Ten-year Treasury yields rose eight bps this week to 4.56%. Yields rose to 4.60% intraday in Wednesday trading, the high since May 21st – and only seven bps below the May 19th peak closing high (4.67%). It’s worth remembering that 10-year Treasury yields dropped to a February 27th low of 3.94%. Five-year Treasury yields traded to 4.34% Wednesday (closed week at 4.30%) – the high back to February 2025. Two-year Treasury yields traded to 4.23% intraday Wednesday, also the high since February 2025 (closed week at 4.21%). Benchmark MBS yields rose to 5.56% Wednesday, the high since the May war spike (closed week 5.53%).
July 7 – Axios (Courtenay Brown and Neil Irwin): “Financial markets increasingly have a new bet about the next phase of America’s economy: Inflation may be coming under control, but borrowing costs could stay higher for longer. The de-escalation in the Iran war and the reopening of oil flows have caused a marked improvement in the near-term inflation outlook, but that hasn’t translated into cheaper overall borrowing costs. Rather, bond prices are indicating higher real interest rates, counteracting the decline in market-based inflation expectations. It means that the energy price retracement has brought little relief to rate-sensitive sectors.”
July 9 – Bloomberg (Elizabeth Stanton): “An auction of 30-year Treasury bonds Thursday drew the highest yield in nearly 20 years… The bonds were awarded at 5.058%. While the auction result was the highest since 2007, it was lower than anticipated…”
The market is pricing a 4.10% policy rate for the April 28, 2027, FOMC meeting, implying almost two (1.9) rate increases. This compares to 2.925% on February 27th. So, the rates market has gone from two cuts to now pricing two rate increases. Interestingly, the end of “Operation Epic Fury” and a $30 plus collapse in crude prices have had a negligible impact on market rate expectations.
It’s worth noting that the New York Fed’s June survey of Consumer Expectations had one-year inflation at 3.67% - the high since September 2023, with three-year inflation expectations at 3.3%, the high back to June 2022.
But this is not a domestic story. Wednesday’s “Trump says Iran MOU ‘Is Over’” and the 6% spike in crude prices exposed ongoing global bond market fragility.
French yields spiked 14 bps Wednesday to 3.93% - the high back to June 2009. French yields closed the week at 3.83%, up 61 bps from February 27th. German 10-year yields spiked 12 bps intraday to 3.12% (closed 3.09%), trading within seven bps of the 14-year high from May 19th (3.19%). UK yields jumped 13 bps intraday Wednesday to a six-week high of 4.98% - with the week’s 4.87% close 64 bps higher since the start of the war. Italian yields spiked 14 bps intraday Wednesday to 3.91% - within 13 bps of March’s three-year high. Greece yields jumped 13 bps Wednesday to 3.81% - within 18 bps of March’s multiyear high.
France’s 14-year-high yield is kid stuff.
July 7 – Financial Times (Ian Smith and Leo Lewis): “Japan’s borrowing costs have shot to their highest in 30 years as investors fret over the tumbling yen and the effect of a $2tn long-term spending plan on the country’s massive debts. A bruising sell-off in Japanese government bonds this year pushed the country’s benchmark 10-year yield to 2.87% on Wednesday, its highest since 1996. Investors say the policies of Prime Minister Sanae Takaichi — centred on a $2.3tn spending plan spread over 14 years — are stoking the sell-off in long-term debt. Some also worry that the Bank of Japan, which raised interest rates to 1% last month, will fall behind the curve and let inflation rise above its 2% target.”
Japan’s 10-year “JGB” yield rose to 2.90% intraday Thursday (at that point up 12 bps w-t-d), blowing through May’s spike high (2.78%) to the highest yield since September 1996. Bloomberg noted the 10-year yield posted “its ninth straight day of gains, the longest streak in 19 years.” The dollar/yen traded to 162.71 in Wednesday trading, near the weakest level versus the dollar back to 1986. This is how crises erupt.
July 10 – Bloomberg (Erica Yokoyama): “Japan’s finance minister called for the nation’s massive pension funds to increase investments in domestic assets, boosting the yen from near four-decade lows and spurring a rally in bonds. ‘One priority is to encourage households, as well as pension funds including the GPIF, to increase their investment in Japanese financial assets. We intend to pursue policies that support that objective,’ Finance Minister Satsuki Katayama said…, referring to the Government Pension Investment Fund. It’s one of the world’s largest pensions with ¥293.6 trillion ($1.81 trillion) in assets.”
The yen rallied 0.7% on Katayama’s timely comment, ending Friday’s session with a meager 0.43% gain (down 0.21% on the week). The bond market reaction was more dramatic. Ten-year JGB yields sank 13 bps to 2.72%. There were years when JGB yields barely moved 13 bps.
The odds are decent that Japan, France and UK markets are leading an upside breakout for global bond yields more generally. In such a heavily indebted world with highly levered global bond markets, one would typically expect some fraying nerves to make their way into higher risk premiums and CDS (Credit default swap) prices. Not so much, at least so far.
The VIX (equities volatility) Index closed the week at 15.03, the lowest close since the first week of the year. While the MOVE (bond volatility) Index posted a one-month high (72.41) on Wednesday, Friday’s close (69.55) was just a few points from lows back to the onset of the war. The MOVE spiked to 115 in late March. High yield spreads and CDS prices are not far from multiyear lows. Bottom line: financial conditions remain exceptionally loose.
July 10 – Bloomberg Intelligence (Brian Meehan): “US credit markets are priced for perfection. Heavy issuance… continues to be met with robust demand, keeping investment-grade and high-yield spreads near record tights. At the same time, credit volatility sits near decade lows while put buying, open interest and downside skew in LQD and HYG continue to fade, signaling growing investor complacency. Together, tight spreads, subdued volatility and collapsing demand for downside protection leave credit with little margin for error should the AI capex, supply or macro narrative begin to crack… Combined investment-grade and high-yield issuance reached $240 billion in June, the second-heaviest June on record, while investment-grade issuance alone set a June record at $204 billion. Year-to-date issuance has climbed to $1.4 trillion, trailing only the pandemic-driven surge of 2020… The biggest driver remains hyperscaler-led AI spending… Record issuance. Record-tight spreads. Decade-low volatility. Vanishing demand for hedges already near record lows. Any one could be dismissed. Together, they describe a credit market priced for perfection.”
There is understandable amazement (exuberance) that nothing has stymied Teflon Markets – tariffs and trade wars, inflation scares, geopolitical instability, military wars, Trump and Fed issues, and such. The key analytical issue is not so much market complacency, as it is the persistence of loose financial conditions. It is this extraordinary resilience of loose financial conditions worthy of deep contemplation.
Between March 2022 and July 2023, the Fed hiked rates from near zero to 5.25 to 5.50%. However, an extraordinarily aggressive “tightening cycle” failed to meaningfully tighten financial conditions. The growth in Non-Financial Debt (NFD) slowed marginally from 2022’s (highly elevated) $3.738 TN to $3.617 TN in 2023 and $3.500 TN in 2024 – only to surge to $3.965 TN last year (surely supported by Fed rate cuts). Equities prices continued to inflate throughout the “tightening,” especially technology stocks. From March 16, 2022 (first hike) to July 26, 2023 (final hike), the MAG7 Index rose 24.9%.
The steadfastness of Credit growth and loose financial conditions is not a conundrum. For starters, annual Treasury borrowings exceeded $2 TN in 2023, 2024 and 2025 – providing powerful Credit system and economy ballast. Meanwhile, an enterprising Wall Street was working overtime: “private Credit” and leveraged lending; “repo,” hedge fund “basis trades” and “carry trades,” speculative leverage and derivatives… Over three years (’23 through ’25) Broker/Dealer balance sheets expanded $1.902 TN, or 44%, as money market fund assets (MMFA) inflated an incredible $2.967 TN, or 57%. Hedge fund “repo” borrowings ballooned $2.152 TN, or 175%, to $3.379 TN.
At this point in the cycle, prospects for a couple rate increases and some back up in global yields will not conjure fears of market upheaval. Conditioned by years of success, an overconfident Wall Street today sees opportunities in about whatever scenario the markets might follow.
July 9 – Bloomberg (Ruth Carson and Masaki Kondo): “Carry trades — one of the most widely-used strategies in the $9.5 trillion-per-day currency market — are seeing the most compelling backdrop in more than two decades, according to Goldman Sachs (GS)... Betting on carry bears more relevance in the Group of 10 foreign-exchange space than at almost any point since 2000, strategist Stuart Jenkins wrote... Goldman currently favors funding the trades using the yen, Swiss franc or euro in the months ahead, he said, referring to the technique of borrowing in a relatively low-yielding currency and investing in one where they are higher. Several factors have catapulted the trade’s appeal. Goldman said interest rates across the world’s biggest developed economies have settled at high and varied levels, creating unusually wide yield gaps for investors, while currency volatility has dropped to historically subdued levels… That combination has helped G10 FX carry trades return about 8% this year, beating global bonds, gold and Bitcoin (BTC.X)…”
July 5 – Bloomberg (Vinicius Andrade and Maria Elena Vizcaino): “Emerging-market traders are increasingly turning to currencies from the euro to the Australian dollar to fund bets in the developing world as the US dollar roars back. Money managers from Invesco Ltd. (IVZ) to AllianceBernstein (AB) are among those who say they’re relying less on the dollar to fund positions in higher-yielding currencies. Morgan Stanley (MS) told clients to express optimism on developing names against a broader basket comprising not only the dollar, but also the euro and yen. And Citigroup Inc. (C) recently recommended betting that the Brazilian real will strengthen against the euro and the Australian dollar.”
July 9 – Bloomberg (Carter Johnson): “Carry trades are likely to remain in favor this year as a durable global economy leaves yield the defining force in foreign-exchange markets, outweighing shocks like the Middle East conflict and leadership change at the Federal Reserve, according to Deutsche Bank AG (DB). ‘One thing has driven FX markets this year: yield,’ George Saravelos, head of currency strategy at Deutsche Bank, wrote... ‘Despite a major war in the Middle East, leadership change at the Fed, and massive shifts in tech valuations, the most important driver of 2026 currency moves has been risk-adjusted carry.’”
Yen weakness has provided powerful tailwinds to global “carry trade” returns. Euro weakness (and low policy rates) has also offered favorable funding. Traders seem confident this bonanza can continue indefinitely with timely rotations and policymaker responses.
No one knows the scope of global “carry trade” leverage. I assume it has ballooned into the many trillions. No one wants to venture a guess, at least publicly.
“Carry trade” leveraging is integral to what has evolved into uniquely synchronized loose global financial conditions across markets and economies. Expanding speculative leverage continues to generate liquidity abundance virtually everywhere. And these loose conditions remain self-reinforcing. Loose finance spurs debt issuance, rising market and asset prices, compressed risk premiums - and then only more risk-taking, speculative leveraging and looser conditions.
Importantly, the global government finance Bubble is in the throes of historic “terminal phase excess” – with leveraging in perceived safe and liquid government securities at its epicenter. Moreover, today’s loose global financial conditions mask myriad festering serious issues and mounting systemic fragilities.
July 8 – Financial Times (Song Jung-a): “As South Korea is on track to have the world’s best-performing major stock index for a second year, its ambition to be recognised as a developed market is being held back by the scars of a crisis from three decades ago. A blistering rally driven by AI chip suppliers Samsung Electronics (SSNLF) and SK Hynix (HXSCL) has helped the Kospi triple in value since the start of 2025… ‘The government is still haunted by the ‘IMF trauma’ and is afraid that foreign influence over the forex market will become bigger once they allow offshore trading of the Korean won,’ said Hwang Seiwoon, a researcher at the Korea Capital Market Institute. During the 1997 Asian financial crisis, the won lost about half its value in two months, while the country’s foreign reserves fell to a low equivalent to just four or five days of imports. The turmoil pushed South Korea to the brink of default, driving up short-term debt and triggering a wave of corporate bankruptcies. Seoul was forced to seek a bailout from the IMF.”
It’s difficult to believe next year will mark the 30-year anniversary of the “Asian Tiger Bubble” collapse. What began on July 2, 1997, with Thailand abandoning the baht’s dollar peg, spread like wildfire. Contagion swiftly saw “hot money” exodus from the Philippine peso, Malaysian ringgit, and Indonesian rupiah, with devastatingly synchronized currency and bond market collapses. Hong Kong and South Korea succumbed somewhat later in the year. Destabilizing inflation, economic collapse, mass unemployment, and even riots and social upheaval.
Having closely monitored the speculative excesses - including hedge fund and derivatives-related leveraging - throughout the Bubble period, it was especially disheartening to watch the devastating collapse. But I did think at the time that global policymakers had at least come to understand the dangers of destabilizing “contemporary finance” and Bubbles. Nope.
Pegged currencies were that period’s weak link. Not only did they foster speculative leveraging, currency pegs also ensured self-reinforcing “hot money” flows, resulting in mounting financial and economic fragility. Loose conditions stoked the boom, while masking epic systemic maladjustment. The breaking of the Thai baht peg set off a chain reaction of broken pegs, deleveraging, bond and currency market mayhem, the seizing up of Credit systems, economic collapse, and social upheaval.
IMF bailouts provided some stabilization. New financial structures arose from the ashes. Currency peg regimes were shunned, while Asian economies built large dollar reserves to protect against abrupt “hot money” outflows. It took years and a lot of hard work, but these countries recovered.
I fear the current “carry trade” regime shares key similarities to nineties currency pegs. Years of seeming stability and surefire speculative returns have fostered massive self-reinforcing “hot money” speculative leveraging/flows. Speculative leverage has accumulated over years, across markets and economies. “Basis” and “carry” trades everywhere, with a few recent years of “blow off” excess. More recently, the global AI arms race has taken “terminal phase excess” to perilous extremes. Along with massive speculative leverage throughout government debt markets, one can now add huge AI-related debt issuance and stock market speculative leveraging (i.e. margin debt, leveraged ETFs, derivatives…).
I won’t venture a guess as to what initially upsets the apple cart. It could be debt market dislocation in any number of countries. An acute geopolitical crisis. There could be a run on a particular currency, or dislocation in a major funding currency (such as the yen). Or perhaps the trigger will simply be a bursting stock market Bubble (i.e., led by South Korean memory stocks).
I am comfortable predicting powerful contagion effects – a likely chain reaction of de-risking/deleveraging that will reverberate across global markets. There should be no doubt that Bubble dynamics function poorly (being kind) in reverse. I can’t help but think that global bond markets are sending a warning.
For the Week:
The S&P500 recovered 12% (up 10.7% y-t-d), while the Dow slipped 0.5% (up 9.5%). The Utilities declined 1.1% (up 6.6%). The Banks rose 1.7% (up 14.0%), and the Broker/Dealers surged 2.9% (up 15.1%). The Transports added 0.7% (up 27.8%). The S&P 400 Midcaps dipped 0.6% (up 14.4%), and the small cap Russell 2000 declined 0.6% (up 20.0%). The Nasdaq100 rose 1.7% (up 18.1%). The Semiconductors rallied 2.7% (up 83.1%). The Biotechs retreated 2.3% (up 21.4%). With bullion declining $57, the HUI gold stock index dropped 4.8% (down 9.5%).
Three-month Treasury bill rates ended the week at 3.6947%. Two-year government yields increased seven bps to 4.21% (up 73bps y-t-d). Five-year T-note yields rose seven bps to 4.30% (up 58bps). Ten-year Treasury yields gained eight bps to 4.56% (up 39bps). Long bond yields rose eight bps to 5.06% (up 22bps). Benchmark Fannie Mae (FNMA) MBS yields added eight bps to 5.53% (up 49bps).
Italian 10-year yields rose 10 bps to 3.80% (up 25bps y-t-d). Greek 10-year yields gained 10 bps to 3.71% (up 25bps). Spain's 10-year yields increased nine bps to 3.51% (up 22bps). German bund yields jumped 13 bps to 3.07% (up 21bps). French yields rose 10 bps to 3.83% (up 27bps). The French to German 10-year bond spread narrowed three bps to 76 bps. U.K. 10-year gilt yields jumped nine bps to 4.87% (up 39bps). U.K.’s FTSE equities index fell 1.7% (up 5.6% y-t-d).
Japan’s Nikkei 225 Equities Index declined 1.7% (up 36.2% y-t-d). Japan’s 10-year “JGB” yields ended the week four bps lower at 2.74% (up 68bps y-t-d). France’s CAC40 dropped 2.0% (up 2.3%). The German DAX equities index fell 2.8% (up 2.4%). Spain’s IBEX 35 equities index retreated 2.4% (up 12.0%). Italy’s FTSE MIB index slipped 0.4% (up 17.1%). EM equities were mostly lower. Brazil’s Bovespa index rose 2.0% (up 10.4%), while Mexico’s Bolsa index declined 0.7% (up 3.3%). South Korea’s Kospi sank 7.6% (up 77.4%). India’s Sensex equities index slipped 0.3% (down 9.0%). China’s Shanghai Exchange Index declined 1.2% (up 0.7%). Turkey’s Borsa Istanbul National 100 index dipped 0.7% (up 27.2%).
Federal Reserve Credit increased $8.4 billion last week to $6.686 TN, with a 30-week expansion of $195 billion. Fed Credit was down $2.204 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.959 TN, or 79%. Fed Credit inflated $3.875 TN, or 138%, since November 7, 2012 (713 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt fell another $9.6 billion last week to $2.902 TN - the low back to September 2010. “Custody holdings” were down $336 billion y-o-y, or 10.4%.
Total money market fund assets (MMFA) added $5 billion to a record $7.953 TN. MMFA were up $880 billion, or 12.4%, y-o-y - having ballooned a historic $3.369 TN, or 74%, since October 26, 2022.
Total Commercial Paper recovered $34 billion to $1.395 TN. CP declined $53 billion, or 2.1%, y-o-y.
Freddie Mac (FMCC) 30-year fixed mortgage rates rose six bps to 6.49% (down 23bps y-o-y). Fifteen-year rates increased three bps to 5.82% (down 4bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down three bps to 6.62% (down 24bps).
Currency Watch:
For the week, the U.S. Dollar Index was little changed at 100.965 (up 2.7% y-t-d). On the upside, the South Korean won increased 2.1%, the Brazilian real 1.2%, the New Zealand dollar 0.9%, the Norwegian krone 0.6%, the British pound 0.4%, the Canadian dollar 0.3%, and the Australian dollar 0.2%. On the downside, the Swiss franc declined 0.7%, the South African rand 0.5%, the Japanese yen 0.2%, the euro 0.2%, and the Swedish krona 0.1%. China's (onshore) renminbi increased 0.05% versus the dollar (up 3.14% y-t-d).
Commodities Watch:
July 7 – Bloomberg: “China’s central bank bought more gold in June, extending the longest buying streak since at least 2015 and underscoring a commitment to diversifying its reserves despite volatility in bullion prices. Bullion held by the People’s Bank of China rose by 480,000 troy ounces to 75.44 million ounces last month… The purchase is the biggest since October 2023, and brings the buying streak to 20 months.”
The Bloomberg Commodities Index rose 3.1% (up 15.6% y-t-d). Spot Gold declined 1.4% to $4,120 (down 4.6%). Silver fell 4.1% to $59.8685 (down 16.5%). WTI Crude jumped $2.63, or 3.8%, to $71.41 (up 24%). Gasoline added 1.1% (up 74%), while Natural Gas sank 9.4% to $2.94 (down 20%). Copper added 0.9% (up 11%). Wheat surged 7.0% (up 25%), and Corn rallied 3.1% (down 1%). Bitcoin increased $1,200, or 1.9%, to $63,900 (down 27%).
Market Instability Watch:
July 4 – Bloomberg (Jaehyun Eom): “The Bank of Korea warned that single-stock leveraged exchange-traded funds tied to Samsung Electronics Co. and SK Hynix Inc. could deepen market concentration, amplify volatility and intensify one-way trading flows… ‘With Samsung and SK Hynix accounting for more than half of stock market capitalization and trading volume, expanding investment in single-stock leveraged ETFs could further intensify this concentration,’ the BOK said in a written response submitted to People Power Party lawmaker Park Sung-hoon…”
July 5 – Bloomberg (Sangmi Cha): “South Korean lawmakers are increasingly sounding alarms over the risks of single‑stock leveraged exchange‑traded funds, with an opposition party member now calling for such products to be delisted. On Monday, Ahn Cheol-soo, a lawmaker from the conservative People Power Party and former presidential candidate, called for strong corrective measures, including delisting, of Korean leveraged ETFs tracking Samsung Electronics Co. and SK Hynix Inc. The Kospi index ‘has turned into a casino,’ he wrote… The products are a ‘complete policy failure. Every day, it is eating away at trillions of won in corporate value and public wealth.’”
July 7 – Bloomberg (Bernard Goyder): “The higher the rally in technology high-flyers, the louder the anxiety around a new wave of turbulence in the group. The Cboe NDX Volatility Index, a gauge of contract costs tied to the Nasdaq 100 Index, has been rising steadily this year and is now sitting near 27. The reading represents the highest level since 2002 relative to the Cboe VIX Index, which uses such contracts to measure the expected price swings for the broader S&P 500. Beneath the relatively placid surface of a broader stock market, concern is growing that its best-performing corner may be experiencing haywire swings.”
U.S. Credit Trouble Watch:
July 7 – Bloomberg (Caleb Mutua and Brian W Smith): “Amazon.com Inc.’s massive bond sale dragged down hyperscaler debt on Tuesday as investors sold existing securities to fund the new issue, signaling growing fatigue over the barrage of artificial intelligence financings. The e-commerce giant is borrowing $25 billion in an eight-part offering that garnered about $62 billion in peak investor demand, about half the orders it attracted for its prior $37 billion deal in March. The offering is heaping pressure on the broader tech space, with the sector among the worst performers in the US high-grade secondary market on Tuesday.”
July 7 – Bloomberg (Dani Burger and Vonnie Quinn): “Private credit is poised to take on an even bigger role in financing the ‘massive amount of infrastructure investment’ for artificial intelligence as companies look for capital to fund outsized expenditures, according to the head of BlackRock Inc. (BLK)’s research arm. ‘We are in, you know, a global transformation like we probably have never seen before,’ BlackRock’s Jean Boivin said… ‘The world will have to leverage up as a result. Leveraging up comes with risk that would need to be managed, but there’s no real alternative to really build out the AI or the global infrastructure that are needed to get to a place where we’re going to require more funding.’”
July 5 – Financial Times (Alexandra Heal and Eric Platt): “Large investors are committing billions of dollars to private credit funds as big institutions seek to profit from an exodus of smaller retail clients. North American direct lending funds that seek to attract institutional clients raised at least $16bn in the second quarter, according to Preqin... These funds, which are a subset of the wider private credit market, underwrite loans to companies without a bank acting as an intermediary. The three months to June 25 were the second-strongest quarter in four years for fundraising by such ‘closed-end’ funds, which raise money from investors only once and have a finite life.”
Global Credit Bubble and Boom Watch:
July 9 – New York Times (Lauren Hirsch): “An ebullient stock market, huge bets on artificial intelligence and an open regulatory environment have fueled one of the biggest six-month booms in deal-making in years. Through the end of June, there were about $3.2 trillion in global deals, a 45% jump from a year earlier, according to Dealogic... That was the most spent on deal-making over a half-year period in at least a decade. The frenzy heavily favored large companies, with 44 deals announced that were larger than $10 billion… Many companies ‘perceive they have a window in which to attempt to affect something transformational, and now is really the time to try to do it,’ Matt McClure, a global co-head of investment banking at Goldman Sachs, said…”
July 8 – Bloomberg (Finbarr Flynn): “Yield premiums on junk notes have compressed to their lowest since before the global financial crisis in mid-2007… Spreads in the multi-currency Bloomberg Global High Yield Index tightened to 273bps Tuesday, their lowest in 19 years. That said, the junk bond market is very different from what it was like back two decades ago, as many of riskiest borrowers have migrated to private credit or leveraged loan funding channels.”
July 7 – Bloomberg (Brian Smith, Michael Gambale and Davide Barbuscia): “When Amazon.com Inc. sold its biggest ever bond earlier this year, it was inundated with investor orders amid hype about the artificial intelligence boom. This time around, there’s less fanfare. Peak demand for its latest $25 billion offering reached $62 billion… That’s about half the orders it attracted for its prior $37 billion deal in March. It signals there’s a limit to the amount of money sloshing around for debt of even the highest-rated hyperscalers.”
July 10 – Bloomberg (Matt Day and Ian King): “The largest builders of artificial intelligence data centers have doubled their debt load in the last five years, turning to borrowing to finance an unprecedented spending spree they claim is needed to transform the economy. Alphabet Inc. (GOOGL), Amazon.com Inc., Meta Platforms Inc. (META), Microsoft Corp. (MSFT) and Oracle Corp. (ORCL), the five biggest spenders on new data centers in the US, collectively added some $350 billion to their debt obligations in the last five years…”
July 6 – Bloomberg (Janice Huang and Harry Suhartono): “Japanese borrowers drove quarterly issuance in Asia Pacific’s offshore bond market to a record, eclipsing the previous peak set during an era of Chinese corporate dominance. Bankers at Citigroup… expect issuance to remain elevated in the second half as borrowers front-load fundraising to avoid the risk of higher interest rates. APAC borrowers sold a record $154 billion equivalent of dollar- and euro-denominated bonds in the quarter ended June 30…”
July 8 – Reuters (Hyunjoo Jin, Pritam Biswas and Kane Wu): “South Korea’s SK Hynix priced its American Depository Receipts at $149 on Thursday, raising about $26.5 billion… The share sale decision comes as the company leverages its position as the leading supplier of high-bandwidth memory chips, a critical component for the advanced processors powering global artificial intelligence systems.”
Leveraged Speculation Watch:
July 7 – Wall Street Journal (Paul Hannon): “Increased borrowing by investors in equity markets has raised the risk of a sharp fall in prices that could threaten the stability of the financial system, the Bank of England warned… In its twice-yearly report, the BOE’s Financial Policy Committee said steps towards securing a lasting resolution to the conflict between the U.S. and Iran had helped reduce, but not eliminate, some threats to stability… ‘There has been a significant rise in hedge fund leverage in equity markets, creating risks, including via the prime brokers that facilitate this activity,’ the BOE said. The U.K.’s central bank said the use of leverage could accelerate declines in equity prices should investors encounter a setback, such as disappointing revenues for providers of AI-generated services. The BOE said hedge funds which also invest in government bonds could face pressure to sell those assets, broadening the impact of the setback.”
July 6 – Bloomberg (Justina Lee): “A violent rotation in the underbelly of a bullish stock market is extending the worst run for quantitative hedge funds since 2023. A long-short momentum strategy, which buys recent equity winners and sells losers, dropped more than 3% for a second straight week, an S&P Global (SPGI) index shows, taking its two-week loss to the worst in more than three years. Systematic long-short managers dropped 2.1% last week through Thursday, after declining 3.1% over a five-day stretch that was their worst since December 2023, according to Goldman Sachs’s prime brokerage.”
July 6 – Bloomberg (Carter Johnson and Mia Glass): “Hedge funds turned the most negative on the yen since 2007 as the currency trades near its weakest level in four decades, boosting the appeal of so-called carry trade. In the options and future markets, leveraged traders boosted their wagers on further losses in the yen to nearly 138,000 contracts as of June 30, according to Commodity Futures Trading Commission data…”
July 6 – Bloomberg (Olga Kharif, Jeff Mason and Jimmy Jenkins): “Global traders have turned the most positive on the outlook for the dollar since 2015 as bets that borrowing costs will remain elevated for longer have fueled a monthlong rally in the US currency. Wagers on a stronger dollar have increased to nearly $40 billion as of June 30 — the highest amount in more than a decade, according to Commodity Futures Trading Commission data…”
July 9 – Bloomberg (Sangmi Cha): “SK Hynix Inc.’s record-setting US debut is paving the way for a fresh wave of leveraged products tied to the South Korean memory giant's shares, bringing to Wall Street the popular bets that have amplified the stock's volatility in Seoul. ProShares, Leverage Shares and Rex Shares are among issuers readying products that would deliver two times the daily return of SK Hynix's American depositary receipts… At least half a dozen products will launch next week…”
Iran War Watch:
July 8 – Associated Press (Jon Gambrell, Seung Min Kim and Konstantin Toropin): “The United States launched new airstrikes against Iran early Thursday, and Tehran responded by hitting Bahrain, Kuwait and Qatar in crossfire that again threatened an interim deal intended to help end the war in the Persian Gulf. The strikes came hours after U.S. President Donald Trump said recent Iranian attacks on ships in the Strait of Hormuz signaled the end of the fragile ceasefire. The U.S. struck a variety of military sites and port facilities early Wednesday following Iran’s targeting of several merchant vessels off the coast of Oman, sparking Iranian fire then as well. But Thursday’s attacks appeared bigger all around, with sirens sounding at least twice in Bahrain, home to the U.S. Navy’s 5th Fleet headquarters.”
July 9 – Reuters (Elwely Elwelly, Nayera Abdallah and Idrees Ali): “Iranian armed forces launched attacks on U.S. military infrastructure in Gulf states on Thursday following U.S. strikes on Iran’s southern coastal and eastern provinces, further eroding a three-week-old ceasefire. Iranian media later reported multiple explosions across southern Iran, including Bushehr, where one of the country’s nuclear plants is located, along with Konarak, Choghadak and Bandar Abbas… The attacks came as Iran buried its slain Supreme Leader Ayatollah Ali Khamenei at a shrine in Mashhad, capping a week of funeral processions and rallies.”
July 8 – Axios (Josephine Walker): “President Trump declared his temporary ceasefire with Iran ‘over’ Wednesday morning, just three weeks after triumphantly describing the deal as ‘unconditional surrender.’ Iran’s renewed attacks on ships in the Strait of Hormuz are undermining Trump’s attempts to convince Americans the skirmish has ended… Speaking to reporters at the NATO summit…, Trump declared the ceasefire ‘over’ and dismissed further negotiations, although he did give his team the green light to continue talks if they chose to do so. ‘As far as I’m concerned, it’s just a waste of time dealing with them,’ he said.”
July 6 – Wall Street Journal (Editorial Board): “Iran’s regime hasn’t hid its intentions for the Strait of Hormuz: Iranian ownership, with passage by toll and permission. The regime claims its memorandum of understanding (MOU) with the U.S. gives it that right, and it has used force to get its way. The latest step is an admission that ‘friendly’ nations such as China could get special treatment in the international waterway. Speaking in Beijing on Saturday, Iran’s Ambassador to China said his regime ‘will definitely charge service fees’ to transit the Strait. But China and other Iranian friends may receive ‘special considerations’ regarding the level and type of fee. Iranian foreign policy will be the determining factor for global energy flows.”
July 5 – Bloomberg: “Iran’s ambassador to Beijing said China and other friendly nations will be granted ‘special considerations’ when Tehran determines the level and nature of service fees charged to ships using the Strait of Hormuz. Abdolreza Rahmani Fazli said the critical waterway for energy supplies is now a matter of ‘national security’ in the aftermath of the four-month US and Israeli war on the Islamic Republic. As such, ‘there will be new arrangements concerning the Strait of Hormuz with the collaboration and cooperation of the state of Oman,’ he said.”
July 6 – Reuters (Samia Nakhoul): “The funeral of late Iranian Supreme Leader Ayatollah Ali Khamenei was more than a national farewell. The sea of mourners in Tehran sent a message to the United States and Israel that their attempt to break the Islamic Republic had failed. Rather than looking weakened by the war that began with U.S. and Israeli strikes on February 28, Iran presented itself as defiant, unified and determined to shape what comes next. That defiance and ability to survive now underpins Iran's negotiating strategy, regional officials, diplomats and analysts say, depicting the funeral as the moment Tehran sought to transform endurance into leverage.”
July 4 – Wall Street Journal (Sune Engel Rasmussen and Benoit Faucon): “Large crowds gathered in Tehran as Iran began six days of funeral ceremonies for its slain Supreme Leader Ayatollah Ali Khamenei, in what the Islamic Republic is framing as a show of defiance against the West. The turnout is set to be one of the largest gatherings in history. Iranian authorities predict that, beginning Saturday, up to 20 million people will turn out to honor Khamenei…”
Iran War Ramifications Watch:
July 8 – Bloomberg (Weilun Soon): “Traffic through the Strait of Hormuz came to a near standstill on Thursday, after the US struck Iran for a second straight day as a fragile truce between the two sides looked increasingly shaky. Observable movements in the world’s most vital energy conduit largely occurred along an Iran-approved route nearer to the waterway's north, while the US-supported Omani corridor was quiet, ship-tracking data show.”
July 8 – Wall Street Journal (Collin Eaton): “America’s oil supplies are far from prepared for the U.S.-Iran ceasefire to end. Global oil prices retreated to prewar levels and tanker traffic through the Strait of Hormuz gradually resumed after President Trump announced a temporary pause in the fighting in mid-June—but crude stockpiles will take much longer to restore… Stockpiles are still so low that the central U.S. storage hub in Cushing, Okla., has reached operational limits that would make withdrawing more crude challenging. Meanwhile, inventories in the government-run Strategic Petroleum Reserve, a system of salt caverns on the Gulf Coast, keep falling and sit at the lowest level since 1983.”
July 7 – Bloomberg (Jack Wittels): “Iran told the United Nations’ shipping agency that it has authority over parts of the Strait of Hormuz, the waterway that’s a centerpiece of peace talks between Washington and Tehran. ‘Parts of the Strait of Hormuz fall within the territorial waters of the Islamic Republic of Iran,’ the country said in a document submitted to the International Maritime Organization, the UN agency charged with overseeing shipping. ‘Under the international law of the sea, a coastal State exercises sovereignty, jurisdiction and sovereign authority over its territorial sea.’”
July 9 – Financial Times (Rachel Millard, Anastasia Stognei and Ryohtaroh Satoh): “Global diesel supplies are heading for a fresh crunch as Russia’s ban on exports adds to strains caused by the Iran war, risking higher prices for motorists and farmers and threatening efforts to curb inflation. Storage levels were already running low before Russian President Vladimir Putin blocked supplies from the world’s second-largest diesel exporter… Shipments of diesel and other products through the Gulf have again slowed to a trickle, due to the threat of further Iranian attacks in the Strait of Hormuz.”
Trump Administration Watch:
July 3 – Financial Times (Amy Mackinnon): “Donald Trump used his speech at Mount Rushmore on the eve of the 250th anniversary of American independence to warn of the ‘resurgence of the communist menace in our land’. Speaking at the foot of one of America’s most iconic landmarks, Trump claimed that the communist ideology presented the ‘greatest threat’ to the US, on par with both world wars and the 9/11 terror attacks. Republicans have sought to brand Democrats with the term ahead of the midterm elections later this year, as Democratic Socialists have won a spate of key primary races in New York and have gained ground elsewhere. ‘America will never be a communist country and we can only lose the midterms if we allow ourselves to lose the midterms,’ he said.”
July 9 – Associated Press (Will Weissert, Farnoush Amiri and Samy Magdy): “President Donald Trump says he believes the ceasefire with Iran is over. He says he’s not sure he wants a deal anymore and says the U.S. should ‘finish the job.’ But he also insists that continued attacks do not mean a return to war or long-term action. The confusion and uncertainty in Trump’s mixed messaging and his approval of back-to-back military strikes leave major questions about what comes next in the conflict, just weeks after difficult diplomacy to reach even an initial deal between the longtime adversaries. The whipsawing rhetoric could be a strategy to increase the pressure on Tehran to stop attacking ships transporting oil and natural gas in the Strait of Hormuz and bend to U.S. demands on its nuclear program — something Trump has tried before.”
July 9 – Wall Street Journal (Laurence Norman, Benoit Faucon, Rebecca Feng and Shelby Holliday): “President Trump’s memorandum of understanding with Iran was supposed to open the Strait of Hormuz and relieve the pressure on the global economy. Instead, it set off a test of wills that has exploded into violence twice in the past two weeks. The root of the dispute is Paragraph 5, which says Iran will make arrangements to restore shipping through the strategic waterway and then work with Oman to determine how to administer it in the future. But it also includes an Iranian pledge to ensure safe passage and remove military obstacles such as mines. Trump administration officials saw that clause as unlocking the strait, the main accomplishment of the president’s deal. Iranian hard-liners, however, have used it to push a maximalist interpretation that gives the Islamic Republic exclusive control over the waterway as a key source of leverage.”
July 8 – Bloomberg (Kate Sullivan, Jen Judson, and Skylar Woodhouse): “President Donald Trump said a decision on US troop levels in Europe would hinge on how allies addressed his concerns over Greenland and the Iran war, comments likely to intensify NATO members’ worries about over his commitment to collective security. ‘I haven’t made that final determination,’ Trump told reporters... ‘A lot’s going to depend on Greenland,’ Trump added, floating the prospect that he would get ‘a very good deal’ on the island. ‘A lot’s dependent on Iran.’”
July 5 – Wall Street Journal (Brian Schwartz, Natalie Andrews and Joshua Robinson): “In the hours after the U.S. secured its first victory in a World Cup knockout match in more than 20 years last Wednesday, the mood inside the White House was anything but celebratory. The game… had been marred by a controversial red card for the Americans’ top scorer at this tournament, striker Folarin Balogun… That’s when senior Trump administration officials hatched a plan that would go down as one of the most audacious in the 96-year history of the World Cup. Never mind that soccer’s world governing body fiercely protects its role as the final arbiter of what happens within the white lines of the pitch, or routinely metes out draconian punishment for political interference. The White House was going to take it upon itself to turn a refereeing decision into a matter of state and reverse a call in a soccer match. And in FIFA president Gianni Infantino, the man Trump once called ‘the king of soccer,’ officials knew they could count on a willing ally.”
New World Order Watch:
July 8 – Bloomberg (Flavia Krause-Jackson and Hadriana Lowenkron): “US President Donald Trump’s fixation with owning Greenland returned with a vengeance at the NATO summit as he launched into a series of broadsides against European allies for letting him down in Iran… ‘I’m not happy with NATO because of what they did with Greenland, and I’m not happy with NATO because of the fact that they didn’t want to help us with the number one state sponsor of terror, that’s Iran… Greenland is very important to the United States, but it’s not important to Denmark,’ he continued, before shifting into an extended digression on World War II… ‘We took Greenland and then, stupidly, we gave it back… We shouldn’t have given it back to them, because we’re the ones that need it. We need it for protection of the world, not just the United States. And it’s very important.’”
July 7 – Financial Times (Steff Chávez and Henry Foy): “Donald Trump has said he could remove all American troops from Europe, in one of his broadest threats yet to allies in the region as he visited Ankara for the Nato summit. The threat came as the US president revived his calls for the US to take control of Greenland, potentially reigniting a crisis that has posed the biggest threat to transatlantic unity. Trump’s longstanding desire to take control of the Danish-owned Arctic island is one of the biggest threats to the future of Nato, which has been cast into doubt by the mercurial US president’s regular attacks on European allies and warnings that he could refuse to come to their aid if they do not spend more on defence.”
July 7 – Reuters (Sabine Siebold, Gram Slattery and Tuvan Gumrukcu): “President Donald Trump threw a summit of NATO leaders into disarray… as he demanded the United States cut trade ties with Spain and made renewed claims on Greenland, but later changed tack and said there had been love and ‘a lot of unity’… ‘Spain is a wasted cause. We don’t want to do any trade business with Spain anymore… By the way, I’d like to cut it off. Spain is a terrible partner in NATO. They don’t participate, they don’t pay. I don’t want anything to do with Spain. Cut off all trade with Spain, including visits.’”
U.S./Russia/China/Europe/Iran Watch:
July 8 – Associated Press (Lorne Cook, Seung Min Kim and Suzan Fraser): “U.S. President Donald Trump said at a NATO summit… that the U.S. will give Ukraine a license to make Patriot air defense systems to counter missile attacks from Russia in their more than four-year war, a huge coup for Kyiv which has long requested the technology. Allowing foreign manufacture of Patriots, which the U.S. had resisted, was a turnaround for Trump that mirrored his day at the NATO meeting: Upon arriving, he lashed out at European partners for resisting his efforts to take control of Greenland and for not supporting his war in Iran. But by day’s end, he described a gathering of unity and ‘tremendous love,’ and praised member nations on their progress in increasing their defense spending.”
July 6 – Financial Times (Henry Foy): “Nato leaders support Ukraine’s intensified drone strikes deep within Russia as part of efforts to force Moscow back to the negotiating table, Finland’s president has said, arguing that Kyiv is in the ‘best’ position since the war began. Alexander Stubb told the FT that despite worries about possible Russian nuclear escalation, the Ukrainian campaign had changed US strategic thinking on the war and bolstered Kyiv’s negotiating position. ‘I think that [all Nato leaders] understand why Ukraine is doing this,’ said Stubb. ‘Everyone believes that we need to continue to increase the pressure.’”
July 7 – Wall Street Journal (Austin Ramzy): “China’s military said… it test-launched a long-range ballistic missile from a nuclear submarine, a rare display of advanced capabilities that set off concerns from the U.S. and its allies across Asia and the Pacific. The missile was… carrying a simulated warhead to a designated area in the Pacific Ocean, said Senior Captain Wang Xuemeng…”
July 6 – Reuters (John Irish and John O'Donnell): “Russia risks an ‘explosive’ banking crisis because lenders are shouldering much of the burden of the country’s war economy, a European state intelligence report… has warned, as the European Union readies a raft of new sanctions. The two-page document, which was prepared in recent weeks to inform European officials about the state of Russia’s banks, outlines their vulnerability to further Western curbs.”
Ukraine War Watch:
July 10 – Bloomberg: “China has again told Russia not to even consider using a nuclear weapon against Ukraine, according to President… Zelenskyy. Russian nuclear saber rattling has accelerated in 2026, with officials and major Russian outlets making the case for tactical nukes more forcefully and unambiguously than any time since Vladimir Putin ordered the 2022 full-scale invasion of Ukraine. In response, China… has told Russia it must avoid any atomic attacks, Zelenskyy said — reiterating Beijing’s long-stated opposition to nuclear strikes.”
July 9 – Wall Street Journal (Yaroslav Trofimov): “Several Ukrainian drones circled over Russia’s largest refinery on Monday and then, one after another, slammed into its crude distillation unit, engulfing the facility in fireballs and clouds of smoke. There was no air defense to speak of because Russian authorities had assumed that the refinery, in the Siberian city of Omsk, was too far from Ukraine to be imperiled. The hit… marked a major expansion in the range of Ukraine’s deep strikes. Until now, they have been confined to European Russia, within some 1,000 miles of Kyiv-controlled territory. But Omsk lies nearly 1,500 miles away in a straight line… Ukrainian drones used in this operation have a maximum range of 2,100 miles…”
July 5 – Financial Times (Alan Smith, Christopher Miller, Anastasia Stognei and Max Seddon): “Ukraine is striking Russian energy infrastructure at an unprecedented rate, according to an FT data analysis showing that Kyiv’s intensified drone campaign is spurring Russia’s worst fuel crisis in decades. The number of successful Ukrainian strikes against Russian refineries reached an all-time monthly record of 16 in May… Since the beginning of 2026, Russian refineries have been hit at least 194 times, an 11-fold increase from the same period the previous year.”
July 7 – Reuters: “Ukrainian drones struck three Russian oil refineries, Russian tankers on the Sea of Azov, and pipeline pumping stations, Ukrainian and Russian officials said on Wednesday, in a major night of strikes ranging from the Ukrainian border to the Urals mountains.”
July 6 – Associated Press (Hanna Arhirova, Samya Kullab and Illia Novikov): “Russia unleashed waves of missiles and drones at Ukraine early Monday, killing at least 22 people in attacks that exposed widening gaps in the country’s air defenses more than four years into Moscow’s full-scale invasion... All of the ballistic missiles launched by Russia struck their targets, underscoring Kyiv’s need for more U.S.-made Patriot interceptor missiles…”
July 8 – Reuters: “President Vladimir Putin is rejecting calls to negotiate peace with Kyiv, three sources close to the Kremlin told Reuters… Two of the sources… said that Putin was instead likely to escalate the conflict, now well into its fifth year. One of them, who meets regularly with the president, described a ‘high probability’ of escalation in the coming months.”
China, Taiwan and Japan Watch:
July 6 – Reuters (Satoshi Sugiyama and Hina Suzuki): “A shortage of critical minerals is starting to affect the broader Japanese economy, adding a sense of urgency for Prime Minister Sanae Takaichi's government to find alternatives to exports that China has cut off, according to recent corporate filings… Since Takaichi enraged Beijing with comments about defending Taiwan in November, Beijing has choked off shipments of certain key minerals to Japan.”
AI Bubble/Arms Race Watch:
July 9 – Bloomberg (Maggie Eastland): “Micron Technology Inc. (MU) plans to increase its spending on new plants in the US to $250 billion to help meet unprecedented demand for its memory chips fueled by the global artificial intelligence boom. The funds would add $50 billion to the company’s previously announced commitment of $200 billion toward expanding domestic chipmaking that includes projects in New York, Idaho and Virginia. The spending will carry through 2035 and support Micron’s goal of making 40% of its dynamic random access memory products in the US a decade from now…”
July 7 – Wall Street Journal (Dan Gallagher): “Big tech reining in its AI spending may be a tantalizing prospect for some. It would also be a costly one. That doesn’t seem in the cards yet. Second-quarter reports coming later this month will likely show another period of blowout AI investments. Wall Street analysts estimate that combined capital spending by Google, Microsoft, Amazon.com and Meta Platforms META surged 74% year over year to hit $168 billion in the June-ending quarter… This spending is crimping both the free cash flow and stock prices of those four companies; only Google-parent Alphabet has managed to outperform the S&P 500 this year.”
July 9 – Bloomberg (Joel Leon): “One notable group has been absent from the 2026 stock rally: the American tech giants that have charged a nearly four-year bull run. The Magnificent Seven Index… has gone nowhere this year, even as the artificial-intelligence boom it’s bankrolling continued to propel other technology names. The group as a whole has trailed 300 stocks in the S&P 500 Index this year… The shift is vexing Wall Street forecasters…”
July 8 – Bloomberg (Sridhar Natarajan, Katherine Doherty, Liana Baker, and Shirin Ghaffary): “Bank of America Corp. (BAC) handed a $520 million credit line to OpenAI in recent weeks after previously spurning the artificial intelligence giant’s request… The deal marks a notable pivot in how the second-largest US lender and its risk-wary chief executive officer, Brian Moynihan, approach money-losing AI startups that are driving global markets. As recently as last year, the bank’s executives were skeptical that ventures known for such voracious capital spending would be able to sustain their business models. But OpenAI’s preparations for an initial public offering influenced the financial firm’s decision, said the people…”
July 6 – Bloomberg (Yoolim Lee): “Samsung Electronics Co.’s quarterly profit surged 19-fold, soaring past elevated expectations due to rocketing demand for memory chips needed in AI data centers. The world's largest memory maker reported preliminary operating income of 89.4 trillion won ($58bn) in the three months through June, dwarfing its performance for all of 2025… Revenue came to 171 trillion won…”
July 8 – Bloomberg (Rachel Phua): “Following several quarters of record order books, a skilled-labor shortage is testing the limits of growth for the craft-labor providers who build data centers across the US. While some executives have downplayed the strain, others acknowledge that a lack of electricians, pipe fitters and site supervisors is forcing them to turn away work or poach crews from smaller contractors to keep projects staffed.”
July 8 – Reuters (Faith Hung): “The governor of Taiwan’s central bank said… that while the growth driving the AI boom is real, so are the risks of an AI bubble… Governor Yang Chin-long told lawmakers that the AI boom has become a major driving force in Taiwan’s economy, while warning that the central bank must carefully monitor the risks of speculative capital expenditures financed by aggressive corporate borrowing within the tech sector. ‘We do have concerns about the possibility of an AI bubble,’ Yang said. ‘AI is driven by real growth potential, but it's the possibility of over-expansion via over-leveraging that concerns us.’”
July 5 – Bloomberg (Tom Rees): “The world must urgently develop guardrails to contain the threat posed by artificial intelligence, Britain’s foreign secretary is set to warn. Yvette Cooper will say that AI may become the ‘greatest security challenge of the next decade,’ calling for international cooperation to stamp out the risks. Cooper will draw parallels between AI and efforts around nuclear safety in the wake of the Second World War and the atomic bombings of the Japanese cities of Hiroshima and Nagasaki. ‘On nuclear, international agreement came only after the world saw the terrifying power of the new technology at Hiroshima and asked what would happen if it fell into the wrong hands,’ she will say in a piece to be published… ‘We cannot afford to wait for an AI equivalent of Hiroshima before we act.’”
July 7 – Bloomberg (Brody Ford): “Microsoft Corp., looking to reduce AI costs, is starting to replace OpenAI and Anthropic with its own models in software products like Excel and Outlook. Tens of thousands of AI prompts in the widely used spreadsheet and email applications are now being completed each week with Microsoft's internally built MAI models…”
July 9 – Bloomberg (Matt Day): “Microsoft Corp. said its carbon emissions climbed 25% in 2025, making it the latest technology company to report a setback in its efforts to erase emissions amid heavy spending on artificial intelligence data centers. The company emitted 20 million metric tons of carbon dioxide equivalent in 2025... The increase was driven by new construction of data centers and a previously announced pause in the purchase of some renewable energy credits…”
July 9 – Wall Street Journal (Jessica Flint and E.B. Solomont): “San Francisco’s pandemic-era doom loop has been replaced by a land grab, driven in part by anxiety about how artificial-intelligence wealth will impact home buying. ‘It’s definitely the Wild, Wild West,’ said David Cohen, founder of City Real Estate. ‘The market has had a huge influx of new demand.’ Buyers are rushing to front-run anticipated IPOs from giants like OpenAI and Anthropic, local real-estate agents said. ‘For many people not in AI, the feeling is, ‘If we don’t get in before the big AI IPOs, we’re going to miss our window,’’ said Kate Tomassi, an agent at Sotheby’s International Realty... In reality, AI money is already flowing, agents said.”
July 8 – New York Times (Emmy Martin): “When Nima Gabbay decided to sell his three-bedroom, two-bath San Francisco home for $2.995 million last month, his listing described the residence’s soaring 10-foot ceilings, kitchen wrapped in Calacatta marble, remote-control skylights and oversize two-car garage. The 51-year-old real estate investor and developer also added an unusual clause: He would accept shares of OpenAI or Anthropic as payment for the home. Two OpenAI employees soon came forward offering some of their shares for the property, Mr. Gabbay said. One bid more than $1 million above the asking price, but appeared to inflate the value of his OpenAI stock.”
Bubble Watch:
July 7 – Wall Street Journal (Dean Seal): “Blockbuster artificial-intelligence deals and a rush to lock down transactions in the U.S. powered global merger-and-acquisition volume to more than $3 trillion in the first half of 2026…, according to Mergermarket data. Counted in dollars, M&A activity from January through June was up 44% year-over-year to set a new first-half record… ‘We’ve had so many events that could be considered black swans in previous years, and then the markets have just ignored it and carried on,’ Mergermarket Executive Editor Lucinda Guthrie said. The surge has been driven by megadeals, or those valued at more than $10 billion, which collectively accounted for 42% of all dealmaking volume. There were also a record-high six ‘gigadeals,’ as the new Mergermarket report calls them, valued at more than $50 billion.”
July 7 – Wall Street Journal (Mark Maurer): “The private-equity industry’s next decade could be a slog. Buyout firms face a backlog of unsold portfolio companies that is only worsening… The firms are expected to take about nine years to clear their logjam at the current pace, according to a PricewaterhouseCoopers analysis... About 13,500 U.S. companies sat in private-equity portfolios as of June 30, up from roughly 13,300 at the end of 2025, PitchBook data… show. Almost 4,000 companies have been held for six or more years. About 1,500 companies have been held for nine or more years. Many private-equity firms historically aimed to hold investments for around three to five years… Private-equity fundraising efforts are on pace with 2025’s muted totals, with the $159.6 billion raised in the year’s first half on track to roughly match last year’s total haul of $308 billion…”
July 9 – Axios (Dan Primack): “More venture capital dollars were invested in U.S. companies during the first half of 2026 than in any full year, according to… by PitchBook and the National Venture Capital Association. U.S. companies raised $412.7 billion between January and June, a whopping 29% increase over what U.S. companies raised in all of 2025 and a 15% increase over the all-time record set in 2021. The boost was driven by mega-rounds, with over 81% of the H1 2026 dollars going to deals of $100 million or more. This includes seven $1 billion+ rounds in Q2.”
July 9 – Reuters (Gertrude Chavez-Dreyfuss): “U.S. equity funding markets remain stretched in the wake of last month's spike in short-term borrowing costs, as near-record stock prices and a frenzy over popular technology shares fuel demand for leverage. Concerns center on the equity repurchase or repo market, where investors and traders borrow short-term cash against stock holdings. Ahead of the June quarter-end, financing costs in that market surged as demand for leveraged equity exposure intensified. The cost of financing equity positions climbed to roughly 200 bps above the federal funds rate on June 26, Morgan Stanley data show, the highest since December 2024.”
July 10 – CNBC (Robert Frank): “Private chefs are making up to $300,000 a year, and butlers can earn as much as $180,000 as the wealthy hire more household staff to manage their increasingly complex lives… Demand for chefs, personal assistants, butlers, nannies, housekeepers, chauffeurs and estate managers have reached records as the wealthy buy more homes in various locations and manage ever-growing families, according to a report from Morgan & Mallet International. The hiring boom has created a war for talent, driving up salaries and increasing job-hopping by household staff.”
Inflation Watch:
July 8 – Financial Times (Myles McCormick and Sam Fleming): “Renewed conflict in the Middle East would drive up global inflation, damage supply chains and weigh on financial markets, the IMF warned, as it lifted its forecasts for price growth. In a report finalised before US President Donald Trump… declared the ceasefire with Iran to be ‘over’, the IMF said that while the global economy had weathered the conflict in the Middle East better than expected so far, the threat of fresh hostilities ‘looms large’. In its latest World Economic Outlook, the Fund predicted global inflation will increase from 4.1% in 2025 to 4.7% this year — higher than it estimated in April — before receding to 3.9% in 2027.
July 7 – Reuters (Michael S. Derby): “Americans grew more concerned about near-term inflation pressures in June even as they projected moderating gasoline price gains and a more upbeat view on current and future personal finances, a Federal Reserve Bank of New York report... Inflation a year from now was seen at 3.7% in June, up from 3.5% in May, for the highest reading since September 2023, the bank said in its latest Survey of Consumer Expectations.”
July 9 – Yahoo Finance (Jennifer Schonberger): “Nearly half of firms that paid tariffs plan additional price increases, with some expecting to raise prices six months or more in the future, according to a new survey from the New York Federal Reserve. Some 44% of manufacturers surveyed expect to raise prices due to tariffs, along with 47% of service firms. ‘While economists and policymakers often expect that price increases due to tariffs will constitute a one-time price-level adjustment, what ‘one-time' means in practice may be a drawn-out affair, especially when the tariffs change frequently,’ New York Fed economists Jaison Abel, Mary Amiti, Richard Deitz, Sebastian Heise, and Nick Montalbano wrote. ‘Our business surveys suggest that, in an ever-changing tariff environment, many firms are spreading price increases across extended periods — meaning that inflationary pressures due to tariffs may well last for some time to come.’”
July 8 – Financial Times (Peter Wells): “PepsiCo has warned that elevated fuel prices will intensify inflationary pressure over the rest of the year as a nascent recovery in US sales at the consumer goods group stalled in the second quarter. The company said… it expected ‘higher input cost inflation’ in the second half of its financial year versus the first six months. Productivity savings and refund claims for tariffs, however, are expected to mitigate ‘a good portion’ of those higher costs.”
July 7 – Associated Press (Rio Yamat): “U.S. airlines spent $6.66 billion on jet fuel in May, the second straight month that fuel costs topped $6 billion, according to government data… The May figure was 84% higher than a year earlier. Airlines spent $6.47 billion on fuel in April…”
July 7 – Reuters (Scott DiSavino): “U.S. power consumption, which hit its second straight annual record high in 2025, will rise further in 2026 and 2027, driven by AI-hungry data centers and electrification, the Energy Information Administration (EIA) said… The EIA projected power demand will rise from a record 4,195 billion kilowatt-hours (kWh) in 2025 to 4,269 billion kWh in 2026 and 4,399 billion kWh in 2027. Demand is surging in large part due to data centers dedicated to artificial intelligence and cryptocurrency, and as homes and businesses use more electricity and less fossil fuels for heat and transportation.”
July 7 – Reuters (Laila Kearney): “For years, electricity costs for the Belden Brick Company in Sugarcreek, Ohio, had been relatively stable. Last year, they surged by 90% — largely because of rising power demand from data centers in the region. The 141-year-old brick manufacturer, whose products can be found in iconic buildings including the Texas Alamo and Notre Dame University, is seeing power bills rise mainly from a monthly capacity charge, which recently jumped from $1,600 a month to $12,000.”
July 6 – Wall Street Journal (Sarah Nassauer and Patrick Thomas): “Walmart (WMT) is cutting prices on thousands of items to help customers with affordability after years of inflation. The largest U.S. grocer said Monday it is lowering the price of ground beef by 12%. The price of cherries is being halved. A 24-pack of Coca-Cola (KO) is falling by one-third to $9.97. The company also said it is cutting prices on household products, toys, apparel and other products. The effort drew praise from President Trump, who hailed it in a social-media post as ‘a huge deal.’”
Federal Reserve Watch:
July 8 – Wall Street Journal (Nick Timiraos): “Federal Reserve officials broadly agreed at their meeting last month that they would need to raise interest rates if inflation stays elevated this year. They also agreed that they could stay on hold if price pressures fade soon, according to minutes… Which of those paths they take depends on something they haven’t resolved: whether the forces pushing up prices will last. The minutes showed how they are increasingly focused on a source of inflation that barely figured in their debates a few months ago: the boom in artificial-intelligence investment. It was one of the forces, along with the war in the Middle East and tariffs, that could keep prices elevated and tip the Fed toward a rate increase, according to the written account.”
July 8 – Associated Press (Christopher Rubager): “The Federal Reserve’s rate-setting committee is split over whether inflation is likely to stay elevated or whether it will cool once the Iran war winds down, according to minutes… In the first set of minutes released under… Warsh, ‘many’ of the Fed’s 19 officials said its key rate would be unchanged from or slightly below its current level of 3.6% by the end of this year. But ‘many’ also said that it would likely be higher by year-end.”
July 8 – Financial Times (Claire Jones): “Former Bank of England governor Mervyn King and crypto investor Marc Andreessen are among Federal Reserve chair Kevin Warsh’s picks to help modernise the US central bank. Warsh… unveiled the rosters for five task forces that he said would ‘sharpen’ the world’s most important financial institution. King and Andreessen, co-founder of Silicon Valley investment group Andreessen Horowitz, were joined in the list by Raghuram Rajan, the former governor of the Reserve Bank of India, and Nobel laureate Thomas Sargent.”
July 9 – Associated Press (Christopher Rugaber): “Venture capitalist Marc Andreessen, economist Raj Chetty and former Bank of England governor Mervyn King are among a slate of names… that will help develop recommended changes to the central bank’s operations… The other leaders are a mix of public officials and business leaders. Warsh called for ‘regime change’ at the Fed last year while he was under consideration by the Trump administration to replace former chair Jerome Powell.”
July 6 – Bloomberg (Enda Curran): “Federal Reserve Governor Christopher Waller said signals from policymakers on the future path of interest rates can play a useful role if done carefully… ‘I continue to believe that forward guidance can be a valuable tool that has, at times, significantly strengthened policymaking and will continue to be useful,’ Waller said. ‘But forward guidance is more art than science, and there have been times when it has hindered, rather than helped, policymaking.’ In a panel discussion…, Waller was asked for his view on Warsh’s pledge that the Fed will hit its 2% inflation target. ‘When you say re-commit let me be very blunt, I have never been anything but committed to a 2% target. The issue is how fast we get there,’ he said.”
July 6 – Bloomberg (Howard Schneider): “U.S. Federal Reserve Governor Christopher Waller said… high inflation is the chief risk facing the Fed given a labor market that remains stable. ‘A year ago I was advocating for rate cuts because the labor market was not looking good, so I was willing to tolerate a longer movement back to our 2% (inflation) target based on the labor market,’ Waller said… ‘Those risks have completely flipped around now. The labor market seems to be stabilizing in the US. Inflation has been taking off. So then that changes how you might want to think about policy.’”
U.S. Economic Bubble Watch:
July 6 – Bloomberg (Reade Pickert): “The US service sector expanded in June at a slightly slower pace, but firms boosted payrolls as cost pressures eased. The Institute for Supply Management's services index decreased 0.5 point to 54… Measures of business activity and new orders cooled, though still signaled solid demand. ISM’s employment index, meanwhile, jumped by the most since 2024 and indicated higher headcount for the first time since February. Prices continued to rise but at a more subdued pace. The group’s gauge fell to a four-month low of 67.7.”
July 7 – Reuters (Lucia Mutikani): “The U.S. trade deficit widened sharply in May as imports of capital goods surged to a record high, suggesting that trade remained a drag on gross domestic product in the second quarter… The trade gap jumped 42.2% to $77.6 billion, the highest level since March 2025… Imports increased 3.3% to $395.3 billion, the highest level since March 2025… Goods imports surged 4.0% to $317.0 billion, the highest level since April 2025, when they soared amid front-running ahead of the imposition of Trump's tariffs… Capital goods imports soared $1.1 billion to a record high $128.0 billion, lifted by large increases in imports of computer accessories and semiconductors… But exports dropped 3.2% to $317.7 billion… Goods exports tumbled 5.1% to $210.6 billion…”
July 8 – CNBC (Diana Olick): “Sales of previously owned homes in June dropped 2.4% from May to 4.09 million units on a seasonally adjusted, annualized basis… June sales were, however, 2.8% higher than the same month a year prior… Inventory at the end of June was 1.56 million units, down 0.6% from May but 1.3% higher than June 2025. At the current sales pace, that represents a 4.6-month supply. The market is considered balanced… at a six-month supply. With the market still lean, prices continue to rise. The median price of an existing home sold in June was $440,600, an increase of 1.8% from the year before and the highest on record.”
July 8 – Bloomberg (Augusta Saraiva): “US consumer borrowing unexpectedly declined for the first time since 2024 on a drop in revolving credit. Total credit outstanding decreased by about $182 million in May after sizable increases in the prior two months… The pullback was driven by a $5.3 billion decline in credit-card and other revolving debt outstanding, which also marked the biggest decline since 2024. Non-revolving credit, such as loans for vehicle purchases and school tuition, rose $5.1 billion in May.
July 8 – Reuters (Neil J Kanatt): “Back-to-school spending among U.S. households with school-age children is expected to decline about 6% this year on an inflation-adjusted basis…, according to a Deloitte survey… Total spending is projected at $30.4 billion, or $557 per K-12 student on average… The survey found that 57% of consumers expect the economy to worsen over the next six months, the highest share since 2020.”
China Watch:
July 4 – Wall Street Journal (Chun Han Wong): “Chinese leader Xi Jinping is employing the sort of autocratic tactics once wielded by Joseph Stalin and Mao Zedong to stamp out opposition and stack the leadership with acolytes as he prepares to extend his reign. In a throwback to the most powerful Communist leaders of the 20th century, Xi has purged dozens of senior officials—even his own protégés—overseen the growth of a cult of personality and demanded absolute loyalty. His goal: dictate China’s destiny for years to come in order to expand the country’s power and match the U.S. in military might and economic clout. Now in his 14th year as party leader, the 73-year-old Xi has eliminated conventions put in place after Mao to prevent a return to one-man rule.”
July 7 – Bloomberg (Gao Yuan): “Chinese companies are ditching Nvidia Corp. (NVDA)’s advanced accelerators in favor of domestic silicon, underscoring how tensions with the US are reshaping the AI infrastructure buildout and propelling Beijing’s ambitions to substitute American technology. Executives in the country say they’ll allocate 46% of their budget for artificial intelligence accelerators to domestic products over the next 12 months, up from 30% today… In addition, 80% of executives said their total infrastructure spending is running over-budget this year, mostly because of the high cost of AI-related projects.”
July 7 – Reuters: “Chinese startup DeepSeek is developing its own AI chip, according to three people familiar…, a push that could reduce its reliance on Nvidia and Huawei chips, which it has depended on to train and run its globally popular models. The chip is designed for inference — the stage of AI computing in which a trained model generates responses for users — rather than for training new models, the sources said.”
July 8 – Reuters (Yukun Zhang and Ryan Woo): “China’s producer price inflation surged to its highest level in four years in June, piling pressure on manufacturers' profit margins as weak domestic demand limits their pricing power… The producer price index (PPI) rose 4.1% year-on-year, the highest rate since July 2022…”
July 8 – Bloomberg: “China’s consumer inflation slowed more than expected after a pullback in commodity costs with an easing of tensions over Iran last month. The consumer-price index decelerated to 1% in June from a year earlier, compared with a gain of 1.2% in the previous month…”
July 8 – Financial Times (Edward White and Harry Dempsey): “Chinese manufacturers that use rare earths are seizing a ‘historic’ opportunity to move up the industrial value chain and squeeze their foreign rivals, as Beijing’s export controls on critical minerals hit their Japanese counterparts. China curbed exports of rare earths to dozens of Japanese companies this year after Prime Minister Sanae Takaichi made remarks about Tokyo’s role in a hypothetical conflict over Taiwan… The controls have put pressure on Japanese manufacturers. Rare earths are indispensable additives in advanced materials and high-end production, used to make everything from magnets in electric cars to ceramics in chipmaking.”
July 10 – Bloomberg: “China set no numeric target for urban job creation for the first time in at least three decades, in an apparent nod to rising uncertainty over employment as AI spreads through the economy. The government will instead keep new urban jobs at a "considerable scale" in 2026-2030, according to a five-year plan…”
Central Banker Watch:
July 7 – Bloomberg (Tracy Withers): “New Zealand’s central bank raised its key interest rate for the first time in three years and signaled potential for more hikes to come as policymakers look to drive inflation back down to target. The… Reserve Bank’s Monetary Policy Committee increased the Official Cash Rate by 25 bps to 2.5%... The RBNZ anticipates activity will strengthen and require less stimulatory settings.”
Europe/UK Watch:
July 8 – Reuters (Kate Abnett): “Western Europe just experienced its warmest June on record…, after an extreme heatwave at the end of the month smashed temperature records, disrupted power supplies and shut schools. Last month was also the second-warmest June globally, and the planet experienced the highest June sea surface temperatures since records began, the EU's Copernicus Climate Change Service (C3S) said…”
July 7 – Financial Times (Leila Abboud and Adrienne Klasa): “French far-right leader Marine Le Pen has been cleared to stand for president next year after appeals court judges shortened her sentence, even as they upheld her conviction of embezzling funds from the European parliament. In a significant reprieve, the three-judge panel… shortened an electoral ban that would have stopped her from running. But they also sentenced Le Pen to three years in prison, with two years suspended and the remaining year to be served under electronic monitoring.”
July 7 – Financial Times (Leila Abboud and Adrienne Klasa): “Far-right leader Marine Le Pen said she would run for the French presidency despite judges upholding her embezzlement conviction, setting up an unprecedented election campaign next year. ‘I am a candidate for president tonight,’ she told TF1 news…, adding that she would appeal the conviction to France’s highest court for criminal and civil matters. ‘My hands are clean today. I will go to the Court of Cassation to prove it.’”
Japan Watch:
July 8 – Reuters (Junko Fujita): “Japan’s bond market is signalling diminishing confidence that the central bank can contain inflation while the government’s spending ambitions further strain the nation’s finances. Yields on 10- and 20-year Japanese government bonds (JGBs) shot to multi-decade highs this week as concerns resurfaced about Prime Minister Sanae Takaichi's commitment to fiscal responsibility and normalisation of monetary policy… ‘The latest steepening of the curve is a warning bell from investors,’ said Kento Minami, senior economist at Daiwa Securities. ‘There is a gap between the risk the market weighs and the government's fiscal and monetary policy.’”
July 10 – Reuters (Leika Kihara): “Japan’s wholesale inflation accelerated in June at the fastest pace in more than three years and the government brushed aside market concern over political interference in monetary policy, bolstering the case for further interest rate hikes. The producer price index surged 7.1% in June from a year earlier…, exceeding market forecasts for a 6.8% increase and marking the fastest year-on-year rise since March 2023.”
July 7 – Bloomberg (Toru Fujioka): “Japan’s bank lending expanded at the fastest pace since the Covid pandemic, suggesting credit is still accessible and the Bank of Japan has room to keep raising interest rates. Loans rose 6.3% in June from a year earlier, the strongest growth since August 2020… The increase was driven by lending for mergers and acquisitions, real estate and economic recovery, the central bank said.”
Emerging Markets Watch:
July 7 – Bloomberg (Rajesh Kumar Singh): “India’s hydropower generation in June plunged by more than a fifth after dry weather linked to El Niño depleted reservoir levels, piling pressure on the grid during the peak summer demand season. Generation from hydroelectric plants fell almost 21% from a year earlier… Output from dams declined nearly 7% in the quarter ended June, while coal, nuclear, and renewable plants generated more to meet record demand driven by extreme heat.”
Social, Political, Environmental, Cybersecurity Instability Watch:
July 8 – Wall Street Journal (Aaron Zitner): “Americans are losing confidence in two main pillars of society: capitalism and democracy. Just under half of Americans say capitalism is working very well or even somewhat well, down from 60% who said so about a decade ago, according to a new Wall Street Journal-NORC survey. Only 35% are even fairly sure that the nation offers people the ability to get good jobs and achieve the American dream. Confidence in the nation’s system of government is even lower. Only 12% say democracy is working very well or extremely well, and a mere 16% say average citizens have considerable influence on politics.”
July 6 – Bloomberg (Eric Roston and Hayley Warren): “Much of the US just sweltered through the July 4 holiday weekend… In Europe, punishing temperatures are set to return days after a deadly heat wave pushed thermometers as high as 43.8C (111F) in France. A troubling pattern has emerged in this summer’s heat: Not only has it broken records, it’s done so often by margins far above the previous all-time highs. These heat jumps are part of a larger shift of climate change seeming to accelerate. Ocean temperatures just reached a new high for the early summer. Sea levels are rising faster than before, while new records for daily rainfall are being set at a rapid clip. The pace of global warming itself has quickened in recent years. While scientists have long braced for climate change, the growing severity of its impacts is shocking them. Today’s climate can ‘seem like an unexpected step change’ from that of a few years ago, said atmospheric scientist Katharine Hayhoe of Texas Tech University.”
July 5 – Reuters (Ahmed Aboulenein and Nathan Layne): “A dangerous heat wave upended Fourth of July celebrations across swaths of the central and eastern U.S. on Friday, forcing officials in the nation’s capital and elsewhere to cancel or postpone dozens of parades, concerts and fireworks displays. Among the events disrupted by the sweltering heat was the Great American State Fair on the National Mall in Washington, a centerpiece of President Donald Trump's efforts to mark the nation's 250th birthday.”
July 9 – Bloomberg (Brian K Sullivan): “The weather-roiling El Niño that emerged across the Pacific last month has continued to build and will likely be one of the strongest in more than 75 years, the US Climate Prediction Center said. Sea surface temperatures of 1C (1.8F) or more above normal, the hallmark of the phenomenon, have spread across the central and eastern equatorial Pacific, and there’s an 81% chance it will become a very strong El Niño and rank among the ‘largest events in the historical record going back to 1950,’ the agency said in its monthly forecast. Some parts of the eastern Pacific reached 2.7C above normal in the last week.”
July 6 – Bloomberg (Ilena Peng): “As the deadly New World screwworm spreads through Texas, posing significant risk to the US cattle herd, experts are still puzzling over the mystery of how it got there. The parasite fly's larvae, which feeds within the wounds of warm-blooded animals, was first detected in a calf in Zavala County at the start of last month, marking the first case in the country's livestock in about five decades. Detections have grown to over 30, and it's still unclear how the pest got into the US or how it is spreading.”
Comments
Log in or sign up to join the conversation.