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The week in Global Markets
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Sovereign yields rose across markets, with the 10-year Treasury reaching multi-year and 19-year highs before the move broadened into a structural reassessment of government borrowing costs. Weak auction demand and persistent inflation concerns made the repricing look less like a temporary selloff.
Oil first eased on hopes for diplomatic progress, briefly supporting bonds and risk assets, but later rose above $102 as tensions around the Strait of Hormuz revived energy-driven inflation fears. The reversal pushed yields higher and reduced expectations for near-term rate cuts.
A firm dollar and wider US rate differentials pressured the euro, pound, yen, rupee, and emerging-market assets throughout the week. Japan's prospective policy normalization introduced a counterforce, but shifting yen expectations also raised the risk of carry-trade unwinds and broader forced selling.
Major indexes held near highs even as participation narrowed and many stocks remained far below their peaks, leaving the rally vulnerable to weakness in its leaders. Rising yields then intensified pressure on equities and pushed mortgage rates above 7%, worsening housing affordability and demand.
The AI trade broadened from infrastructure into consumer applications and global technology shares, pushing major benchmarks to new highs. Even after the rates shock hit broader equities, investors continued to concentrate in AI and began cautiously returning to selected Chinese AI opportunities.
Weak debt demand and expensive borrowing exposed the financing risks behind the AI buildout, culminating in a record high-yield deal to fund an AI investment. Warnings about links among AI companies, lenders, chip suppliers, and data centers shifted the issue from project economics toward systemic risk.
The bond rout increasingly exposed refinancing, leverage, and liquidity risks beyond government debt, including corporate and private-credit markets. Rising debt-service costs and weaker confidence in US debt also narrowed fiscal flexibility and raised the chance that stress could spread across financial assets.
China maintained a record 40% share of global container exports despite tariffs, while its $1.2 trillion trade surplus reflected strong external demand, weak domestic consumption, and excess capacity. The persistence of that imbalance increased the likelihood of broader defensive trade measures.
Day’s Recap