Lale Akoner, global market strategist at eToro, argues that rising government bond yields across the US, UK, Europe and Japan are becoming the market’s main warning signal, reflecting a growing acceptance of a "higher-for-longer" interest-rate environment.
The analyst says the shift is driven by a reassessment of inflation risks amid higher energy prices, political uncertainty and mounting fiscal pressure, and that those higher yields risk spilling into equities, particularly in growth and technology, while increasing strain on governments with large debt burdens.
Akoner highlights, in a note, that rising oil prices and renewed fears of disruption around the Strait of Hormuz as key geopolitical upside risks to inflation that complicate central banks’ hopes for a continued easing in price pressures.
"For now, bond markets appear to be signalling that investors should prepare for a more volatile environment where higher borrowing costs remain a key market theme well into the second half of the year", the analyst said.
