Home · Business · Sep 2 archive
Global Bond Rates Rising: What to Expect
Confirmed
In Short: Rising bond yields are driven by higher energy prices and corporate willingness to pay premium rates, prompting concerns among economists about the impact on economies and markets.
A confluence of factors, including rising energy prices, is pushing up short-dated bond yields, according to Michael Metcalfe, head of macro strategy at State Street.
Naka Matsuzawa, chief macro strategist at Nomura Securities, notes that hyperscalers' willingness to pay high rates is contributing to the broader rise in yields, with the key question being whether growth can keep pace to support higher rates.
Economist Ed Yardeni, who coined the term 'bond vigilantes,' expresses concern over large government deficits but believes bond yields are not yet prohibitive, suggesting Treasury Secretary Scott Bessent might need to issue more shorter-dated debt to manage market reactions if yields rise significantly.
Nick Ferres, chief investment officer at Vantage Point Asset Management, warns that rising rates could start to cause financial pain for both public and private borrowers, with higher yields also impacting stock valuations.
The fear is that bond vigilantes are driving yields higher in response to large government deficits, though Yardeni remains cautious about the immediate impact of these higher rates on the economy and markets.
What's confirmed
What's still developing
- A confluence of factors was at play, said State Street's head of macro strategy, Michael Metcalfe, with rising energy prices causing traders to bet on rate hikes, pushing up short-dated yields.
- Naka Matsuzawa, chief macro strategist at Nomura Securities in Tokyo, said so-called hyperscalers' willingness to pay reasonably high rates was pulling up yields broadly, with the focus now on whether growth can rise…
- "The fear is that the bond vigilantes are on the loose and driving yields higher in protest over large government deficits," said Ed Yardeni, president of Yardeni Research.
- "We share the bond vigilantes' concerns, but we aren't convinced bond yields are, or will soon be, prohibitively high," said Yardeni, who coined the term in the 1980s.
- He said that if U.S. 10-year yields hit 5%, he expected Treasury Secretary Scott Bessent to issue more shorter-dated debt to buy back longer-dated bonds to calm markets.
- Nick Ferres, chief investment officer of Vantage Point Asset Management in Singapore, said rates could start to cause pain for public and private borrowers, with higher yields also weighing on stock valuations.