This week's interesting finds

 

A chart worth discussing

“$445 billion in AI related debt issued year-to-date. 1.5% of US GDP. 8% of the size of the entire US investment grade corporate bond market. 25% of the annual US deficit.”

- Derek Skomorowski

Other charts worth pointing out

Private construction spending: offices and data centers

China’s exports and imports since 1990

Chinese domestic demand vs. imports

Hedge fund ownership positioning in mega-cap tech stocks 

Mutual fund ownership positions in the Mag 7 

Average hedge fund portfolio turnover since 2010

U.S. equity fund flows by category 

Mutual fund positioning in consumer staples

Number of stocks with negative beta to the S&P 500 Index

Auto loan repayments across income groups

Small business travel spending by category

Top 5% household spending vs. S&P 500 Index performance 

US Treasury to boost long-term bond purchases in bid to steady market

The US Treasury said it would “at least double” purchases of long-term government debt as policymakers seek to contain a sell-off that has sent borrowing costs soaring in the world’s most important bond market.

The more aggressive buyback operation affects Treasury securities maturing in 10 to 20 years and 20 to 30 years, increasing from $2bn to “at least” $4bn, the Treasury said on Wednesday.

The surprise move comes at a time of growing strains in the $32tn US Treasury market as investors fret over the burst of inflation triggered by Donald Trump’s Iran war and Washington’s mounting public-debt burden.

The Treasury said on Wednesday that the increased buybacks, which will begin on September 9, reflected its “desire to provide greater liquidity support” to long-dated US debt. It marks a significant expansion of a programme that is designed to facilitate market function for older and less actively traded Treasuries, known as “off-the-run” securities.

US government bonds rallied sharply after the announcement, with the yield on the 30-year bond down 0.08 percentage points to 5.21 per cent. The yield on 10-year debt, a benchmark for trillions of dollars in assets worldwide, slid 0.04 percentage points to 4.67 per cent.

The 30-year yield reached almost 5.34 per cent on Tuesday, the highest level since 2007, in a jump that has also ricocheted around the world. An auction of 30-year debt last week also saw investors buy government bonds at the highest yield since 2001.

The dollar also declined following the buyback announcement, with an index of the currency against six peers sliding 0.7 per cent on Wednesday.

Barclays analysts added that the Treasury’s decision to expand its buybacks just weeks after the quarterly “refunding” announcement, when it details its debt management plans, highlighted how “the recent rise in yields did catch [officials’] attention”.

In an early sign of the limits of the buyback strategy, the Treasury’s $16bn auction of 20-year bonds on Wednesday afternoon drew only modest appetite. The debt was sold at a yield of 5.204 per cent, a small premium to the 5.199 per cent on the secondary market, Bloomberg data shows.

The so-called bid-to-cover ratio, a measure of demand relative to the amount of debt sold, was 2.53, compared with this year’s average prior to the sale of 2.66.

Wall Street expects the agency to offset the buybacks by issuing more short-term debt, part of an effort to shift US borrowing towards Treasury bills that mature in one month to one year.

Yields on three- and six-month bills rose slightly on Wednesday, reflecting expectations for more issuance on the shorter end of the curve.

The yield on the 10-year note is closely watched as it tends to have a greater impact on the cost of borrowing for businesses and households, heavily influencing the price of products such as residential mortgages.

However, economists warn that longer-term borrowing costs will probably remain high amid concerns about inflation and vast US deficits.

This week’s fun finds

Scientists invent 'world's greenest party balloon'

Scientists in London have invented what they claim is the world's first fully biodegradable party balloon.

Researchers at Imperial College London say standard balloons can take years to break down and can release harmful chemicals.

But their new balloon biodegrades within nine months.

The research was part-funded by a party planner, who wanted to reduce the impact of balloon litter on marine wildlife.

The new balloon, called Bioloon, is no more expensive than a standard balloon and is easier to blow up, according to the scientists.

This week's interesting finds

 

A few charts worth discussing

“AI-linked issuance is becoming an increasingly significant source of capital across nearly every funding channel."

- Frank Mullen

Other charts worth pointing out

Historical 10-year yield change during U.S. Federal Reserve cutting cycles

Credit spreads by rating

Investment grade and hyperscaler bond issuance

Tech and AI drive nearly 40% of longer-duration issues

Travel spending by generation

Equal-weighted vs. cap-weighted S&P 500 performance

Megacap Technology/Media/Telecoms – fund ownership

Equity allocation mix

S&P 500 Index Earnings growth estimates

Ratings Firm Accused of Grade Inflation Vouched for $40 Billion of Insurer Debt

Egan-Jones Ratings, based in King of Prussia, Pa., is being sued by two former employees who allege that it pressured staff to inflate ratings to gain business. The Securities and Exchange Commission has questioned the company’s reliability, and a regulator in Bermuda, where insurers park a huge amount of capital, has stopped accepting the firm’s ratings.

Ratings firms play a crucial role in making sure life and annuity insurers don’t take too much risk when investing policyholders’ premiums. That is because the credit rating on each investment generally determines the dollar amount an insurer must set aside to protect against the risk of loss. A better rating means insurers don’t have to set aside as much capital.

Life insurers chasing higher returns have splurged on private credit deals in the past decade, leading to a sharp increase in confidential, or “private letter” ratings assigned by firms like Egan Jones that often accompany the investments.

A wave of defaults on often illiquid private-credit assets has brought attention to the potential pitfalls that come with lending to smaller or less-creditworthy businesses, and stoked concern about the ratings assigned to these investments even though they apply to a fraction of the total debt owned by insurers. 

Many insurers have debt rated by Egan-Jones on their books, according to the Journal’s analysis, which drew on ratings data disclosed by the firm and investment holdings data from the National Association of Insurance Commissioners.

Among the biggest holders are insurance companies controlled by Mark Walter, the financial titan who owns the Los Angeles Dodgers. Egan-Jones rated about $2.6 billion of loans held by Walter’s insurers, the analysis showed, including debt issued by American Media Productions, a firm controlled by a Walter affiliate that owns the Dodgers’ local TV broadcaster.

Loans tied to Walter’s business empire are at the center of a federal investigation into possible fraud. Egan-Jones said its understanding is that the Walter investigation is focused on disclosures, not ratings. A spokesperson for Walter’s insurers declined to comment.

Insurance companies and the state commissioners who regulate them have long relied on public ratings from Moody’s Ratings or S&P Global to assess risk and determine how much of a financial cushion insurers should hold for each bond they invest in. Those letter-grade credit assessments have historically been limited to public debt. But that changed in the past decade as private credit in life insurer portfolios swelled to an estimated $980 billion, or about a quarter of total holdings, as of 2025, according to an estimate by insurance-company ratings firm AM Best.

Rather than go to insurance regulators for an individual assessment of how much capital to hold for each private investment, insurers and debt issuers began paying for confidential, or private-letter, ratings. Insurers held about $480 billion worth of privately rated debt instruments in 2025, more than 10 times their $47 billion value in 2018, when companies first began disclosing their use, the Journal’s analysis shows. Most were for private debt, but insurers can also seek private-letter ratings on public securities.

Egan-Jones is among the main players in the private-letter ratings business but has lately attracted considerable scrutiny. The lawsuit filed in 2024 by the firm’s two former executives alleged they were fired after telling securities regulators they were concerned about conflicts of interest.

In its statement, Egan-Jones denied the allegations by the former employees and said they were establishing a competing ratings business.

In a September 2023 letter to Egan-Jones, the SEC wrote that the firm’s incentives for analysts could lead to compromised ratings. And in March, the Securities and Exchange Commission questioned Egan-Jones’s capacity to “consistently produce credit ratings with integrity” on asset-backed securities, a type of debt instrument it was seeking permission to rate. An SEC spokesperson declined to comment.

Egan-Jones said the incentives referenced by the agency were part of a work-tracking system commonly used by businesses.

In January, regulators in Bermuda removed Egan-Jones from its list of recognized ratings providers. A study by the National Association of Insurance Commissioners said private-letter ratings from small firms, a group that includes Egan-Jones, were often inflated. The group has pulled the report from its website, saying it needed to clarify its findings.

The general lack of disclosures around private credit have been a concern for investors and lawmakers worried about hidden risks in the industry. Evaluating private-letter ratings is difficult because so few are disclosed, and unlike with big publicly traded bond issues, the investments are frequently rated by only one firm.

In its analysis of a data set of 5,000 private-letter deals rated by Egan-Jones, the Journal also assessed how the firm’s ratings compare with those of peers, drawing on limited publicly available data. The Journal found 52 investments that carried ratings from Egan-Jones and another firm covering the same period. Among those, Egan-Jones’s ratings were on average one notch higher than those of the other raters. In two dozen cases, they were at least three notches higher, the Journal’s analysis shows. Egan-Jones had a lower grade in 18 instances.

Methodology

The Journal assembled and analyzed a data set of nearly 18,200 private-letter rated instruments, drawing on filings made by insurance companies. Egan-Jones issued ratings for more than a quarter of those instruments, based on the Journal’s analysis of disclosures made by six ratings firms. The Journal identified 52 instruments across 79 rating actions where Egan-Jones and at least one other firm maintained an active credit rating.

To measure changes in ratings, the Journal converted letter ratings into numerical designations used by insurance regulators. The Journal only looked at ratings that were in effect during overlapping periods and used discrete, nine-character identifiers—known as Cusip numbers—to identify debt instruments that were rated by both Egan-Jones and a competitor.

Many of the ratings compared by the Journal applied to publicly traded bonds. Egan-Jones said that in many of those cases, it provided unsolicited ratings for its subscribers, using only publicly available information. Egan-Jones said it uses the same methodology whether ratings are private or public, solicited or unsolicited.

This week’s fun finds

From myth to reality. Kris from the Operations Team hosted one of the most anticipated moai’s of the year. He arranged to have infamous focaccia sandwiches delivered from his hometown of Bolton to our Toronto office. They were fresh, flavourful and offered a ton of variety for everyone to enjoy.

Scientists Reveal Why Mosquitoes Bite Some People More Than Others

Ever felt like mosquitoes bite you while ignoring everyone else?

Scientists are now making progress in deciphering the complex chemical cocktail that makes particular people more enticing to these disease-spreading bloodsuckers.

A range of sensory cues can cause mosquitoes to pick one human over another – mainly the smell and heat our bodies give off, and the carbon dioxide we exhale.

Female mosquitoes – which are the only ones that bite – detect these signals with finely-tuned receptors, then choose their target accordingly.

This week's interesting finds

We’re hiring!

We're always looking for talented people who can help us achieve our goals and we understand that extraordinary human ability is a scarce resource in high demand. If you think you've got some and are interested in our company, please send your resume to: WeAreGrowing@edgepointwealth.com.

We're currently looking for an Investment Analyst.

A few charts worth discussing

“China isn’t the only country with a ‘not enough babies’ problem.”

- Jeff Hyrich

Other charts worth pointing out

Canadian interest payments by level of government

2026 loan & high-yield return by rating

Household air conditioning by country

U.S. & Japan – exchange rates vs. interest rates

Japanese equity ownership by shareholder type

Employment and wage growth across income levels

Savings-to-spending ratios by generation

10-year U.S. Treasury yields vs. Effective Federal Funds Rate

S&P 500 Index and 10-year bond return correlations

North American merger & acquisition volumes

S&P 500 Momentum Index – relative total returns & volatility

S&P 500 Index Shiller P/E ratio vs. U.S. labour productivity

Historical ROE – S&P 500 Index vs. TMT sector

Relative performance of the best-performing U.S. equity vs. the rest of the market

Non-U.S. equity performance during major technology sector sell-offs

Style performance during major technology sector sell-offs

US Factory Activity Expands at Strongest Pace Since 2022

The Institute for Supply Management’s July manufacturing gauge rose to 55.6, the highest since May 2022, according to data out Monday. Readings above 50 indicate growth, and the sector has now been above that mark for seven consecutive months. 

The gauge for production rose to 58.5, its highest level since late 2021, while the employment measure indicated manufacturers increased headcount for the first time since September 2023. New orders growth — a sign of demand — also picked up.

The manufacturing sector has gained momentum this year, with factories benefiting from resilient consumer demand, solid business investment and government outlays on defense. 

All but one manufacturing industry reported growth in July, with chemical products being the only sector that contracted. Printing, apparel and electrical equipment were among the industries that grew. 

The report reflects a volatile month in the Middle East. The interim peace deal between the US and Iran effectively collapsed, driving up oil prices. After a brief respite in hostilities, fighting in the five-month war flared again toward the end of the month as attacks spread throughout the region.

High Prices

Factories continued to face longer lead times on supplier deliveries and rising prices for raw materials. ISM’s prices index fell to 71.1 in July, the lowest in five months but still significantly higher than at the beginning of the year.

The report pointed to price pressures including tariffs and increased costs for petroleum-based products due to conflict in the Middle East.

ISM’s gauge of exports for July was the highest since March 2022 and a measure of imports climbed to its best mark since June 2021.

This week’s fun finds 

The 25 Sculptures That Define the Modern Age

Sculpture occupies an odd place in contemporary art. Because of their sheer physical presence, sculptures are often harder to show, not to mention more difficult to sell: This fact forces the medium into a secondary role behind painting, especially in a business so obsessed with the markets. And yet, sculpture is arguably the art that the public, throughout history, has tended to interact with the most, even if we’re not always paying it much attention. Sculpture is an indelible part of the global landscape. It’s in our public plazas, our corporate office parks. Celebrated (and often meticulously preserved) as a form of creative expression across the world, sculpture goes back to the prehistoric age, to early peoples’ use of stone flints to carve anthropomorphic figures out of mammoth ivory. Every culture since has made its own totems, sometimes to mark its triumphs and tragedies, and sometimes for reasons that are less clear. 

To choose the 25 most important works of sculpture made since 1945, we asked a panel of experts to gather at the New York Times building in March. They included the artists Firelei Báez, 45; Charles Gaines, 82; Adam Pendleton, 42; and Arlene Shechet, 77 — each of whom has, to varying degrees, explored and advanced sculpture in their work — along with Ruba Katrib, 44, the chief curator of MoMA PS1 in Queens and the former curator of the nearby SculptureCenter, the only museum in New York explicitly dedicated to the medium. Any task that ends in anointing something “the most important” is highly subjective and should be considered with a heavy dose of skepticism; a different group would have come up with different selections, and it’s easy to imagine the following list turning out differently had this same group met at a different time on the same day.

This week's interesting finds

Check out the second quarter podcasts! 

Investment Team members Jason Liu and Tracey Chen discuss their Q2 2026 commentaries with relationship manager Sydney Campbell.

A few charts worth discussing

“The U.S. fiscal situation is top-of-mind for me this week, especially after the FOMC rate decision on Wednesday. There seems to be no real path toward a balanced budget other than cuts to military spending (which seem unlikely) or cuts to entitlements such as Medicare and Social Security.”

- TJ de Gruijter

Other charts worth pointing out

Investment-grade corporate bond markets by currency

AI-related investment-grade debt issuance

AI-related high-yield and leveraged loan issuance

YTD software index performance

10-year government bond yields – U.S., Germany and Japan

Maturing U.S. Treasury debt within one year

Strait of Hormuz tanker vessel transit activity

China crude oil imports 

U.S. Strategic Petroleum Reserve levels

Historical U.S. household savings rate

European cyclicals vs. defensives – relative price

Minister apologizes as Korean leveraged ETF investors nurse heavy losses amid chip stock rout

The May 27 introduction of single-stock leveraged Exchange Traded Funds has seen Korean retail investors pile in with net purchases of 14 trillion won ($9.7 billion), compared with roughly 2 trillion won by foreign investors, according to KB Financial Group.

But the speculative trading boom that helped fuel one of the world’s hottest equity markets has resulted in those investors nursing heavy losses as Korea’s Kospi index has experienced a sharp correction, led by a downturn in chip stocks.

The pain has been especially acute for holders of single-stock leveraged ETFs tied to chip giants Samsung Electronics and SK Hynix, which had surged alongside the AI-driven semiconductor rally.

The KODEX SK Hynix Single Stock Leverage ETF — a product designed to deliver twice the daily move in SK Hynix shares — has fallen more than 80% since its June 23 peak, according to LSEG data.

It comes after a blistering rally in the Kospi has come to an abrupt halt, with jitters over chip stocks seeing the value of the index plunging almost 35% over the last month.

South Korea’s finance minister Koo Yun-cheol accepted lawmakers’ demand for an apology in a parliamentary session on Wednesday after single-stock leveraged ETFs were introduced without careful consideration, according to Reuters.

The country’s Financial Services Commission Lee Eog-weon also said on Wednesday that the regulator is considering cutting off access to the products to all but professional investors.

This week’s fun finds

To celebrate the Toronto Caribbean Carnival (a.k.a. Caribana), relationship manager Aisha organized a laid-back Moai full of good food, music and vibes. Carnival is all about energy, culture and bringing people together. Her Moai kept that same spirit with a spread of flavourful Caribbean dishes. It was a perfect way to kick off the long weekend. Thanks, Aisha!

‘Spider-Man’ superhero jumps to the aid of a man using wheelchair to cross several lanes of traffic

A man using a wheelchair was struggling to get across six lanes of traffic in an Arkansas city when help came in an unexpected way — from a spidery superhero who jumped into action from a red Jeep waiting at a light.

Christopher Hellenthal was still garbed in his Spider-Man costume from a superhero-themed event at a trampoline park where he works when he spotted the person in traffic Tuesday and ran out to help, declaring: “I got you.”

Hellenthal swiftly rolled the person in the wheelchair to safety only seconds before the light changed and the rows of traffic advanced. The moment was captured by a street security camera in the city of Jonesboro and shared on social media by local police, who thanked Hellenthal for helping the man reach safety across the crosswalk.