The strong rally in US equities is beginning to face a new challenge as the cost of borrowing to finance stock market positions climbs sharply, raising questions over how long the momentum can be sustained.
According to a Reuters report, surging demand for leveraged investments, record hedge fund positioning and heightened activity in derivatives markets are putting pressure on the balance-sheet capacity of major global banks that provide equity financing. The tightening supply of financing has pushed borrowing costs higher, even as stock markets continue to trade near record highs.
