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AI Summary. The Euro has appreciated beyond what interest rate differentials justify, a decoupling that began when U.S. tariff announcements weakened the dollar while other major currencies showed no comparable divergence from their rate-based valuations.
Robin Brooks Robin Brooks SubstackAI 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 BloombergCore 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.AI Summary. Global venture capital returns are highly skewed: 62% of deals lose money, more than half lose 50–100% of invested capital, but fat-tailed outliers drive overall returns. This pattern mirrors historical whaling voyages, where payoffs were similarly variable and driven by rare outsized outcomes.
Michael Mauboussin and Dan Callahan Morgan StanleyCore argument: Across 31,000+ global venture capital deals from the mid-1990s to 2018, 62% lost money and more than half destroyed 50–100% of invested capital, yet fat-tailed winners generate returns sufficient to offset the majority of losses.
Exhibit 8 shows in excess of 31,000 observations of returns, measured as multiples of invested capital at the beginning of the period, for global venture capital deals. These results are from the mid-1990s to 2018. 62% lost money and more than one-half of all deals lost 50 to 100% of invested capital. The offset is that the tails are much fatter than those for buyouts or public equities. Public market equivalent (PME) is generally reflected as a ratio between private equity and public market returns. A ratio above 1 reveals relative outperformance and below 1 means underperformance. Here’s an example of how PME works. Say a fund drew $200 million from its investors in January 2021 and paid out $470 million in December 2025. An investor could have invested the $200 million in the S&P 500, which returned $392 million over the same period. The PME would be 1.2 ($470/$392). For venture funds, the average over [1984-2020] was about 1.4.AI Summary. 54 percentage point yield increase since 2022. The shift reflects reduced Federal Reserve absorption of long-duration debt, forcing private investors to demand greater compensation for interest rate risk.
Hanno Lustig The Two CentsCore 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.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 SubstackCore 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.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 BloombergCore argument: The 30-year Treasury-swap spread narrowed to its smallest since February following Bessent’s announcement, as Treasuries outperformed equivalent-maturity swaps and benchmark yields drifted lower.
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.AI Summary. Foreign private investors now hold $6.7tn in U.S. government debt, vastly exceeding the $3.9tn held by foreign governments. This shift reflects a structural move away from official to private foreign ownership of U.S. debt over the past two decades.
Anusha Chari and Gian Maria Milesi-Ferretti Brookings InstitutionCore argument: Foreign private holdings of U.S. Treasury securities ($6.7 trillion) now exceed official holdings ($3.9 trillion) by 1.7x, reversing the official-investor dominance that characterized the pre-2008 era.
Figure 5 shows a large shift in foreign holdings of US Treasurys: a diminishing role for official investors, who accounted for the predominant share in 2008, offset by a rising role for private investors. Figure 6 shows net issuance and purchases of U.S. Treasury securities during the past 25 years. The boom in net issuance during and after the COVID pandemic is particularly striking, even after controlling for the net purchases by the Fed which reduce net market supply. Foreign net purchases show a notable shift toward private purchases relative to the 2000s. As a result, foreign private holdings of U.S. Treasury securities in mid-2025 ($6.7 trillion, including the Cayman Islands correction) vastly exceed official holdings of $3.9 trillion.