Capital Flows
· Capital Flows
· 12 августа 2026, 22:50
· ⏱ 3 мин чтения
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The article argues that interest rates and foreign exchange are two expressions of the same macro trade, driven mechanically by the quantity of money and sovereign issuance rather than just rate differentials. It asserts that the stability of the long end of the yield curve signals a high Fed pain threshold, meaning bonds will not rally until the AI CapEx cycle breaks, while equities face mounting risks from a bear-steepening curve.
•Interest rates and FX are the same trade; Fed policy mistakes reflect in the long end, while shifts in government issuance are absorbed by the currency.
•The yen's persistent devaluation is mechanically driven by the Ministry of Finance funding deficits with bills while the BOJ suppresses the short end.
•The recent drop in two-year yields was driven by inflation swaps, while real rates remained restrictive.
•The long end of the curve has barely moved, indicating the Fed can remain significantly restrictive without generating immediate credit stress.
•Bonds will not catch a bid until the AI CapEx cycle ends or the credit supporting it collapses.
•The optimal way to front-run the AI CapEx cycle is through the physical value chain, specifically electricity permits, zoning approvals, and grid buildouts.
The author explicitly states that the way to front-run the AI CapEx cycle is through the physical value chain, specifically noting that 'grid buildouts get secured before any data center announcement
The author explicitly states that the way to front-run the AI CapEx cycle is through the physical value chain, specifically noting that 'grid buildouts get secured before any data center announcement hits a press release.'
Risk: Dependent on the continuation of the AI CapEx cycle; if the credit behind it collapses as warned, infrastructure spending could halt.
The article highlights 'electricity permits' as a leading indicator and primary value chain beneficiary of the AI data center buildout before public announcements are made.
The article highlights 'electricity permits' as a leading indicator and primary value chain beneficiary of the AI data center buildout before public announcements are made.
Risk: Regulatory hurdles in securing zoning and permits could delay capacity expansion.
The author argues that 'bonds will not bid until the AI CapEx cycle ends or the credit behind it collapses,' noting that the long end of the curve is quietly bear steepening.
The author argues that 'bonds will not bid until the AI CapEx cycle ends or the credit behind it collapses,' noting that the long end of the curve is quietly bear steepening.
Risk: A sudden collapse in AI-related credit or a broader macro shock could trigger a rapid bid in long-duration bonds.
The author warns of 'Dangerous Risk Building In Stocks,' pointing out that equity valuations are sitting at highs while the long end of the yield curve bear steepens underneath them.
The author warns of 'Dangerous Risk Building In Stocks,' pointing out that equity valuations are sitting at highs while the long end of the yield curve bear steepens underneath them.
Risk: Equities could continue to melt up if the AI CapEx cycle sustains earnings growth that outpaces the drag of higher long-end yields.
This newsletter, published August 12, 2026,
features Capital Flows
discussing PWR, CEG, TLT, SPY.
4 trade ideas extracted by AI with direction and confidence scoring.