1. Hyperscalers are issuing so much debt and are pushing up bond yields.

Analysts point to the laws of supply and demand: if there is a jump in need for borrowing, lenders can charge higher interest rates, pushing up yields.
Five of the biggest AI hyperscalers — Alphabet, Amazon, Meta, Microsoft and Oracle — have issued $220 billion of debt already this year as they fund investments in data centres and models, LSEG data shows. This is more than double last year's total figure.

Below: The hyperscalers have already issued more than $220 billion of debt this year.

2. Bond investors seek to impose fiscal discipline on governments by demanding higher compensation to buy their bonds.

Many investors say the current rise in yields is orderly and reflects higher borrowing and inflation.
Falling oil prices would help short-term, but ultimately, longer-term borrowing costs will only come down durably once governments take concerted steps to bring down debt or boost growth, they say.
Unless they do that, bond investors will be on alert.

Below: Debt-to-GDP ratios.

3. It's a natural movement for Japanese investors to pull money out of the U.S. and back into Japan.

"I know it first hand from talking to Japanese investors," said Michael Weidner, co-head of global fixed income at Lazard Asset Management. "They've underinvested in yen securities for probably 25 years. Now it's become more attractive and they are reallocating."
Toshinobu Chiba, a Tokyo-based fund manager at Simplex Asset Management, is one of those investors, saying he's gone bearish on U.S. Treasuries and started buying the 10-year Japanese government bond just before its recent peak in yield.
"It's easy to buy the 10-year at above 3%," said Chiba.

4. A weaker USD typically helps international stocks to perform.

“The USD has been acting as a safe haven during the geopolitical escalation, but does not look cheap, and could resume depreciating thereafter.”
Below: USD positioning is at a record high.

5. Volkswagen faces 'existential' choice.

Citi says CEO Oliver Blume "is doing what needs to be done at VW", but investors have yet to benefit as a succession of structural headwinds, from falling China sales and competition to U.S. tariffs and electrification costs, continue to weigh.
Volkswagen's European cost base looks unsustainable. The bank estimates manufacturing costs at around 4,700 euros per car in Europe, compared with roughly 2,500 euros for best-in-class European rivals and 1,700 euros in China. Its German workers earn about €75 an hour, versus roughly €50 for the average German worker and around €15 in China.
Volkswagen faces a defining moment this week as the carmaker's supervisory board prepares to vote on management's restructuring plans, including the closure of several German plants and a further 50,000 job cuts.
"No further change is not an option," writes the analyst.
The warning comes at a time when Volkswagen's shares are languishing near 16-year lows and trading at record-low valuation multiples, ie 0.2 book value.

Below: Price-to-book values

Not a subscriber yet?