Higher yields worldwide see bonds threaten global stock rally

Investors around the world are seen betting on bonds as global yields climb higher creating a threatening situation for recent stock market bull runs, an analysis of the international investment market by deVere Group seen by Business a.m. has predicted.

Nigel Greene, deVere Group’s chief executive officer, in an investment note shared with Business a.m. wrote that investors are increasingly shifting toward fixed income assets that offer higher returns, lower volatility and, genuine competition to equities for the first time in years.

The deVere Group analysis noted that global equities were in retreat and sovereign bond yields surged across markets in the United States, United Kingdom, Europe and Japan amid mounting alarm over runaway government borrowing, structurally higher inflation, and a global repricing of risk.

Specifically, it noted that Wall Street closed sharply lower on Friday with the S&P 500 falling 1.2 percent, the Dow Jones Industrial Average dropping 1.1 percent, and the Nasdaq Composite losing 1.5 percent. 

Also, Europe’s STOXX 600 fell more than one percent, Japan’s Nikkei declined around two percent, while Hong Kong’s Hang Seng slid roughly 1.6 percent.

While those markets were dropping, deVere noted that at the same time, bond markets delivered an increasingly stark warning.

According to the market advisory note, deVere stated that the US 30-year Treasury yield climbed back above five percent, UK 30-year gilt yields hit their highest levels since 1998, and Japanese government bond yields pushed to multi-year highs as the Bank of Japan continued stepping away from ultra-loose policy.

Green, who is deVere’s chief analyst and chief executive officer, explained that markets are waking up to a fundamental shift in the global financial system.

“Governments across the world are issuing extraordinary amounts of debt at precisely the moment inflation risks are becoming entrenched and investors are demanding higher compensation to lend.

“Bond markets are beginning to challenge the entire foundation of the equity rally.”

Providing context, Green explained that the scale of the debt story is enormous, noting that according to the International Monetary Fund (IMF), global public debt rose to almost 94 percent of world GDP in 2025 and is projected to reach 100 percent by 2029, earlier than previously forecast.

On the other hand, the Organisation for Economic Co-operation and Development (OECD) estimates governments and corporations will borrow around $29 trillion from markets in 2026 alone, up 17 percent from 2024 levels.

All these come with consequences, Green said, adding that investors can no longer ignore them.

“For more than a decade, markets operated in an era dominated by artificially cheap money. Central banks suppressed yields, governments borrowed aggressively and investors were pushed deeper into equities and speculative assets because fixed income generated almost no meaningful return,” he explains.

“That world is disappearing rapidly, with investors now securing 4%, 5% and in some cases higher yields in sovereign debt and investment-grade fixed income.

“Once that happens, the incentive to take extreme equity risk changes dramatically,” said Green.

According to him, the repricing is global and increasingly self-reinforcing.

“This is not confined to one country or one region. Britain, the US, France, Italy and Japan are all dealing with rising borrowing costs, elevated deficits and growing refinancing pressure at the same time,” he said.

“In Britain, markets are worried about weak growth, stubborn inflation and limited fiscal flexibility.

“In Europe, governments face widening deficits just as the European Central Bank steps back from bond purchases.

“Japan is critically important because rising domestic yields there could encourage huge pools of Japanese capital to move back home from overseas markets,” the deVere chief executive stated.

At the heart of this development is inflation, the advisory note indicated. For instance, higher oil prices following renewed Middle East tensions have intensified fears that inflation could remain structurally above pre-2020 norms for years. Brent crude has surged sharply in recent weeks while long-dated bond yields across G7 economies have climbed to their highest levels in more than two decades.

“Markets increasingly recognise that the old ultra-low inflation era is over,” Green said.

“Trade fragmentation, tariffs, defence spending, labour shortages, energy security concerns and massive AI and tech infrastructure investment are all contributing to persistent inflationary pressure,” he added

Warning that rising yields are now feeding directly into broader financial conditions, Green explained thus: “Higher sovereign yields raise the cost of capital across the entire system. Mortgage rates remain elevated, corporate refinancing becomes more expensive, leveraged sectors come under pressure and equity valuations face far greater scrutiny.”

He observed that the current stock market rally has become increasingly concentrated in a narrow group of AI and tech giants.

“Strong earnings and AI optimism have kept markets moving higher, but leadership has narrowed significantly.

“Bond markets are now testing whether those valuations remain sustainable in a world where capital is no longer effectively free,” he said.

Accordingly, “Fixed income has become genuinely attractive again. Investors are once again being paid properly to own sovereign debt.

“Markets are shifting from a liquidity-driven cycle into one increasingly dominated by debt, inflation and bond market discipline.

“The rise in global bond yields is fast becoming one of the defining investment stories of 2026,” Green said.

Business a.m.