TREASURY TRANSFORMATION

Three structural forces are pushing up long rates: the budget deficit outlook, skyrocketing AI-related corporate debt issuance, and the changing nature of the Treasury buyer. In 2009, 40% of foreign Treasuries holdings were in central banks, today it’s roughly 12%. One-third of the shortfall has been made up by foreign private investors, increasingly dominated by hedge funds who finance their Treasury purchases by borrowing. What could go wrong?