Investors are increasing expectations that the European Central Bank will raise rates in 2026 even as the Federal Reserve continues easing, widening the policy gap and posing fresh pressure on the dollar. Swap markets now imply a small ECB hike next year, reversing expectations of further cuts, as hawkish signals from Eurozone, Canadian and Australian officials gain traction. The divergence comes as US rates move lower and global bond yields rise, with traders watching this week's Fed meeting for guidance on the pace of additional cuts.

Foreign investors now make up about 65% of monthly Japanese government bond trading, amplifying market volatility as the Bank of Japan scales back purchases and yields hit multi-decade highs. Prime Minister Sanae Takaichi's fiscal push and expectations of another rate hike are further heightening sensitivities, with analysts warning that faster-moving offshore funds could export turbulence into global fixed-income markets.

The Reserve Bank of Australia held rates at 3.6% and signaled the next move could be a hike as inflation risks tilt upward and domestic demand proves stronger than expected. Governor Michele Bullock ruled out cuts and said policy now hinges on whether the bank maintains an extended hold or responds to persistent price pressures, prompting markets to price in earlier tightening next year.

US bond investors are positioning for a mild Federal Reserve easing cycle by reducing long-duration exposure and favoring intermediate Treasurys, reflecting expectations of fewer rate cuts in 2026 and a higher neutral rate near 3%. With inflation still above target and policy uncertainty elevated, banks and asset managers say the belly of the curve offers better risk-adjusted returns than traditional long-bond strategies.

South Korean individuals increased their overseas bond holdings by $16.1 billion over the past year, surpassing the National Pension Service as higher US yields draw retirees toward Treasuries. The shift reflects a prolonged US-Korea rate inversion and aggressive brokerage marketing, though analysts note risks from potential rate increases or a weaker dollar.

Private credit is increasingly resembling the public debt market as rapid industry growth pushes its scale to roughly $3 trillion, up from $2 trillion in 2020, according to Morgan Stanley. Analysts warn the convergence brings new risks, including weaker underwriting standards and reduced transparency as private lenders take on characteristics traditionally associated with bond markets.

JPMorgan CEO Jamie Dimon has formed a high-profile advisory council, including Jeff Bezos, Condoleezza Rice and former NSA director Paul Nakasone, to guide the bank's $1.5 trillion "Security and Resiliency Initiative" aimed at strengthening US supply chains and critical technologies. Dimon also named Todd Combs to run a $10 billion investment fund within the effort, which focuses on national security priorities from rare earths to AI.

Hong Kong regulators urged investment banks to raise the quality of IPO submissions as listings surge to their highest level since 2021, with equity capital raised reaching $75 billion this year. HKEx and the Securities and Futures Commission issued a joint call for stricter vetting to protect investors and bolster the city's competitiveness as a regional capital-markets hub.

European leaders signaled growing confidence in sealing a year-end agreement to use frozen Russian sovereign assets to back a €90 billion loan for Ukraine, amid mounting pressure to secure new financing as US aid stalls. Talks in London aligned positions on reconstruction and security guarantees, though divisions remain with Washington over peace terms and with EU members like Belgium over asset use.

The US Commodity Futures Trading Commission has launched a pilot program allowing Bitcoin, Ether, and USDC to serve as collateral in derivatives markets, part of Acting Chair Caroline Pham's broader push to modernize digital asset oversight. The initiative, which includes new reporting requirements for futures commission merchants, rolls back older restrictions and could accelerate institutional use of tokenized collateral.

At the recent US-China Symposium on Building the Financial System of the 21st Century, SIFMA President and CEO Kenneth E. Bentsen, Jr. shared perspectives on the future of the US-China financial relationship. In this post, he highlights the scale of US-China capital flows and progress on market access; The growing nexus of national security and capital markets; and SIFMA's priorities: fair market access, strong investor protections, transparency, and pragmatic data rules.