SPY•(Opinions expressed are those of the authors. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.)
China vs hedge funds in U.S. Treasuries market https://fingfx.thomsonreuters.com/gfx/mkt/zgvoeqjalvd/UST1.png
(By Anna Szymanski Editing by Marguerita Choy)
MIKE DOLAN, ROI Finance & Markets Columnist: As summer drew to a close this week, cooler September air chilled sovereign bond markets, with traders bracing for rate hikes around the world this month.
The U.S. 10-year Treasury yield, which is used to price 30-year mortgages, rose to its highest level since January 2025, Japan's benchmark 10-year bond yield topped 3% for the first time since 1996, and Germany's 10-year Bund yield hit the highest point in 15 years.
A breakdown of those yields suggests the latest move is being driven, at least in part, by "real," inflation-adjusted yields — not inflation expectations or the murkier "term premium." That could make these increases sticky.
JAMIE MCGEEVER, ROI Markets Columnist: The marginal buyer in the $29 trillion Treasury market has changed — and this could make the world's biggest, most liquid market more volatile. While China and other major central banks have shed their Treasury exposure in recent years, domestic "fast money" — including hedge funds and speculators — has increasingly been taking their place. Hedge funds now own some $2.6 trillion of all Treasuries outstanding, more than 8% of the market.
This means conservative, long-term, price-insensitive investors are being replaced by yield-sensitive, nimble private-sector investors with shorter time horizons and often quite a bit of leverage.
Right now, as Treasuries and global sovereign bonds undergo their heaviest selloff in decades, it is worth asking whether changes in the ownership structure of the U.S. bond market increase the chance that an "accident" turns a correction into a crisis.
ANNA SZYMANSKI, ROI Editor-in-Charge: Broadcom AVGO.O — the biggest company to report this week — has seen its shares slump since its earnings release on Wednesday. Although the U.S. chipmaker beat revenue expectations for the third quarter and lifted its 2027 AI chip revenue forecast, its fourth-quarter outlook was below analysts' estimates. Even before the latest decline, the company was trailing peers and the broader SOX chip index significantly. In the AI era, the bar for impressing investors just keeps rising.
RON BOUSSO, ROI Energy Columnist: President Donald Trump this week unveiled a highly unusual agreement granting the U.S. access to a fifth of Venezuela's oil reserves.
Under the proposal, the U.S. government will take a 35% stake in privately held North American Blue Energy Partners, which would receive a 100-year lease on 17 Venezuelan oilfields containing an estimated 65 billion barrels of reserves. In exchange, the U.S. will secure 20% of production and gain the right of first refusal on the remaining output.
The deal has sparked criticism in Venezuela, with some describing it as akin to modern-day colonialism and others arguing that it bears the hallmarks of election-year policymaking. What's clear is that the proposal carries significant political, legal and commercial risks, not least the threat of hampering the recovery it seeks to encourage.
GAVIN MAGUIRE, ROI Global Energy Transition Columnist: Renewed tensions in the Middle East this week have put crude oil prices back on investors' radar as a key gauge of economic stress, with the Brent benchmark rising above $95 per barrel. For U.S. voters, however, the more immediate concern is what they pay at the pump.
Fuel prices are likely to face upward pressure heading into the U.S. midterm elections, which are less than 10 weeks away. With the cost-of-living crisis already dominating the political debate, any further rise in gasoline prices risks becoming a daily reminder of inflationary pressures and a tangible measure of economic dissatisfaction for households.
