Sales in the bond market: the keys to the rise in yields
9 SEPT, 2026
The fixed income market is going through a sales phase that has brought investors' attention back to the sustainability of sovereign debt. The sales in the bond market, especially visible in German bunds and US Treasuries, respond to a combination of factors that goes beyond the monetary policy of central banks.
The increase in public deficits, growing financing needs and competition for capital generated by investment in artificial intelligence are pushing up term premiums on both sides of the Atlantic, to which is added the persistence of inflationary risks linked to energy. The result is an environment in which yields could continue to rise before stabilizing, with direct implications for portfolio management and equity valuation.
Why are bond yields rising?
Gregor Kapferer, director of developed market debt at Vontobel, locates the origin of the movement in two different planes of the curve. In the short term, persistent inflation, exacerbated by the rising cost of energy, has led the market to discount a less expansive monetary policy by central banks, including the ECB.
In the long term, the Vontobel expert points to fiscal concerns and the increase in debt supply, both in the United States and in Europe, where higher defense spending increases financing needs. Japan adds additional pressure, as its own yields reduce the relative attractiveness of Western bonds. Kapferer summarizes that "the recent rise in yields is due to a combination of the revaluation derived from inflation and monetary policy at the short end, and fiscal pressures, supply and global capital flows at the long end".
The role of fiscal policy in bond yields
Florian Späte, senior bond strategist at Generali Investments, delves into the fiscal dimension and anticipates that the rebound in yields has not yet peaked. In his opinion, the strong sale of German bunds in August has improved their valuations, but not enough to justify a decisive entry into long durations.
Späte predicts that the 10-year German bond will reach 3.25% in three months and 3.30% in six, while the US Treasury would be at 4.70% and 4.80% in the same periods. The strategist warns that "yields will continue to be under upward pressure and any decline will likely be temporary", in a context where fears about fiscal dominance gain weight against ECB rate expectations.
The idiosyncratic risk, according to Späte, is concentrated in France: "fiscal deterioration and electoral risks leave French government bonds exposed to a widening of spreads", while the rest of the European periphery should remain in a relatively stable range.
Does the rate hike affect equities?
Ben Ritchie, head of developed market equities at Aberdeen Investments, shifts the debate to the stock markets. For the manager, the increase in yields is not automatically bearish: the decisive factor is the reason behind the rise. Ritchie argues that the current movement is mainly due to the rise in real yields and the financing needs linked to investment in artificial intelligence, "rather than a loss of confidence in central banks or a rebound in long-term inflation expectations".
Historically, Ritchie recalls, equities have withstood higher yields well when they reflect economic growth and improved profits, a scenario that Aberdeen Investments considers current. Corporate profits and investment in AI continue to be, in his opinion, the main support for the stock markets, ahead of the trajectory of central bank rates.
Risks to watch in the debt market
Ritchie himself admits that the risk of a more severe correction is real, although it does not constitute the central scenario of Aberdeen Investments. His macroeconomic analysis contemplates a "plunge in the bond market" in which excessive issuance or an aggressive reduction of balances triggers a sharp rise in yields and a wave of sales in the stock market. "Concern would increase considerably if yields rose much more and much faster", he points out.
This diagnosis connects with Späte's warning about France and Kapferer's reading on Japan: all three agree that the bond market sends a signal about fiscal sustainability that, while not yet disruptive, requires extreme caution in duration decisions.
Conclusion
The common thread between Vontobel, Generali Investments and Aberdeen Investments is that the rise in yields responds to structural, fiscal and supply forces, rather than a fleeting episode of inflation. Equities have absorbed the movement thanks to profit growth, but that margin is not unlimited. If term premiums continue to widen or perceptions about the sustainability of sovereign debt deteriorate, the impact could shift more strongly to other assets. For now, active duration management and monitoring of fiscal risk hotspots, especially in France and the United States, are shaping up as the keys to navigate this environment.
Disclaimer: This article includes the analysis of Vontobel, Generali Investments and Aberdeen Investments for informational purposes only and does not constitute investment advice. Past performance does not guarantee future results. Fixed income investment carries interest rate, credit and duration risks that can affect the value of the invested capital.
