2022, dwarfing the 98-basis-point contribution from rising expected short rates.
  2. The term premium bottomed at -1.355% in 2020, when Fed absorption of long-end Treasury and MBS issuance stripped duration risk from the market and pushed yields 135 basis points below the expected path of short rates.
  3. The term premium’s steady climb since 2022 signals that investors now demand compensation for bearing interest rate risk rather than paying for the privilege, reversing a multi-year structural distortion created by quantitative easing.

Related Articles:

  • What Are Bond Markets Telling Us? — U.S. bond market indicators, including long-term inflation expectations and default insurance prices, show no meaningful rise in concern about government insolvency or debt sustainability.
  • What Are US Treasury Markets Really Telling Us? Part I — Lusting agrees with Krugman that low CDS prices on Treasurys argue against default panic, but finds them a weak signal. Constructing synthetic Treasuries from…
  • America’s Risky Debt: What Markets See That Policymakers Don’t — The safety premium that investors historically paid for US government bonds over equivalent alternatives has compressed toward zero and, at longer maturities, reversed — with global investors now pricing foreign government bonds as safer than US Treasurys.
  • Financial Markets
  • Fiscal Policy
    • Fiscal Deficits
    • Government Spending
  • GDP
    • Inflation
  • Monetary Policy

Is the AI Buildout Pushing Up Yields?

AI Summary. Heavy corporate investment in new technology can shift businesses from net savers to net borrowers, absorbing household savings and widening the current account deficit, as occurred during the early-2000s technology boom.

Robin Brooks Robin Brooks Substack
Date Posted:
August 27, 2026
Is Database:
Database

Brooks argues, “The AI buildout isn’t why government bond yields are rising,” noting the US non-financial corporate sector was a net saver as of Q1 2026, which suggests government deficit spending is driving up long yields.

Does massive technology investment shift corporations from savers to borrowers?

Core argument: Government dissaving—not corporate capital expenditure—is the primary driver of U.S. domestic savings consumption and current account deterioration.

The chart shows quarterly data for the US saving-investment balance going back to 1990. This is an identity that apportions the current account balance into net saving in various sectors of the economy. Households tend to be net savers, as is the financial sector and non-financial corporates. The government tends to be a net borrower. The last time we had a lot of excitement about technological innovation and higher productivity growth was in the “IT bubble” of the early 2000s, which saw non-financial corporates flip from being net savers to borrowers, i.e. the capex buildout at the time was very large and - for a few years - accounted for the entire current account deficit. Nothing like that’s happening now. It’s government dissaving, i.e. the budget deficit, that’s eating up resources, while the non-financial corporate sector stayed a net saver in data through the first quarter of this year.

Takeaways by Macro Roundup® AI

  1. Government dissaving—not corporate capital expenditure—is the primary driver of U.S. domestic savings consumption and current account deterioration.

Related Articles:

  • AI Is Driving Up Treasury Yields: ‘It Just Touches Everything’ — Heavy corporate bond issuance driven by AI investment has reduced demand for long-term government debt, pushing 10-year Treasury yields up ~0.3 percentage points as investors rotate into higher-yielding corporate bonds.
  • The Other US Capex Question — Weak non-AI business investment in the U.S. is driven primarily by near-zero labor force growth from tightened immigration policy, not by AI spending crowding out capital, since corporate savings are sufficient to fund both simultaneously.
  • Corporate America Is Minting Money—and Not Just in Tech and Finance — S&P 500 earnings per share are growing above 13% year-over-year for the sixth consecutive quarter, with sales rising at the fastest pace since late 2022 and margins expanding across most sectors. The gap between earnings-per-share growth and net income growth has narrowed to under 1 percentage point, indicating profit gains
  • Financial Markets
  • Fiscal Policy
    • Fiscal Deficits
  • GDP
  • Monetary Policy

Bessent Bounce Starts to Emerge in Long Bond Market Metrics

AI Summary. The gap between long-term government bond yields and equivalent swap rates has narrowed to its smallest in months, reflecting increased investor willingness to hold long-dated government debt following expanded buybacks of longer-dated bonds.

Greg Ritchie and Elizabeth Stanton Bloomberg
Date Posted:
August 26, 2026
Is Database:
Database

Modest compression of the spreads between Treasury yields and synthetic “swap” securities (~5.5bp for the 30 year and ~3bp for the 10 year) suggest Bessent’s Treasury purchase program has had a degree of success at lowering long-term government yields.

Are investors returning to long-term government bonds?

Core argument: Treasury Secretary Bessent’s appointment triggered a long-bond rally, narrowing the 30-year swap spread to its tightest level since February and compressing the 10-year swap spread by 3 bps to ~38 bps.

Since Bessent’s announcement, Treasuries have outperformed equivalent-maturity swaps, narrowing the 30-year spread to the smallest since February. Swaps are popular with some investors as an alternative to owning bonds; the gap between [swap rates] and US government yields [gauges] how willing [investors] are to hold Treasuries instead. The 10-year swap spread has compressed too, with the gap three basis points smaller at around 38 basis points. Still, the recent drop has only dented a years-long rise in long-term US government borrowing costs. The 10-year US yield inched up 3bp to 4.66% after touching 4.75% last week. “While conducting buybacks at the long end of the yield curve may technically decrease yields, higher structural US budget deficits, which [require] a significant supply of Treasuries to finance the US debt, [are] not changing anytime soon,” said Libby Cantrill, head of public policy at Pimco.

Takeaways by Macro Roundup® AI

  1. Treasury Secretary Bessent’s appointment triggered a long-bond rally, narrowing the 30-year swap spread to its tightest level since February and compressing the 10-year swap spread by 3 bps to ~38 bps.
  2. The 10-year U.S. yield remains elevated at 4.66%, just 9 bps below last week’s 4.75% peak, as Bessent’s appointment has only dented a years-long structural rise in long-term borrowing costs.
  3. Pimco’s Libby Cantrill argues that long-end Treasury buybacks may technically suppress yields but leave the underlying driver — structural U.S. budget deficits requiring sustained heavy issuance — entirely unchanged.

Related Articles:

  • Let the Bond Market Speak — Treasury intervention in a functioning bond market suppresses the price signal that transmits collective market information to decision makers, removing the mechanism by which orderly volatility performs its intended economic function.
  • US 30-Year Bonds Erase Gains From Treasury’s Buyback Surprise — US government bond yields have returned to near two-decade highs despite a buyback program targeting long-dated debt, indicating that investor concern over rising government borrowing remains unresolved.
  • America’s Risky Debt: What Markets See That Policymakers Don’t — The safety premium that investors historically paid for US government bonds over equivalent alternatives has compressed toward zero and, at longer maturities, reversed — with global investors now pricing foreign government bonds as safer than US Treasurys.
  • Financial Markets
  • Fiscal Policy
    • Fiscal Deficits
    • Government Spending
  • GDP

America’s Risky Debt: What Markets See That Policymakers Don’t

AI Summary. The safety premium that investors historically paid for US government bonds over equivalent alternatives has compressed toward zero and, at longer maturities, reversed — with global investors now pricing foreign government bonds as safer than US Treasurys.

Hanno Lustig Aspen Economic Strategy Group
Date Posted:
August 21, 2026
Is Database:
Database

Lustig shows the premium investors pay for Treasurys over substitutes such as AAA corporate debt and G10 sovereign debt has compressed post 2020. “Investors are now indifferent between [Treasurys] and close substitutes.”

Are global investors losing confidence in US government debt safety?

Core argument: The U.S. Treasury safety premium has compressed to near zero post-2022 and at points reversed, signaling that markets no longer treat Treasurys as unambiguously superior to credit-risk-adjusted corporate equivalents.

The top panel uses the credit risk-adjusted AAA-Treasury spread. We use the CDS to strip the default-risk compensation out of the corporate-bond yield. What remains is a clean estimate of the safety premium that investors pay for Treasurys over otherwise-equivalent corporate exposure. Post-2022, it has compressed toward zero, and at points, has reversed. The bottom panel uses the Treasury Premium, defined as the difference between the synthetic-dollar foreign sovereign yield and the US Treasury yield at the same maturity. The synthetic-dollar foreign yield is constructed by swapping the coupon payments on foreign G10 sovereign bonds into dollars using the foreign-exchange forward market. This eliminates currency risk over the life of the bond, so the resulting dollar cash-flow stream is directly comparable to a US Treasury yield of the same maturity. At longer maturities, global investors now seem to prefer the safety of foreign G10 bonds.

Takeaways by Macro Roundup® AI

  1. The U.S. Treasury safety premium has compressed to near zero post-2022 and at points reversed, signaling that markets no longer treat Treasurys as unambiguously superior to credit-risk-adjusted corporate equivalents.
  2. At longer maturities, global investors now price dollar-hedged G10 sovereign bonds above U.S. Treasurys, marking a structural erosion of the safe-haven premium that has historically anchored U.S. borrowing costs.

Related Articles:

  • The United States Capital Structure — Government bondholders hold the riskiest position in the U.S. fiscal structure, absorbing adverse shocks through inflation or financial repression, while entitlement recipients function as senior claimants whose payments are politically protected.
  • Are Government Bonds Safe in Times of War and Pandemic? — US government bonds, normally safe assets, become risky in times of war because of negative real returns due to bursts of inflation. As in the fiscal theory of…
  • U.S. Treasury Investors Are Long in AI — U.S. government debt acts as a leveraged bet on long-run productivity growth, because tax revenue rises automatically with faster growth while spending commitments stay flat. Each 0.1 percentage point increase in permanent productivity growth raises the fundamental value of government debt by $1.3tn, implying a 71 basis point decline in
  • Financial Markets
  • Fiscal Policy
    • Fiscal Deficits
    • Government Spending
  • GDP
  • Monetary Policy

Yen Intervention = US Self-Preservation

AI Summary. Japan holds $1tn in U.S. government bonds — the largest foreign position globally — giving the U.S. a strong incentive to support a stronger yen rather than risk Japan selling those bonds or raising rates sharply enough to redirect domestic capital away from U.S. debt markets.

Katie Martin Financial Times
Date Posted:
August 4, 2026
Is Database:
Database

To shield Treasuries from selloffs and higher yields, the US prefers its own yen support tools: ESF yen purchases as a signal and the Fed’s rarely used FIMA facility, lending Japan dollars against Treasuries to forestall direct Japanese Treasury sales.

Does the U.S. need a stronger yen to protect its debt markets?

Core argument: Japan’s $1 trillion in U.S. Treasury holdings—the world’s largest foreign position at ~4% of total outstanding—give the U.S. a direct strategic interest in defending the yen, as Japanese dollar sales would intensify pressure on a 10-year yield already at 4.7%.

Japan has two traditional routes to push up the battered yen. One is a massive rise in Japanese interest rates, and the other is massive sales of dollars — i.e., of US Treasuries. Neither would be good news for the US. Japanese yields are already seriously elevated by historical standards — 2.8% on the 10-year and 4% on the 30-year. The US is just not in a position to lose a big buyer of Treasuries when its own 10-year yield is tickling 4.7% and the 30-year is well over 5. And it certainly can’t tolerate a big seller of Treasuries, in the form of Japanese authorities selling dollars, hoping to prop up the yen. (Japan’s Treasury holdings already lead the world, at $1tn, or just below 4% of the total outstanding.) Much better to stand behind Japan and hope to scare off the yen sellers. Recent use has been made of the Exchange Rate Stabilization Fund [ESF] to signal that intent. Bessent has also said he will encourage the Fed to bump up Fima, the Fed’s international repo facility, in the coming months. This tool has rarely been wheeled out since it was established during the 2020 Covid shock. Its current $60bn per counterparty, per day limit has been reached just once. The fact that US authorities approved the use of this facility suggests the US side sees potential risk that fx intervention could push up US Treasury yields.

Takeaways by Macro Roundup® AI

  1. Japan’s $1 trillion in U.S. Treasury holdings—the world’s largest foreign position at ~4% of total outstanding—give the U.S. a direct strategic interest in defending the yen, as Japanese dollar sales would intensify pressure on a 10-year yield already at 4.7%.
  2. U.S. participation in Friday’s joint yen intervention, executed via euros from the Exchange Stabilization Fund, delivers a credible “back off” warning to yen sellers without triggering the Treasury market disruption that direct dollar sales would cause.
  3. Japan’s 10-year yield at 2.8% and 30-year at 4%—elevated by historical standards—redirect domestic capital away from U.S. Treasuries, compounding Washington’s vulnerability at a moment when its 30-year yield exceeds 5%.

Related Articles:

  • US and Japan Aim to Transform Yen Landscape With Joint Moves — A coordinated currency intervention by the US and Japan to strengthen the yen exceeded the scale of previous joint efforts, with Japan alone spending an estimated $53bn in a single day.
  • Shadow Government Bond Yields in the G10 — Government bond yields across major economies are artificially suppressed by central bank intervention; if those interventions were removed, long-term yields would rise materially above current market levels.
  • Global Debt Report 2026 — Across the OECD last year, $13.5T of governmental debt needed refinancing, 70% ($9.5T) of which was US debt, up from 57% in 2020. The US and Japan were…
  • Financial Markets
  • Fiscal Policy
    • Fiscal Deficits
    • Government Spending
  • GDP
  • Monetary Policy
© Copyright 2026 Coherent Research Institute · All Rights Reserved · Privacy · Terms