John Velis, Americas Macro Strategist at BNY, joined Keith Black, Managing Director of RIA Channel to discuss trends in global markets, particularly in U.S. Treasuries, consumer sentiment, and the weakening dollar.
BNY’s iFlow data, which is derived from $52 trillion in assets under custody and administration, shows a trend of foreign selling of U.S. Treasuries, which has been occurring for about a year.
Despite the expectation that U.S. Treasuries would be a safe haven during periods of market stress, foreign investors have been shedding these assets, particularly around events like the “tariff tantrum” and the market swoon of August 2024. Velis speculated that this could lead to higher bond yields in the future.
Interestingly, Velis noted that while institutional investors were selling into market dips, retail investors were buying the dip. The retail data comes from BNY Pershing’s custodial data. This behavior suggests that retail investors may be taking a long-term, buy-and-hold approach, while institutional investors are more bearish. Velis remarked on the contrast between retail and institutional sentiment, noting that consumer sentiment data reflects concerns about inflation and financial outlooks.
As for the weakening dollar, Velis explained that this is not a result of foreign investors shunning U.S. assets, but rather a reaction to hedging currency exposure. Institutional investors are buying U.S. assets and selling forwards to hedge against currency risk, which is putting downward pressure on the dollar. This marks a reversal from previous years when foreign investors benefited from a stronger dollar.
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