Bitunix Analyst: Record Overseas Capital Inflows into US Stocks, Strong Equities and Weak Bonds Reveal Divergence in USD Asset Pricing
BlockBeats news, September 28 — Global capital allocation to U.S. assets has shown clear divergence. In the 12 months through July of this year, overseas investors net bought about $942 billion of U.S. equities and funds, a record high since statistics began in 1985; over the same period, overseas buying of U.S. Treasuries weakened. This reflects that international capital has not fully withdrawn from dollar assets, but is instead concentrating bets more heavily on the profit outlook for AI and technology companies. As corporate earnings expectations continue to be revised upward, U.S. equities have the capacity to temporarily absorb higher discount rates, but this support still depends on whether future performance can be delivered.
The pressure on the bond market comes from the other side. The U.S. 10-year Treasury yield has risen to its highest level since 2007, while the spread between the 2-year and 10-year has narrowed to 17 basis points, indicating that while the market is digesting more rate-hike expectations, it has also begun assessing the risk of excessive monetary tightening. The U.S. deficit remains close to 6% of GDP, and government financing needs together with AI company bond issuance are competing for funds, making high yields no longer merely inflation compensation but also a reflection of bond supply and duration risk. If short-end rates continue to rise and the curve flattens further, pressure could transmit from the bond market to banks' net interest margins and corporate financing costs.
Another variable in monetary policy comes from Japan. The Bank of Japan raised rates to 1.25% in September, and the latest meeting minutes show that some members discussed accelerating rate hikes as early as July; former policy officials also believe that another rate hike in October is already an option that needs serious assessment. If Japan continues to narrow the rate differential with the United States, the incentives for yen and Japanese capital allocation may change, further affecting global bond demand. However, the timing of rate hikes still depends on underlying inflation and exchange-rate changes and cannot be regarded as a foregone conclusion.
Next, the market needs to judge whether the productivity gains brought by AI can support corporate profits while easing cost pressures. Bessent believes technological progress will help expand supply, but core CPI is still up 2.4% year over year, above the Federal Reserve's 2% target; if inflation fails to cool sustainably, the policy rate may remain restrictive or even tighten further. At present, support for U.S. equities comes from corporate profits, while pressure on U.S. Treasuries comes from inflation, policy, and fiscal supply; whether the two can continue to diverge hinges on whether earnings growth is sufficient to offset rising funding costs.
