Investors flee US long-term bonds at swiftest rate since Covid-19

Today’s agenda: Trump changes tune on Zelenskyy; Von der Leyen faces no-confidence vote; Meta wins AI copyright case; Pilita Clark on the next financial crisis; and why fish are getting smaller

Good morning. Investors are fleeing long-term US bond funds at the swiftest rate since the height of the Covid-19 pandemic five years ago, according to Financial Times calculations based on EPFR data.

Why it’s happening: America’s soaring debt load is causing jitters among the institutional investors that use these funds. President Donald Trump’s “big, beautiful” tax bill, which is under consideration in Congress, is forecast to add trillions of dollars to US debt over the next decade, something that would force the Treasury department to sell a huge amount of bonds. Investors are also bracing themselves for higher inflation from the administration’s tariffs.

Why it matters: The outflow “reflects concerns over the longer-run outlook for fiscal sustainability”, a Goldman Sachs analyst said. Longer-dated bonds are particularly sensitive to inflation, which erodes the value of fixed interest payments. Investors might opt to diversify their bond holdings more internationally, one asset manager said, and start demanding “more compensation to invest further out the curve” when it comes to buying new Treasury bonds.

Here’s more on the exodus from long-term US bonds.

Here’s what else we’re keeping tabs on today:

• US: First quarter GDP estimate.

• EU: A two-day European summit begins in Brussels, while the European Central Bank’s general council meets online.

• UK: Prime Minister Sir Keir Starmer will launch a new trade strategy focused on boosting services export, while Bank of England governor Andrew Bailey speaks at the British Chambers of Commerce’s annual conference.

• Results: H&M, Nike and Walgreens Boots Alliance report earnings.

Five more top stories

1. Trump has described Volodymyr Zelenskyy as “very nice” after meeting Ukraine’s leader on the sidelines of the Nato summit. He however struck a tougher note on Russia. The US president has oscillated in his attitudes towards both sides but has grown increasingly frustrated with Moscow of late. He said yesterday that “Vladimir Putin really has to end that war”.

• More Nato: Allies have pledged to meet Trump’s demand to raise defence spending to 5 per cent of GDP by 2035, in a historic rearmament shift.

2. Exclusive: European Commission president Ursula von der Leyen is facing a no-confidence vote over a Covid-19 pandemic scandal that threatens to scupper her second-term policy agenda. Far-right lawmakers in the European parliament claim they have secured sufficient support for their motion, with one MEP telling the FT he would submit it today.

3. Meta has won a copyright case over its artificial intelligence models, with a US federal court ruling that its use of millions of books to train them was “fair”. The tech group had argued the titles had been used to develop a transformative technology, which was fair “irrespective” of how it acquired the works.

• Nvidia: The chipmaker’s shares hit a record high yesterday, putting it ahead of Microsoft as the world’s most valuable company.

• Reddit: Chief executive Steve Huffman warned the platform was pushing to protect its online communities from a surge in AI-generated content.

4. Trump has branded Zohran Mamdani “a 100% Communist Lunatic” after the New York mayoral hopeful won a surprise victory in the city’s Democratic primary. Trump’s post came hours after the 33-year-old leftwing candidate emerged from obscurity to shock the national Democratic establishment.

5. Exclusive: Private equity-backed software group Visma has chosen London over Amsterdam for a planned initial public offering next year. The planned debut of the €19bn company, which provides small to medium-sized businesses with accounting and payroll software, is a rare win for the UK’s beleaguered stock market.

From the Magazine

A US housing bubble fuelled partly by “subprime” home loans was considered one of the main culprits of the last financial crisis. Fears are growing that property markets could again be roiled, this time not by risky lending practices but by rising numbers of climate-related disasters putting pressure on insurers and other critical financial institutions.

We’re also reading . . . 

• Israel-Iran: The extent of the damage from strikes in both countries has been hotly contested, but satellite images offer a picture.

• Sleepless Kyiv: Millions of residents are losing sleep to Russia’s night-time attacks as the sounds of sirens, drones and explosions rock the city.

• Summer market fling: As temperatures rise, make sure you don’t get burnt by unpredictable flare-ups in financial markets, writes Katie Martin.

• Shrinking fish: Eastern Baltic cod have evolved to be smaller and slip through nets, according to landmark research that links overfishing to changes in marine species’ DNA.

Chart of the day 

Shoplifting has been a scourge for the retail industry since high inflation eroded consumer spending power in the wake of the pandemic. Now, companies are building up an arsenal of antitheft technology to combat an epidemic of petty larceny.

Take a break from the news

It’s a strange, unsettled moment in fashion, writes HTSI’s Alexander Fury, with geopolitical tensions affecting demand. The overwhelming complexity of the world may be why menswear at this year’s Milan Fashion Week sometimes resembled a pyjama party — an embrace of a gentler, simpler aesthetic.