Jonathan Fortun / Institute of International Finance
A changing investor base is adding pressure to Japan's longest bonds as the Bank of Japan reduces its purchases. Weaker demand from life insurers and greater foreign participation make yields more sensitive to global bond-market conditions, even after reductions in super-long issuance. Stabilizing long-term borrowing costs may therefore require domestic demand, changes in issuance maturities or direct bond-market measures alongside decisions about the policy rate.
Jonathan Fortun / Institute of International Finance
July brought $18.8 billion in net portfolio inflows to emerging markets as equity withdrawals slowed sharply. Debt attracted $26.7 billion, while Asia shifted from the main source of outflows to the largest regional contributor. The note warns that a more hawkish Federal Reserve, coordinated yen intervention and geopolitical tensions could weaken the interest-rate advantage supporting debt inflows.
Jonathan Fortun / Institute of International Finance
After coordinated US-Japan intervention, the note estimates a medium-term yen equilibrium range of 125–138 per dollar, stronger than the market rate near 157. It distinguishes the model's unadjusted signal from a more conservative undervaluation estimate and shows how investment income retained abroad limits currency-market demand. Intervention may alter near-term risks, but sustained convergence would depend on a better policy mix rather than repeated currency purchases.
Marcello Estevão · Jonathan Fortun / Institute of International Finance
AI is reshaping international trade and capital allocation before its productivity gains are established, the authors argue. Their analysis distinguishes supplying chips and equipment from owning platforms and intellectual property that earn recurring income. Emerging economies may gain productivity through adoption while still paying more for imported hardware and digital services. Building exportable digital capacity could instead attract lasting investment and improve external balances.
Marcello Estevão · Jonathan Fortun / Institute of International Finance
Statistical revisions could change the apparent path of US inflation, growth and productivity. A change in measuring financial services could lower core PCE inflation, while broader revisions expose difficulties in tracking a technology-intensive service economy. These measurement choices could influence Federal Reserve judgments about sustainable growth and interest rates, with consequences for Treasury yields, the dollar and emerging-market financing.
Jonathan Fortun / Institute of International Finance
The July tracker reports a $17.8 billion net portfolio outflow from emerging markets in June: $28.3 billion of debt inflows were outweighed by $46.1 billion of equity withdrawals. Asian equity selling drove the overall result, while Chinese equities also became a drag. Strong sovereign issuance contrasts with the equity weakness. The note identifies a more hawkish Federal Reserve and renewed oil volatility as risks to dollar liquidity and emerging-market investment.
Jonathan Fortun / Institute of International Finance
Japan's policy rate has reached 1% amid firmer underlying inflation and pressure on long-term government bonds. Subsidies suppress headline prices, while wage growth, services inflation and a weaker yen could prompt further tightening. Elevated super-long yields reflect fiscal concerns and changing demand, complicating normalization. Wide estimates of the neutral rate favor a flexible assessment of risks over a mechanical policy rule.
Marcello Estevão · Jonathan Fortun · Phoebe Feng / Institute of International Finance
Financing the United States' role as a destination for global savings is becoming more costly, the authors argue. Its investment-income advantage is narrowing as market-priced portfolio liabilities become more important and respond to interest rates, valuations and hedging costs. Institutional portfolios increasingly channel savings into US assets. The dollar's central position persists, while the income-account cost of supplying those assets grows.