Research — 23 August 2026

Verdict

The Treasury's long-end buyback expansion is a signaling exercise that temporarily flattens the curve but does not address fiscal fundamentals; the more durable expression is a weaker dollar.

Desk views

GS Meschoulam argues the buyback can influence term premia but cannot eliminate them; the most likely outcome is a temporary flattening, not a permanent solution.

Evidence IDs · P017

GS desk sees the more durable expression as lower dollar rather than structurally lower rates, with the market skeptical about near-term fiscal consolidation execution.

Evidence IDs · P015

ING views the buyback as a signaling tool that the US Treasury has a problem with high bond yields, favoring a benign, risk-friendly dollar decline.

Evidence IDs · P029

Nomura's McElligott sees the buyback as a signaling exercise that losing the long end is a non-starter, with authorities capitulating into more activist posture.

Evidence IDs · P039

Investor implication

Favor short USD exposure, particularly against high-beta EM and commodity currencies; avoid structurally long UST duration until fiscal consolidation becomes credible.

Verdict

Wide rate differentials, upbeat risk sentiment, low FX volatility, and a softer dollar environment support long EM FX carry, with TS Lombard adding a basket of IDR, ZAR, HUF, BRL, MXN, COP, CLP vs USD.

Desk views

TS Lombard sees good risk/reward for long EM FX carry, with conditions broadly met and a new basket trade added.

Evidence IDs · P001

GS Global Markets Daily recommends staying long TRY, NGN and KZT against the USD.

Evidence IDs · P022

UBS maintains a preference for selected higher-yielding and pro-growth currencies, favoring diversified exposure to ZAR, BRL, MXN, and INR.

Evidence IDs · P047

Investor implication

Long EM carry baskets remain attractive while the dollar softens; monitor oil price spikes and Fed hawkishness as key risks.

Verdict

Rising oil prices, driven by US-Iran tensions and refinery outages, are pushing yields higher and squeezing consumers, creating a stagflationary backdrop that supports energy and gold as hedges.

Desk views

Deutsche Bank notes Brent crude advancing for a fifth consecutive session to $93.78/bbl amid US-Iran tensions, reinforcing pressure on rates and equities.

Evidence IDs · P009

GS Oil Analyst highlights global refinery runs down 7mb/d yoy while margins remain near record highs, with diesel margins above $100/bbl in the US.

Evidence IDs · P025

Jefferies notes the Diesel Crack Spread rose above US$100/bbl for the first time ever, arguing investors need to own oil and energy stocks as the best hedge.

Evidence IDs · P032

GS desk highlights Walmart's poor consumer data point, with fuel prices above $4 creating psychological impact and trade-offs.

Evidence IDs · P015

Investor implication

Maintain long energy and gold exposure as hedges; watch for consumer weakness spreading beyond Walmart and potential US-Iran de-escalation as a reversal catalyst.

Verdict

Accelerating Japanese inflation and government acquiescence after US joint intervention support a BoJ hike in September, but USDJPY remains elevated around 159 with limited FX impact so far.

Desk views

Natixis expects the BoJ to hike by 25bps to 1.25% in September, earlier than their previous call of October, driven by accelerated inflation and government support.

Evidence IDs · P035

MUFG notes core-core CPI jumped to 1.9%, backing market pricing of about 80% probability of a BoJ hike in September.

Evidence IDs · P034

GS desk notes Japan core CPI accelerated for a second month to 1.8%, keeping a September BOJ hike firmly live (80%) with USDJPY still around 159.

Evidence IDs · P015

Investor implication

A September BoJ hike is largely priced; USDJPY downside requires softer US data or more proactive BoJ communication. Watch Deputy Governor Himino's speech next Friday.

Verdict

Early signs are encouraging for AI monetization, with token volume doubling every 11 weeks and AI spend set to accelerate 29% to ~US$250bn, but record capex and FCF outflows make cloud assets difficult to underwrite until returns are proven.

Desk views

JPM highlights that token volume doubles every 11 weeks and OpenRouter data shows >4.5 quadrillion run rate, with AI spend set to accelerate 29% over the next 12 months.

Evidence IDs · P030

GS Privorotsky notes model economics keep improving stupidly fast, with useful intelligence per dollar exploding, which is bullish for AI adoption but less obviously bullish for token sellers.

Evidence IDs · P018

GS Vol Views notes AI-demand is still intact though the ferocity has abated recently, leading to notable restructuring of prior positions.

Evidence IDs · P028

Investor implication

AI infrastructure spend remains robust, but selectivity is key; favor companies with proven monetization and avoid crowded token/model access plays with eroding moats.

Verdict

BofA's August Asia Fund Manager Survey shows a clear shift toward defensive positioning, with 59% hedging AI downside risk by rotating into value, cyclical, and defensive sectors, more than double July's level.

Desk views

BofA survey shows 59% of investors are hedging AI downside risk by rotating into value, cyclical, and defensive sectors, more than double the level seen in July.

Evidence IDs · P004

Investor implication

Expect continued rotation into defensives (Utilities, Banks, Staples, Healthcare, Telecoms) and out of cyclicals and tech hardware in Asia ex-Japan; Japan remains concentrated in Banks and Semiconductors.