Analysis

Eurozone Issuers Turn to Non-Euro Debt in Hunt for New Investors

Published

1 month ago

May 28, 2026

The European Central Bank bought its last net tranche of eurozone government bonds in July 2022. What followed was, in some respects, an orderly handover: private investors stepped in, yields adjusted, and the mechanical shock of the ECB’s withdrawal was absorbed without the crisis many had feared. Yet the long-run consequences of that exit are still propagating through the architecture of European capital markets. By the first quarter of 2025, the Eurosystem held just 25% of all euro-area sovereign bonds — down from a peak of 33% as recently as late 2022. The gap the ECB left behind has to be filled by someone else. Increasingly, eurozone issuers are deciding to go and find those buyers directly, on their terms, in their currencies.

A Structural Shift, Not a Tactical Detour

The push into non-euro issuance isn’t happening in isolation. It unfolds against a backdrop of seismic, slow-moving change in who owns fixed-income assets globally. The OECD’s Global Debt Report 2026 puts the combined government and corporate bond market at roughly $78 trillion, with euro-area issuers accounting for 34% of that total — split almost evenly between sovereign and corporate paper. Within that vast pool, the composition of buyers has shifted decisively. Central banks, the dominant marginal purchaser of the past decade, have retreated. In the euro area specifically, the Eurosystem’s quantitative tightening since mid-2022 has compelled the private sector to absorb an estimated €430 billion of German government bonds alone — a recalibration with no peacetime precedent.

Layered on top is a geopolitical repricing. The ECB’s Financial Stability Review for November 2025 noted that euro-area non-bank financial institutions still carry heavy concentrations in US dollar assets, even as investors globally began rotating away from US Treasuries following Washington’s tariff turbulence earlier that year. That asymmetry — of European savings lodged in dollar assets while European borrowers need to attract dollar investors — defines the precise opportunity that multi-currency issuance is designed to exploit.

1 — The Anatomy of Eurozone Non-Euro Bond Issuance

Eurozone non-euro bond issuance has accelerated sharply across the sovereign, financial, and corporate segments throughout 2025. Eleven European borrowers — among them Orange SA, CaixaBank SA, and Raiffeisen Bank International AG — raised an aggregate $20.45 billion in US dollar-denominated offerings through early November 2025, according to Akin Gump’s annual bond market review. That figure captures only named issuers in the senior unsecured segment; it excludes covered bonds, AT1 capital instruments, and private placements, which tell a similar story. These are not crisis-driven deals priced out of necessity. They’re strategic, roadshow-backed transactions designed to cultivate investors who don’t naturally trade in euros.

The pull factors are equally important as the push. Across the wider emerging-market universe — a useful benchmark for global appetite shifts — EM sovereign issuance reached nearly $200 billion in the first nine months of 2025, the highest level for that period on record, with nearly half of new hard-currency bonds denominated in non-dollar currencies. Euro-denominated emerging-market bonds reached 30% of new issuance on a trailing 12-month basis, up from around half that share two years earlier. Eurozone issuers are, in a sense, rowing into a current that’s already moving.

The mechanics behind the trade are straightforward. Investors who hold mandates anchored to US dollars or sterling face real friction when trying to acquire a German corporate bond priced in euros — they must take on currency risk or arrange their own hedges. By issuing in dollars or sterling, the eurozone borrower eliminates that friction, bringing the bond to the investor rather than waiting for the investor to come to the bond. The European Stability Mechanism recognized this logic as early as 2017, when it established its US dollar issuance programme for precisely this reason: access to a wider investor base whose mandates wouldn’t otherwise reach euro-denominated paper.

Cross-currency economics are, for now, highly accommodating. A Reuters analysis from February 2025 found that companies converting dollar interest payments into euro payments through cross-currency swaps could shave nearly 200 basis points off their all-in funding costs. That differential reflects the gap between ECB and Federal Reserve rate trajectories: the ECB has eased steadily while the Fed held, generating a basis that eurozone borrowers can effectively arbitrage.

2 — The Structural Logic: Why Are Eurozone Issuers Issuing Bonds in US Dollars?

European borrowers are turning to dollar, sterling, and yen debt primarily to access investors whose mandates limit or preclude direct holdings of euro-denominated paper. With the ECB’s Eurosystem reduced from 33% to 25% of euro sovereign outstanding since 2022, issuers face a structurally wider distribution task. By offering bonds in dollars or sterling, they bring the credit to where those investors already operate — expanding the buyer pool without requiring cross-currency hedging on the investor’s side.

The structural interpretation cuts deeper than opportunistic arbitrage. During the decade of ECB quantitative easing, foreign investors’ share of euro-area sovereign bonds fell from around 37% in 2015 to just 21% by mid-2022, as the Eurosystem crowded them out. That contraction wasn’t benign. It represents a generation of US pension funds, UK insurers, and Asian sovereign wealth vehicles that drifted away from European credit during the years of sub-zero yields — and that now need to be structurally accommodated, not merely re-invited.

The post-QE investor landscape is qualitatively different from its predecessor. The OECD’s analysis documents a clear shift toward more price-sensitive private-sector investors as central banks withdraw, and warns explicitly that yields may need to remain structurally higher to sustain demand from those investors in countries where fiscal trajectories appear stretched. That warning has particular force for higher-debt eurozone sovereigns — and it’s why, even from Rome or Lisbon, the logic of non-euro issuance as a demand-cultivation tool is increasingly worth entertaining.

Yet there’s a complicating wrinkle. The same geopolitical disruptions driving investors globally to reassess US asset concentrations are also creating natural demand for euro-denominated paper. Since April 2025, net purchases of euro-area government bonds by international investors have been consistently strong. In that single month, foreign investors bought €26 billion in euro-area government bonds while simultaneously selling €56 billion of US Treasuries. If euro bonds are already in demand, why issue in dollars?

The picture is more complicated than the aggregate flows suggest. That foreign buying is heavily concentrated in German, French, Italian, and Spanish sovereign benchmarks — securities that trade on screens globally and require no proprietary infrastructure to settle. European bank capital instruments, sub-investment-grade corporate credit, and mid-tier sovereign names still struggle to clear the screens of US fund managers who don’t routinely run euro-denominated book exposure. Multi-currency issuance solves precisely that problem.

3 — Implications and Second-Order Effects

The consequences extend well beyond the bond desk. If eurozone issuers successfully cultivate a durable non-euro investor base, they reduce their structural dependence on any single policy regime — specifically, whether the ECB resumes asset purchases during the next downturn. That’s a form of funding sovereignty that finance ministers and corporate treasurers alike have good reason to value.

The ESM’s December 2025 market commentary put this directly: cumulative euro-denominated issuance outside the euro area exceeded €1 trillion in 2025, with countries including China, Chile, Indonesia, and Saudi Arabia choosing the euro for their sovereign bonds. “Diversification is the name of the game,” the ESM wrote. “These issuers want to open new horizons and tap new investors.” The logic applies with equal force in reverse — eurozone borrowers issuing in dollar and sterling are playing the same game, from the other side of the currency table.

Still, multi-currency issuance creates new vulnerabilities. A eurozone corporate that issues in dollars takes on foreign-currency liability exposure. If the hedge is imperfect, or if cross-currency swap markets seize up during a stress episode — as they did, briefly, in March 2020 — the mismatch can become damaging quickly. Raiffeisen Bank International, one of the eleven European borrowers that tapped the dollar market in 2025, operates in a complex regulatory environment across Eastern and Central Europe; its dollar issuance adds funding flexibility, but also another dimension of currency risk management that its euro-only peers don’t carry. Verizon, going the other direction, closed a £1 billion sterling note alongside a €2.25 billion Eurobond in November 2025 — a dual-tranche structure that captures two demand pools but multiplies hedging complexity on both sides.

For the ECB, the implications are subtler but real. A eurozone bond market reliant on globally dispersed, price-sensitive private investors will structurally exhibit more volatility than one where a single policy-driven buyer dominated the clearing mechanism. The ECB’s Financial Stability Review warned that “sudden reversals of holdings — in response to global economic or political shocks — could have destabilising effects on sovereign bond markets.” Cultivating non-euro investors diversifies demand; it also multiplies the number of actors who might exit simultaneously under stress. That’s a trade-off central bankers in Frankfurt understand, and that weighs on how aggressively they welcome the trend in official communications.

The OECD’s analysis reinforces this concern. It notes that structural shifts away from defined-benefit to defined-contribution pension arrangements are reducing institutional demand for long-duration sovereign bonds more broadly, regardless of currency denomination. Issuer flexibility may be rising while structural anchor demand is falling — a combination that pushes funding costs higher over the medium term, in both euros and in any other currency eurozone borrowers choose.

4 — The Counterargument: Is Non-Euro Issuance Actually Necessary?

Not everyone is persuaded that the non-euro turn is strategically necessary, sustainable, or wise for European issuers to pursue at scale.

The alternative view is grounded in supply and demand data that looks, from the euro side, genuinely encouraging. Euro-denominated corporate bonds now exceed €3.2 trillion in outstanding value across more than 3,700 issuers, according to Bloomberg data cited by BNY in September 2025. In 2025, euro corporate bond funds attracted net inflows of €19.2 billion, making the category one of fixed income’s best-performing segments. That’s not a market starved of buyers. The spread compression throughout the year — peripheral sovereign spreads tightening, investment-grade credit trading tight — tells the same story: money is flowing into euro assets, not out of them.

From an execution standpoint, dollar or sterling issuance adds real complexity. US Securities and Exchange Commission registration requirements for publicly offered dollar bonds generate significant legal cost and disclosure burden. Smaller eurozone issuers — particularly those below investment-grade or without established international investor relations programmes — may find that the incremental demand from dollar investors doesn’t justify those costs. A single-currency, well-syndicated euro deal can still clear effectively when the credit is familiar and the roadshow thorough.

There is also a longer structural concern. The same geopolitical fragmentation driving non-euro issuance today could, in a different scenario, make dollar-denominated European bonds harder to place. The OECD warns explicitly that “geopolitical tensions can have an outsized impact on demand from foreign investors” and describes global financial fragmentation risk as “an important concern for issuers.” A eurozone bank that builds a structural dollar investor base assumes that US investors will remain willing and able counterparties through whatever political environment follows. That assumption deserves scrutiny.

The New Normal in European Debt Markets

The eurozone’s search for new investors — in new currencies — is, fundamentally, a reckoning with a decade of monetary exceptionalism. When the ECB was buying everything, issuers didn’t need to think hard about who else might want their bonds, or in what form. Now they do.

What’s striking is the convergence at work. As global investors reassess US assets and rotate toward Europe, European borrowers are simultaneously rotating into dollar and sterling markets to capture investors before they fully discover the euro denominated product on offer. It’s a two-way traffic jam at a major intersection — everyone crossing in opposite directions, each convinced they’re moving toward better returns.

Whether the non-euro turn by eurozone issuers proves durable will depend on how long the interest-rate differential between the US and the eurozone persists, and on whether the geopolitical triggers driving investor rotation toward European assets moderate or intensify. Either way, the market infrastructure — the legal frameworks, the dealer networks, the hedging conventions — is being built now.

The ECB’s exit from bond markets was always going to force a renegotiation of who funds Europe. That renegotiation is visibly underway. It turns out the terms are written, in part, in other people’s currencies.

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Analysis

South Korea’s Won Slides to Its Weakest Since Lehman: Asia market impact

Published

8 hours ago

July 1, 2026

Abdul Rahman

South Korea’s won has not traded at these levels since Lehman Brothers collapsed and the world was sorting through the wreckage of its worst financial crisis in eighty years. That the currency has returned to those depths under entirely different circumstances — not a global credit event, but a sustained combination of dollar strength, political uncertainty, and structural capital outflows — makes the current episode more complex, and in some ways more concerning, than 2009.

The Numbers

On July 1, 2026, the won declined as much as 0.6 percent to 1,559.10 per dollar, following a prior session low of 1,562.20 — a level last seen in March 2009. Overseas investors sold a net 1.46 trillion won ($938 million) of stocks in the Kospi index on a single trading day, marking the eighth consecutive session of equity outflows from the Korean market.

“The dollar’s strength is such that a fresh low for the won would not be surprising,” said Moon Dawoon, an economist at Korea Investment & Securities. “If it does break through, it will be difficult to identify the next technical level, so from a qualitative perspective, the downside for the won should be kept open to around 1,600 per dollar.”

A breach of 1,600 would represent territory not visited since the 1997 Asian financial crisis — a threshold that carries both technical and psychological significance for regional currency markets.

Why the Won Is Falling

The 2026 won story is not a simple export slump. South Korea continues to run a current-account surplus — $18.70 billion in December 2025, $13.26 billion in January 2026. The fundamentals of the trade balance have not deteriorated dramatically. What has changed is the capital account.

Several forces are pulling simultaneously in the wrong direction. The US-Korea interest rate differential remains wide, making dollar-denominated assets relatively attractive to Korean investors. Structural outward investment — Korean residents and institutions consistently moving capital into foreign assets — keeps upward pressure on dollar demand. Trade friction and tariff uncertainty from the United States raise risk premia on Korean assets broadly. And geopolitical stress in the Middle East has driven a risk-off flight to dollar safety that penalises emerging market currencies disproportionately.

The IMF estimated Korea’s growth at 0.9 percent in 2025, with a projected rebound to 1.8 percent in 2026 — an improvement, but well below Korea’s historical growth trajectory. The Bank of Korea has held its base rate at 2.50 percent, balancing growth support against exchange-rate and financial stability concerns.

The Semiconductor Exposure

Korea’s currency vulnerability is amplified by its sector concentration. Samsung and SK Hynix together constitute a dominant share of the global memory chip market — and global memory chip markets are themselves being stress-tested by the AI infrastructure boom. The so-called “RAMageddon” dynamic, in which AI-fuelled demand for memory chips has sent prices soaring, has provided export revenue support. But it has also created concentration risk: a reversal in AI capex demand, which the BIS and Chinese hedge funds have been warning about, would hit Korea’s export base and currency simultaneously.

The Kospi index’s heavy weighting toward Samsung, Hyundai, and semiconductor-adjacent companies means that institutional investors who reduce technology sector exposure globally tend to sell Korean equities as a primary execution path. Eight consecutive days of outflows is the market expressing that thesis in real time.

Regulatory Response

Following an earlier episode in which the won slid to its lowest since 2009 in June 2026, South Korean authorities convened an emergency meeting between the Bank of Korea governor and financial regulators. The government announced measures including stepped-up oversight of offshore currency derivatives, boosted inspections for suspected market misconduct, and investigations into potentially illegal foreign-exchange transactions.

The won briefly rebounded following those announcements before resuming its decline in early July. The pattern is familiar in currency management: administrative measures can slow momentum but rarely reverse the underlying capital flow dynamics that are driving the move.

Regional Contagion Signals

The won’s decline on July 1 led a broader retreat in Asian currencies, reflecting the dollar’s role as the default safe haven in periods of global risk aversion. The Japanese yen simultaneously extended losses to multi-decade highs against the dollar — a different dynamic driven by the US-Japan rate differential, but contributing to a picture of simultaneous stress across the major Asian currency pairs.

Emerging market investors are monitoring whether won weakness begins translating into spillover dynamics: whether Korean retail investors rotate into crypto as a won hedge (measurable through the “kimchi premium” on Korean crypto exchanges), and whether institutional outflows from Korean equity and bond markets intensify as currency losses erode total returns for foreign holders.

A currency at 1,562 per dollar, trending toward 1,600, with eight straight days of equity outflows and a semiconductor sector exposed to an AI capex cycle that global institutions are increasingly questioning — is not a crisis yet. But it is accumulating the conditions for one.

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Analysis

Japan’s $2.3 Trillion Bet: Takaichi’s AI-Semiconductor Moonshot and the Fiscal Tightrope It Requires

Published

8 hours ago

July 1, 2026

Abdul Rahman

Japan has never been timid about industrial policy. But the plan unveiled by Prime Minister Sanae Takaichi on June 24, 2026, represents an ambition of a different magnitude: JPY 370 trillion — approximately $2.3 trillion — in combined public and private investment across 17 strategic sectors over the 14 fiscal years ending in March 2041. It is the most consequential economic growth blueprint Japan has released in a generation, and it carries risks proportionate to its scale.

The Numbers and Their Logic

The plan’s centrepiece is AI and semiconductors, which together account for JPY 101.6 trillion — nearly one-third of the total. Of that allocation, the largest share targets semiconductor manufacturing. The government projects that domestic chip sales, currently at roughly 8 trillion yen annually, will reach 40 trillion yen by fiscal 2040: a fivefold increase that would require sustained policy commitment, significant private capital mobilisation, and a structural reconfiguration of Japan’s manufacturing base.

Beyond semiconductors, the plan earmarks $65 billion specifically for AI infrastructure — data centres, power capacity, and the hardware underlying large-scale AI deployment. Vertical AI tools, built for specific industries such as healthcare, manufacturing, and logistics, receive separate priority funding alongside physical AI systems. The government projects semiconductor investment alone will generate 443 trillion yen in economic spillovers by fiscal 2040, with physical and vertical AI adding a further combined 366 trillion yen.

Additional sectors covered include defence, space development, advanced manufacturing, shipbuilding, and critical minerals — all framed as pillars of economic security in an era of intensifying geopolitical competition.

The Political Context

Takaichi became Japan’s first female prime minister in October 2025, following a decisive Liberal Democratic Party electoral victory in February 2026 that gave her government the political runway to pursue long-horizon strategies. The plan builds on prior investment commitments: since 2021, the government has channelled roughly 7.2 trillion yen into semiconductors and AI, including approximately 2.6 trillion yen in support for state-backed chip venture Rapidus.

The Nikkei 225 briefly surpassed 72,000 following the announcement — a level that reflected AI-adjacent stock enthusiasm, particularly around SoftBank and Tokyo Electron. The market signal was interpretable in two ways: confidence in the industrial vision, or exuberance about government-supported capital flows into a sector already attracting speculative premium.

The Fiscal Tightrope

The plan’s fiscal architecture is where complexity enters. According to the Japanese government’s roadmap, public funding accounts for slightly less than half of the total, with the remainder expected from private capital. Three long-term fiscal scenarios were released alongside the plan, with sharply divergent outcomes.

In the most optimistic case, the strategy delivers as intended: Japan’s debt-to-GDP ratio declines steadily even as the government contributes 10 trillion yen in real annual spending. In the two alternative scenarios, where market demand or technological uptake falls short, the ratio resumes its upward trajectory during the 2030s.

Critically, all three scenarios assume inflation stabilises at around 2 percent. They exclude the potential costs of expanded defence spending and proposed consumption-tax reductions, meaning actual fiscal pressure could significantly exceed the government’s baseline projections. Meanwhile, Japan’s superlong government bond yields have risen to multi-decade highs — a market signal that investor confidence in fiscal discipline is not fully intact, even as the Nikkei rallied.

The Bank of Japan, under Governor Kazuo Ueda, has signalled continued rate increases in response to above-target inflation and upside price risks. Deputy Governor Ryozo Himino reinforced that the BoJ expects to adjust policy in response to economic conditions and financial developments, while monitoring risks including the conflict in Iran. A government pushing expansionary fiscal policy while the central bank tightens monetary conditions is a combination that creates sovereign yield risk — precisely the kind of sovereign-financial nexus the BIS has flagged as a global vulnerability.

The Industrial Security Imperative

The plan’s framing as an economic security initiative, rather than purely a growth strategy, reflects Japan’s reading of the current geopolitical moment. Supply chain resilience, technological self-sufficiency, and domestic semiconductor capacity have become strategic imperatives for governments across the developed world in the wake of the pandemic disruptions and US-China technology competition.

Japan’s bid to quinttuple domestic chip sales by 2040 places it in direct competition with the United States’ CHIPS Act investments, the EU’s European Chips Act, and South Korea’s semiconductor cluster ambitions. The difference is that Japan is making the largest single national commitment to that competition — a bet that the country has identified the window for industrial transformation, and that the cost of missing it exceeds the fiscal risk of pursuing it.

Whether the numbers work depends on outcomes that no government roadmap can control: whether AI adoption curves justify the infrastructure being built, whether Rapidus can achieve competitive semiconductor yields, and whether private capital follows government funds at the scale the plan requires. The bet is large. The stakes are higher.

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Analysis

A 13% Surge in Billionaires, a Falling Median: The AI Boom’s Wealth Paradox

Published

8 hours ago

July 1, 2026

Abdul Rahman

The numbers are unambiguous, even if their implications remain contested. In 2025, global personal wealth rose at its fastest pace since 2017. Nearly one million new millionaires were minted. The billionaire population swelled by 13 percent. And in most of the 56 markets where the UBS Global Wealth Report tracks outcomes, median wealth — the wealth of the person sitting precisely in the middle of the distribution — actually declined.

That combination, record headline growth alongside falling typical household wealth, is the defining economic signature of the AI boom. It raises questions about the sustainability of an economic narrative built on aggregate progress.

What the UBS Report Found

The UBS Global Wealth Report 2026, released June 30 and built from data spanning 56 markets representing 92 percent of all global wealth, recorded 10.8 percent growth in personal wealth in 2025 — the fastest rate in at least three years. The millionaire population grew by 1.5 percent, adding close to one million people at a pace of roughly 2,680 per day.

More than 440,000 of those new millionaires were American — exceeding 1,200 per day — making the United States responsible for close to half of the worldwide increase. The United Kingdom added more than 43,000 new millionaires, while France, Spain, Japan, and India each added more than 30,000.

The report also counted 3,302 US dollar billionaires, an increase of 383 people, or 13.1 percent, over the prior year. Billionaire wealth grew by 25 percent on average in the year ended in April, compared with a 10.8 percent rise in average personal wealth. James Mazeau, an economist at UBS, attributed the outperformance directly to the AI boom in equity markets.

The Median Paradox

UBS chief economist Paul Donovan acknowledged to Fortune what the headline figures conceal: “There is a concentration of equity wealth into the very highest wealth and income cohorts, which means that periods of strong equity performance will widen the gap between the two.” When asset markets rise and the gains are overwhelmingly held at the top of the distribution, aggregate averages can soar while the typical household experiences stagnation or decline.

The pattern is not incidental. Software and platform businesses scale at close to zero marginal cost, meaning that when an AI-adjacent product wins, it tends to win globally — and the revenue, profit, and equity all funnel into very few hands. The World Inequality Report 2026 sharpened the point with striking precision: just 56,000 ultra-wealthy individuals — the top 0.001 percent — now control more wealth than the poorest 4 billion people on Earth combined. Their share of global wealth has nearly doubled since 1995.

Since 1995, billionaire wealth has compounded at approximately 8.5 percent annually. The bottom half of the global population has grown theirs at roughly 3.4 percent.

The Ultra-Wealthy Tier Accelerates

Altrata, a wealth intelligence firm, tracked a 14.4 percent jump in 2025 in the number of people worth more than $30 million — reaching a record 556,850 worldwide. In mainland China, the $50 million to $100 million cohort has compounded in real terms at nearly 31 percent annually since 2000. The United States’ top 1 percent of households, per the Federal Reserve, now holds approximately 32 percent of the nation’s total wealth — the highest proportion since the Fed began compiling the relevant data in 1989.

Within this hierarchy, the AI trade has functioned as a supercharger. Founders who hold large equity stakes in companies that have benefited from AI-driven market re-ratings have watched their personal wealth compound at the same exponential rates as the underlying businesses. The upcoming major IPOs — SpaceX, Anthropic, and OpenAI — are projected to create a new cohort of billionaires and dramatically expand the existing ultrawealthy population.

The Political Economy of the K-Shape

Bloomberg’s K-shaped economy analysis projected that the divergence between asset holders and wage earners will deepen further. The political consequences are already visible. California Governor Gavin Newsom, in comments reported ahead of a potential 2028 presidential run, proposed a national wealth tax and an initiative to give Americans a direct stake in AI development. Former Amazon CEO Jeff Bezos called for the bottom 50 percent of earners to pay zero federal income tax.

Axios reported that a growing number of tech billionaires are developing prescriptions for AI-fuelled inequality — not from altruism, but from a calculation that populist revolt represents a greater threat to their interests than redistributive taxation. “The pitchforks are here, they’re not just coming,” Newsom warned, predicting that resentment toward billionaires and AI-driven automation will dominate the 2026 and 2028 electoral cycles.

Donovan, the UBS economist, noted that governments are likely to seek to mobilise wealth to lower the cost of debt finance. What that means in practice — wealth taxes, forced investment mandates, or some novel fiscal instrument — remains the defining policy question of the decade the AI boom is creating.