Sovereign Funds to Turn to Non-Dollar Bonds Amid AI-Driven Liquidity Crunch, Citi Banker Says

3-line summary

• Speaking in Bangkok at IMF/World Bank meetings, Citi's global public sector group head Stephanie von Friedeburg said sovereign wealth funds are increasingly raising capital outside dollar bond markets, with competition for funding pushing up bond-issuance costs — 'there is a limited pool of capital,' she said, citing growing issuer interest in local-currency markets like China's yuan, the Australian dollar, Hong Kong dollar and Singapore dollar, per Investing.com.
• The report attributed the squeeze to private capital chasing AI opportunities while sovereigns and public-sector issuers raise more debt for infrastructure, energy security, defense and development needs; per Fitch, 10-year government bond yields across 10 major advanced economies have risen an average of 81bp this year, crowding out emerging markets already facing heavy debt-service burdens and limited fiscal space. Rising gold prices have also prompted reserve managers to consider hedging, liquidity management and gold-collateralized borrowing, though the dollar is expected to retain its primary reserve-currency status given its unmatched depth and liquidity.

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