Investors are increasing expectations that the European Central Bank will raise rates in 2026 even as the US 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. Japanese 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.

US bond investors are positioning for a mild US 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.

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.

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.

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.

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