Rising long-term yields ripple through stocks, currencies, and lending—demanding sharper portfolio focus
Soaring long-term government bond yields are sending ripples across global markets, raising the stakes for asset allocation and risk management, according to Reuters.
As borrowing costs climb to multi-year highs in major economies—including Canada—investors are bracing for broader impacts on equities, currencies, and corporate financing.
In Canada, 30-year bond yields are now near 14-year highs, and speculative bets against the Canadian dollar have reached a five-month peak, Reuters reported.
This mirrors a global trend, with 30-year yields in the United States and Germany hovering around 5 percent, France hitting 16-year highs, and Britain’s 30-year yields recently touching a 27-year high.
These elevated borrowing costs traditionally influence everything from housing and corporate lending to stock market valuations.
The pressure is not confined to North America.
European markets have also felt the strain.
French budget turmoil has weighed on European stocks, with the region lagging the MSCI world index since June.
“French-driven negative sentiment is not only affecting France but the rest of Europe,” said George Efstathopoulos, multi-asset manager at Fidelity, as cited by Reuters.
Meanwhile, the euro’s rally appears to be stalling, and caution is rising around European banks after a strong year-to-date performance.
Technology stocks, once market leaders, are now showing signs of vulnerability as higher long-term rates increase the cost of capital for multi-decade investments in artificial intelligence and innovation.
Over the past month, global tech stocks have underperformed the broader market, while banks—whose profits benefit from higher rates—have outpaced them, according to Reuters.
Some market participants, however, argue that the surge in yields is less about fiscal panic and more about shifting expectations for interest rates.
“I don’t think these global moves reflect worries about fiscal positions,” said Alex Brazier, BlackRock’s global head of investment and portfolio solutions, in an interview with Bloomberg.
He attributes the repricing to a higher “neutral” rate, driven by factors such as increased investment spending and looser fiscal policy.
Despite volatility, demand for government debt remains robust.
Even France, with the euro area’s widest deficit, has attracted strong interest at recent bond auctions, as per Bloomberg.
Investors appear to expect that governments will ultimately address their fiscal challenges.
Yet, the risks are real. Longer-dated bonds remain under pressure amid mounting fiscal concerns in France, the UK, and Japan.
Political uncertainty and warnings of potential debt crises have kept markets on edge, with few areas offering comfort for those seeking long duration, according to Simon Blundell, BlackRock’s co-head of EMEA Fundamental Fixed Income, as reported by Bloomberg.
