Jonathan Fortun / Institute of International Finance
Jonathan Fortun examines why portfolio flows to emerging markets reversed in September. Flows fell to a net outflow of $26.3 bn from an $11.4 bn inflow in August, the first outflow since June, as a hawkish Fed pushed up U.S. real yields and the dollar. Equities drove the swing with $19.2 bn of outflows, mostly heavy foreign selling of Korean shares, while debt flows were negative at $7.0 bn once hard currency demand faded and credit spreads widened late in the month. The note concludes that Fed projections of further hikes, a BoJ at its highest rate since 1995 and tightening across advanced economies raise the bar for EM carry in the fourth quarter.
Jonathan Fortun / Institute of International Finance
Jonathan Fortun asks whether fiscal pressure is behind the rise in long Japanese yields and the weakness of the yen. The note finds that the 10 year JGB yield has risen by more than 100 basis points in 2026, even as its premium over swaps has narrowed. Forward rates five to ten years out sit well above the Bank of Japan's estimated neutral range, which points to a higher expected policy path, greater uncertainty, or both. The yen is also weak relative to the U.S. and Japanese yield gap, possibly reflecting fiscal expansion and outward investment by residents. Because average coupons trail current yields, interest costs should keep climbing as debt rolls over.
Marcello Estevão · Jonathan Fortun / Institute of International Finance
Marcello Estevão and Jonathan Fortun examine how the AI investment boom may affect the cost of long term capital. Five AI intensive companies raised $157 billion through August 2026, adding $108 billion in ten year equivalents, about one fifth of long end Treasury supply. Bond markets absorbed this duration without lasting borrower specific repricing, but the authors argue that stronger investment can still raise the common real rate. Emerging markets may face costlier dollar financing even as countries able to host AI infrastructure attract capital.
Marcello Estevão · Jonathan Fortun / Institute of International Finance
Marcello Estevão and Jonathan Fortun argue that higher US long term yields primarily reflect the real returns investors demand, rather than a sharp rise in inflation compensation. Persistent federal borrowing adds to financing pressures across the economy, but markets are not visibly imposing a larger Treasury specific premium than at the start of the year. Refinancing older debt at higher rates will continue to lift federal interest costs even if yields stabilize, while deficits before interest payments make the debt outlook more sensitive to growth and interest rates.
Jonathan Fortun · Martín Castellano · María Paola Figueroa / Institute of International Finance
Fiscal credibility shapes borrowing costs through different channels across Latin America. Jonathan Fortun, Martín Castellano and María Paola Figueroa contrast Brazil’s high domestic financing costs with Mexico’s sovereign repricing ahead of a rating downgrade. In Colombia, lower spreads already reflect expectations of political and fiscal improvement, leaving the country exposed if those expectations are not met. The comparison places institutional strength and credibility alongside debt levels when assessing sovereign risk.
Jonathan Fortun / Institute of International Finance
Emerging markets attracted $11.3 billion in portfolio inflows in August, with debt accounting for almost all of the total despite high US bond yields and no sovereign issuance. Equity purchases in Taiwan and India offset selling elsewhere. Jonathan Fortun examines whether demand for emerging market debt can withstand upcoming Federal Reserve and Bank of Japan decisions and the return of new issuance.
Marcello Estevão · Jonathan Fortun / Institute of International Finance
Higher long yields increasingly reflect the real cost of capital. Real yields explain most of the 2026 increase in the United States and Japan, while inflation compensation plays a larger role in Britain and Germany. Bond and swap markets reveal how fiscal demands compete for savings. Debt management and currency intervention can buy time, but durable relief requires fiscal adjustment and credible inflation control.
Bolivia’s IMF program has advanced on exchange rate reform and central bank financing, but fuel pricing remains its hardest political test. Jonathan Fortun examines how currency depreciation and import costs have eroded earlier subsidy reforms, arguing that postponement can shift the adjustment from higher pump prices to shortages. The essay connects reform sequencing with the credibility of the 2027 budget.