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.”
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.
