U.S. Fights Rising Long-Term Rates With Bonds, Yen and Fed

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an AI-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six tailored news items by reader type.

1. 'Declaring War on Treasury Yields': Bessent's Three Cards

- Summary: The U.S. Treasury Department has activated three measures at once to curb the rise in long-term rates. In its Quarterly Refunding Announcement, the department changed language on reviewing an "increase" in the issuance of coupon bonds and floating-rate notes (FRNs) to reviewing a "change," which the market took as a signal to reduce the supply of long-term Treasurys. The coordinated U.S.-Japan yen-buying intervention, the first in 28 years since 1998, is read as a step to head off the possibility that Japan might sell off large amounts of U.S. Treasurys to fund a defense of the yen. Alongside this, U.S. Treasury Secretary Scott Bessent defended Fed Chairman Warsh, moving to dispel market doubts over the commitment to fighting inflation.

2. Interest Pressure Mounts on Big Tech After 'Astronomical Investment'; Treasury Vows to 'Deploy All Available Tools'

- Summary: As high rates weigh on the U.S. economy overall, the interest burden has grown for AI companies that have raised large sums. According to the Financial Times, Google paid an interest rate of up to 9.3% a year to finance data centers using Nvidia AI chips, and even that was structured financing in which private equity funds (PEFs) and customers set up special-purpose vehicles (SPVs) to provide guarantees. In a BMO Capital Markets survey, about 61% of responding clients expected the size of 30-year Treasury bond issuance to shrink. With the annual fiscal deficit approaching $2 trillion and national debt at about $40 trillion, however, Wall Street assessed that without addressing the deficit, the measures amount to a stopgap.

3. Growth Assessment Raised, but 'U.S. Tariffs and Middle East Risks Resurface'

- Summary: The Korea Development Institute (KDI) diagnosed that the improvement in Korea's economy is broadening, as strong semiconductor exports are joined by improving consumption. All-industry output in June rose 4.2% from a year earlier and facility investment jumped 21.7%, while July exports climbed 62.8%, producing a trade surplus of $30.32 billion. However, KDI again pointed to U.S. tariff measures and instability in the Middle East as risk factors — U.S. tariffs returned to its overall assessment after six months and the Middle East situation after one month. Meanwhile, the increase in employed persons in June was 63,000, far below the first-quarter average of 183,000, indicating a continuing slowdown in the labor market.

4. China Secures AI Funds Through Listings as State Investors Also Prop Up the Market

- Summary: China is moving away from a subsidy-centered approach to nurturing industry and using its capital markets as a channel to fund AI. Over the past two years, Chinese tech companies raised $217 billion — short of the $1.4 trillion raised in the United States — but this year's onshore and offshore bond issuance reached $38 billion, the most since 2016, with an average coupon rate of 1.9%, more than 3 percentage points below that in the United States. When Korean and Japanese semiconductor stocks plunged just before CXMT's listing, China Reform Holdings and Chengtong Holdings poured in 60 billion yuan (about 12 trillion won) to prop up the market. With listings by Yangtze Memory Technologies (YMTC) and Moore Threads to follow, the approach is expected to be put to the test.

5. Hardliner Named as Iran's Security Chief; U.S. Effectively in Long-Haul Mode

- Summary: Iran has appointed Mohsen Rezaei, who served for 16 years as commander-in-chief of the Islamic Revolutionary Guard Corps (IRGC), as the new secretary of the Supreme National Security Council (SNSC). Rezaei was added to the U.S. Treasury's Specially Designated Nationals (SDN) list in 2020 and last month remarked that control of the Strait of Hormuz is more important than an atomic bomb. The Wall Street Journal reported that U.S. President Donald Trump told his aides he is willing to walk away even if a nuclear deal is not reached. Iran, on the other hand, is demanding reparations, recognition of its control over the strait and the lifting of sanctions, so negotiations are expected to be difficult.

6. 'Let's Build the "Eyes" of Physical AI': Sony's 9 Trillion Won Alliance With TSMC

- Summary: Sony Group and TSMC will set up a joint venture within this year — with Sony holding about 60% and TSMC about 40% — to produce next-generation image sensors at a plant in Kumamoto Prefecture. The investment is 1 trillion yen (about 8.9 trillion won), equivalent to four years of capital spending by Sony Group's semiconductor division, with mass production targeted for 2029. Sony has held a share of around 50% in CMOS image sensors, but explained it faced a challenge last August when Samsung's foundry won an order for the iPhone image sensor from Apple. Meanwhile, TSMC has begun operating its first production line for its next-generation packaging technology, chip-on-panel-on-substrate (CoPoS), and its July consolidated revenue rose 44.7% from a year earlier to about NT$467.58 billion (about 21 trillion won).