Investors are pulling out of long term US bond funds at the fastest pace since early 2020, the Financial Times reports. Nearly USD 11 bn left long-dated government and corporate bond funds in 2Q — a stark reversal from the average USD 20 bn in inflows over the past three years.

The bigger picture: The US bond market is often used as a reflection of wider investor sentiment, with recent outflows pointing to a growing discomfort with the long end of the treasury curve amid ballooning supply, political dysfunction, and renewed inflation risks from Trump’s tariff agenda. Inflation is also expected to rise as the effect of the trade levies start to be felt, dampening confidence even more by eroding yields on longer-dated bonds.

Another USD tns in debt still to come? At the same time, a sweeping tax-and spending package advanced by the Republican-controlled US Senate over the weekend is deepening investor jitters over the country’s long-term fiscal outlook, Reuters reports. If the senate passes the bill, it returns to the House for final approval before heading to Trump’s desk.

The bill: The legislation — which would extend Trump-era tax cuts, raise military and border spending, and lift the debt ceiling by USD 5 tn — passed a procedural hurdle by 51-49 after hours of backroom negotiations. Analysts predict it could add USD tns to the current USD 36.2 tn worth of US government debt.

Higher inflation is bad for long-term bonds: Currently, inflation — to which longer-dated bonds are sensitive as the value of fixed-interest payments erodes over time — remains above the target, and investors are already demanding high yields to absorb the supply.

On the flip side, funds holding short-term US debt have seen over USD 39 bn in inflows this quarter as yields remain strong after the Fed’s decision to keep short-term rates high. Greater diversity in maturity dates for holdings is also an option for investors, RBC Global Asset Management’s Andrzej Skiba told the Financial Times.

MARKETS THIS MORNING-

Asian markets are mostly in the green, as data out of Japan showed an increase in industrial output and China’s purchasing managers’ index showed another month of contraction. Japan’s Nikkei hit a six-month high, rising 1.5%, while China’s CSI 300 rose 0.2%. On the flip side, Hong Kong’s Hang Seng lost 0.5%.

Over on Wall Street, futures have also inched up after another rally last Friday, which saw the S&P 500 and Nasdaq notch new records.

ADX

9,886

+0.8% (YTD: +5.0%)

DFM

5,684

+1.3% (YTD: +10.2%)

Nasdaq Dubai UAE20

4,663

+1.4% (YTD: +12.0%)

USD : AED CBUAE

Buy 3.67

Sell 3.67

EIBOR

4.2% o/n

4.2% 1 yr

TASI

11,203

+1.2% (YTD: -7.1%)

EGX30

33,207

+0.6% (YTD: +11.6%)

S&P 500

6,173

+0.5% (YTD: +5.0%)

FTSE 100

8,799

+0.7% (YTD: +7.7%)

Euro Stoxx 50

5,326

+1.6% (YTD: +8.8%)

Brent crude

USD 67.44

-0.7%

Natural gas (Nymex)

USD 3.68

-1.5%

Gold

USD 3,269

-0.6%

BTC

USD 108,166

+0.7% (YTD: +15.3%)

Chimera JP Morgan UAE Bond UCITS ETF

AED 3.6

-1.6% (YTD: +1%)

S&P MENA Bond & Sukuk

145.29

-0.1% (YTD: +3.8%)

VIX (Volatility Index)

16.32

-1.6% (YTD: -5.9%)

THE CLOSING BELL-

The ADX rose 0.8% on Thursday on turnover of AED 1.9 bn. The index is up 5.0% YTD.

In the green: Al Khaleej Investment (+7.9%), Rak Properties (+7.6%) and Abu Dhabi National Co. for Building Materials (+7.5%).

In the red: Oman & Emirates Investment Holding Co (-10.0%), Sharjah Cement and Industrial Development Co. (-3.1%) and Presight AI Holding (-2.9%).

Over on the DFM, the index rose 1.3% on turnover of AED 954.5 mn. Meanwhile, Nasdaq Dubai was up 1.4%.

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