IMF Managing Director Kristalina Georgieva has warned of a "risk cocktail" that includes an unbalanced artificial intelligence boom, prolonged energy shocks and record-high global debt. Georgieva has called on central banks to maintain a "prudently hawkish bias," while noting that governments may face tough decisions if they have large budget deficits.

US Federal Reserve Vice Chair for Supervision Michelle Bowman has announced a significant restructuring of the central bank's supervisory approach, replacing the traditional district-based oversight with five regional hubs aligned with state lines. This change aims to improve efficiency and accountability in supervision, addressing issues highlighted by the 2023 regional banking crisis. Bowman also noted plans to expand the definition of community banks and to update regulatory thresholds to reflect economic growth and inflation.

Traders have increased short positions against US government bonds as long-term yields approach a 24-year high, driven by renewed inflation concerns, global financial instability and technical factors. Open interest in futures linked to longer-dated securities, such as the 10-year US Treasury note, has been increasing, suggesting traders expect bond prices to continue falling.

The International Swaps and Derivatives Association has released a paper on the potential of tokenized money market funds as collateral in financial transactions. The paper highlights issues to consider, potential standardization and practical approaches for market participants. ISDA invites feedback on whether there are further matters on which ISDA could helpfully convene the market.

European investors held $3.66 trillion of US Treasurys at the end of July, surpassing Asia's $3.63 trillion for the first time since at least 2012. The shift was driven largely by a $41.7 billion decline in Asian holdings, while UK Treasury holdings approached $1 trillion.

US Treasury Secretary Scott Bessent has reportedly repeatedly dressed down senior and junior staff, with current and former officials saying his behavior contributed to several high-level departures. The turmoil comes as the US Treasury faces pressure over high prices, borrowing costs and unmet economic goals ahead of the midterm elections.

BIS General Manager Pablo Hernández de Cos is focused on rising public debt, risks in non-bank finance and the growing role of AI across financial markets and the broader economy. Tokenization is also emerging as a key policy issue as the BIS navigates a more complex global financial environment.

Efforts to pass comprehensive crypto legislation have faced significant obstacles, as highlighted by the failure of industry-backed bills in the Senate. The crypto industry has invested heavily in lobbying for favorable legislation, only to see these efforts stall. Despite efforts from the US CFTC and the US SEC to enforce regulation, the real barrier seems to be the industry's reluctance to submit to traditional regulations. This ongoing legislative gridlock underscores the challenge of reconciling industry demands with existing legal frameworks.

This paper examines the transition to mandatory central clearing of US Treasuries, covering the policy objectives underlying the reforms and the evolving market structure, including trends in clearing adoption and client participation. Click here to read the paper.