Bond and stock markets: A divergence with consequences

Stable trends are the exception in volatile financial markets and clear certainties from today often turn out to be big mistakes tomorrow. However, what can currently be observed in the global bond markets leaves little room for interpretation.

Long-term capital market interest rates are rising steeply. The yield on ten-year US government bonds temporarily rose to around 5.23 percent at the beginning of the week. The interest rate for 30-year-olds is now 5.57 percent. These are levels that existed before the financial crisis broke out in 2008. The European and Asian markets can hardly escape the pull of the world's largest bond market. At the same time, interest rates for classic business loans, consumer loans and mortgages are rising.

What is surprising, however, is that the stock markets overlook and even ignore the crisis signals. Despite the tectonic shifts in debt markets, many stock market indices are near record highs.

You can also put it this way: bond and stock markets speak different languages. The former demand risk premiums almost every day for a system that is reaching its limits. Seconds seem to be in the best of all possible worlds, consisting of rising corporate profits, breathtaking technological advances in AI and corresponding leaps in productivity. So who is right?