FED: US TSY 9Y-10M TIPS AUCTION: NON-COMP BIDS $116 MLN FROM $19.000 BLN TOTAL

The headlines on missiles launched from Iran are likely further confirmation from the previous alert that the UAE’s air defence systems had been activated.

• Reuters reported that two ballistic missiles were launched from Iran.
• As per the UAE’s Defence Ministry, one fell outside territorial waters and a second fell inside Emirati territorial waters.
• The UAE said it is ready to deal with any threats.
• The UAE was disproportionately targeted by Iranian missiles during the earlier hot stages of the conflict.
• It continues to see attacks on its tankers performing shuttles of oil through the Strait of Hormuz to the Gulf of Oman. Such activity erodes Iran’s grip on the waterway and thus its key leverage in the conflict.
• The UAE has also been more closely aligned with the U.S. and Israel, with the country historically viewing Iran as a strategic threat.

UAE'S DEFENSE MINISTRY SAYS IT DETECTED TWO BALLISTIC MISSILES LAUNCHED FROM IRAN - Rtrs

• UAE'S DEFNSE MINISTRY SAYS ONE MISSILE FELL OUTSIDE TERRITORIAL WATERS, WHILE THE SECOND FELL INSIDE TERRITORIAL WATERS - Rtrs
• UAE'S DEFENSE MINISTRY SAYS READY TO DEAL WITH ANY THREATS - Rtrs

• Currently high business net saving rates aren’t from a notable trimming in gross investment either and should continue to support medium-term economic growth from a productivity angle.
• The AI-driven nature of the current investment cycle sees a vastly different driving force behind investment compared to past cycles.
• It’s notable though that the aggregate real-time boost to real GDP growth of circa 1pp can be considered around normal cycle highs rather than comfortably stronger as might be assumed where hearing about the magnitude of AI-related investment.
• Indeed, non-tech investment and broader structures in particular are struggling, likely from both a substitution impact and also a backdrop requiring restrictive monetary policy. The contraction seen here is rare outside of recessions.
• Comparing to past cycles in terms of aggregate investment impact, the late 1990s prior to the dot-com crash looks to be the closest with 2012 strength being boosted by a pulling forward of investment on accelerated depreciation provisions. Of course, associated equity gains with this AI cycle will have seen a material wealth affect supporting household consumption although we focus on direct business investment here.
• Some look for further robust increases in AI-driven capex ahead, with BofA in a note on Friday forecasting a 91% increase in hyperscaler capex in 2026 to $795bn before a further 35% increase in 2027 to $1.07tn. That’s on top of other S&P 500 capex rising 10% to $1.01tn in 2026 before another 6% to $1.07tn in 2027. For context, national accounts data put total non-residential investment at an annualized $4.6tn in Q1.