James Brodie
Head of Learning & Development, Flux
Oil Prices No longer Driving US Treasury Yields, SpaceX IPO Loses over $600B
Yields hit cycle highs as rate hike bets rise; SpaceX tumbles, ETF inflows top $1T, and semis reach record exposure.
While Brent fell $2.70, yields rallied with 5yr rising 5bp to cycle highs (OIS prices 38 bp hikes by year end), and the S&P is now struggling to make new highs, still marginally down on the month.
Oil prices are no longer the dominant factor driving US Treasury yields, with the correlation between the two breaking down. US 2-year yields have reached the highest levels since February 2025, even while crude continues to decline. (Bloomberg)
SpaceX IPO Selloff
SpaceX shares dropped 16% Monday, losing over $600 billion in market value, continuing a three-day decline that began after the company announced its first-ever investment-grade bond offering. The selloff dragged broader markets down with it, with strategists suggesting the initial wave of buyer enthusiasm has been exhausted.
ETF Inflows Hit $1 Trillion
US-listed ETFs have already absorbed $1 trillion in 2026, reaching in under six months a milestone that took all of 2024 to hit. Flows are on pace to shatter last year's record of $1.5 trillion, with Vanguard's S&P 500 fund leading the way at roughly $110 billion in inflows year to date.
BofA now calling for three 25 bps rate hikes this year starting in September. "We were skeptical of the need for cuts in 2025. Both the data and our updated read of the Fed's reaction function suggest the Fed would reverse those cuts in short order. We think the Fed would stay on hold next year."
Semiconductors and semiconductor equipment now account for ~12% of total global hedge fund gross exposure, the highest on record. Net exposure, which measures positioning after accounting for hedges, has surged to ~22%, also a record high, reflecting an aggressive build in long positions with minimal offsetting shorts. Both metrics have accelerated sharply over the last several months, with exposure more than DOUBLING. Semis are now on track to finish the year as the most purchased global sector for the 2nd consecutive year. (Goldman Sachs)
Gold's sensitivity to real yields has re-emerged. (Bloomberg, Standard Chartered)
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