{"text":[[{"start":10.05,"text":"The US’s status as the world’s lowest-cost dollar borrower faces a challenge from foreign development banks as President Donald Trump’s erratic policymaking increases the appeal of alternative haven assets."}],[{"start":22.200000000000003,"text":"A months-long rally in bonds issued by the likes of the World Bank, the European Investment Bank and Germany’s state-owned KfW has driven yields down to levels close to US Treasuries, the traditional haven for investors during periods of turmoil."}],[{"start":38,"text":"In a sign of the surging demand for so-called sovereign, supranational and agency (SSA) dollar debt, the EIB this week set a record after attracting more than $33bn of orders for a $4bn, three-year bond. "}],[{"start":54.15,"text":"The debt was priced to yield 3.82 per cent, just 0.04 percentage points above comparable Treasuries. Investors typically demand yields above sovereign bonds to hold the debts of other borrowers."}],[{"start":67.25,"text":"The development banks said that demand for their dollar-denominated bonds began to pick up after Trump launched his trade war on “liberation day” just over a year ago in a move that convulsed global markets. "}],[{"start":78.55,"text":"“Dollar SSAs are the golden child in this environment — they let investors stay in the US currency while minimising exposure to idiosyncratic US risk,” said Steven Johnston, head of cash rates trading at Japanese bank Mizuho."}],[{"start":94.5,"text":"“The Trump administration’s policy volatility is making investors wary of holding US assets.”"}],[{"start":99.95,"text":"The yields of some SSA dollar bonds over Treasuries have recently fallen to a few hundredths of a percentage point in the secondary market, while some issuers have achieved record-low spreads on new debt in the primary market. "}],[{"start":115.3,"text":"“We’ve seen investors’ interest in our dollar bonds increase very noticeably after the US first announced global reciprocal tariffs — particularly from buyers in Asia,” said Petra Wehlert, head of capital markets at KfW. "}],[{"start":129.35,"text":"While investors were not necessarily selling Treasuries, she added, some were no longer reinvesting their redemptions exclusively in Treasuries as they often did in the past. "}],[{"start":139.54999999999998,"text":"“They need exposure to US dollars but they are increasingly looking to alternative assets to fulfil it — including our instruments,” she said."}],[{"start":147.95,"text":"There is little sign that the market volatility triggered by the Iran war has hurt demand for such debt."}],[{"start":153.85,"text":"“The market is responding very differently to this geopolitical crisis compared with the past,” said Jez Walsh, head of the debt capital markets syndicate desk at Daiwa Capital Markets Europe."}],[{"start":165.04999999999998,"text":"“Previously, we would have seen a flight to quality, with investors piling into Treasuries and SSA spreads widening. This time, it’s been the opposite — if anything, spreads have gotten tighter.” "}],[{"start":null,"text":"
"}],[{"start":176.54999999999998,"text":"SSA bonds are issued by non-sovereign public sector entities, ranging from large multilateral organisations to subnational institutions. They typically have higher borrowing costs than benchmark government borrowers such as the US and Germany, reflecting their much lower liquidity and the huge powers that governments have to service their own debts, including through taxation."}],[{"start":201.6,"text":"The biggest issuers, including the EIB, the World Bank and KfW, have top-notch credit ratings, which have increased their appeal to conservative investors at a time when governments around the world have suffered rating downgrades and are flooding bond markets with record issuance. "}],[{"start":218.65,"text":"Investor interest in this relatively niche asset class was already high before the Iran war, as fears about Washington’s fiscal sustainability made investors wary, with the downgrade of US debt by Moody’s in May 2025 a lowlight."}],[{"start":233.8,"text":"“From a fiscal sustainability perspective, it drove the point home that the US is no longer a safe haven,” said Johnston."}],[{"start":241.65,"text":"SSA issuers were viewed as “very stable and [their] net issuance is more limited” than some sovereigns, said Lee Cumbes, Barclays’ head of debt capital markets for Europe, the Middle East and Africa."}],[{"start":254.4,"text":"The dollar SSA market is no rival to the US government bond market in scale or liquidity. In 2025, the EIB, World Bank and KfW collectively raised about $80bn in dollar-denominated debt, according to Bloomberg data. Fresh Treasury issuance of similar maturities was about $4.5tn in the same year."}],[{"start":278.15,"text":"For many buyers, one of the key reasons to hold SSA bonds historically has been that they provide a higher yield than government bonds without carrying much additional risk. "}],[{"start":289.15,"text":"Although this additional yield has shrunk, demand was still very strong, said Walsh. In part, investors say, this is due to scarcity value: the dollar programmes of issuers such as the EIB and KfW are limited, and represent a minority of their issuance, which is weighted towards euro debt. "}],[{"start":309.2,"text":"While unusual, some corporate dollar bonds — including those issued by Microsoft and Johnson & Johnson — have temporarily traded at lower yields than Treasuries in the past."}],[{"start":319.45,"text":"Some traders speculate that dollar SSA yields could yet fall below those of Treasuries. "}],[{"start":325.65,"text":"But an official at a large supranational issuer said that such a scenario would require a further “substantial erosion of trust” in US assets. "}],[{"start":334.59999999999997,"text":"“We’re not there yet,” the official said, while adding that sustained demand for dollar SSA bonds in the face of tighter spreads suggested there was already “trepidation in the system”."}],[{"start":344.24999999999994,"text":"“We may find out soon enough where the floor is,” the official said."}],[{"start":348.44999999999993,"text":"Additional reporting by Michelle Chan in New York"}],[{"start":361.3999999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1776450675_5282.mp3"}