FX & Y, North America

If there has been one consistent message in our analysis over the past few years, it is that global portfolios have crowded—to an unhealthy degree—into a single bet: the US technology sector, and by extension the US dollar. Yesterday offered a small but telling illustration showing why that should trouble investors. Shares linked to artificial intelligence sold off. The yen and the Swiss franc rallied. And yet the dollar tumbled. That is not how a reserve currency is supposed to behave on a risk-off day. It is how a risk-sensitive currency behaves. A long period of US exceptionalism set the...

The US Treasury market has long served as the world’s financial anchor—deep, liquid and reliably stable. That reputation for placidity is becoming harder to sustain*. America is borrowing at a pace that would have seemed extraordinary a generation ago, and the buyers who once absorbed that paper without blinking are quietly stepping away. The scale of the fiscal expansion is astonishing. Publicly held US debt has risen more than fourfold since the global financial crisis and now tops 100% of gross domestic product—a threshold last breached in the aftermath of the second world war. America borrows more than every other...