The Meaning Of Higher Real Yields
AI Summary. US real borrowing costs are rising as demand for capital increases during an economic expansion, with businesses funding investment from strong profits rather than cheap debt.
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Showing 882 database articles primarily about either GDP, Business Cycle, Financial Markets, Growth, Housing, Inflation, Savings Glut/Trade Deficit, or Trade (not deficits)
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:
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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
- 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.
- 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…
Public to Private Equity in the United States: A Long-Term Look
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 Stanley- Date Posted:
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Btw the mid-90s and 2018, 62% of global venture capital investments lost money, and more than half of the deals lost 50–100% of invested capital. Yet US VC returned ~40% higher mean wealth btw 1984 and 2020 than a parallel investment path in the S&P 500.
Does venture capital's extreme inequality in returns justify its economic role?
Core 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.Takeaways by Macro Roundup® AI
- 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.
- Harvard Business School professor Tom Nicholas finds venture capital return distributions mirror those of historical whaling voyages, where payoffs were determined by highly variable oil and whalebone yields — confirming that extreme skewness in risk capital is a durable structural feature, not a modern anomaly.
Related Articles:
- Killer Incentives: Status Competition and Pilot Performance during World War II — Analysis of >5k German fighter pilots reveals that awards & status competition significantly influenced performance, with disparities across skill levels…
- The Deep End: 2025 Alternative Investments Review — For venture funds vintage 2018 and later both the mean and median investor have underperformed the S&P 500 as of 2025. While the top quartile has…
- One Hundred Years in the U.S. Stock Markets — Btw January 1926 and December 2025, 60% of US firms had negative total returns relative to T-bills. 46 firms accounted for half of the $91T in net wealth…
What Are U.S. Treasury Markets Really Telling Us? Part II
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 Cents- Date Posted:
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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.
Does reduced Fed demand for long-duration debt explain rising Treasury yields?
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
- 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.
- 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.
- 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.
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:
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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
- 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
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:
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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: 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.Takeaways by Macro Roundup® AI
- 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.
- The Treasury’s plan to at least double longer-dated bond buybacks drove the repricing.
- the swap-yield gap—a direct gauge of investor preference for Treasuries over derivatives—compressed in response.
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.
The United States and Its Creditors: Assessing Foreign Demand for U.S. Assets
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 Institution- Date Posted:
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The composition of foreign ownership of U.S. Treasury debt has shifted sharply from official to private investors over the past two decades. Foreign private investors now hold $6.7T in Treasuries, vastly exceeding the $3.9T held by foreign official institutions.
Are foreign private investors replacing governments as holders of U.S. debt?
Core 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.Takeaways by Macro Roundup® AI
- 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.
- The U.S. creditor base has shifted decisively toward market-sensitive private investors since 2008, replacing the official-sector dominance that once provided more stable, policy-driven demand for Treasuries.
Related Articles:
- Mid-Year Outlook: At the Crossroads of Stagflation—What’s Next? — Citing a decline in foreign participation in 30-year Treasury auctions in recent months, Torsten Sløk argues that while the risk of a “firesale” of US assets…
- Tariffs and “International Payments Problems” — The worsening of the US net international investment position – from -20% of US GDP in 2010, to -53% pre-pandemic, and to -89% as of the end of 2025Q3…
- Global Trade Imbalances: Actual Problems, Unlikely Solutions — The composition of foreign investment into the U.S. is shifting from government bond purchases to private equity and riskier assets, meaning future productivity gains will flow to foreign investors and capital is more likely to flee during downturns.