Bonds could derail the current stock market bull run as investors increasingly shift toward fixed income assets offering higher returns, lower volatility and, for the first time in years, genuine competition to equities.
This is the analysis from Nigel Green, CEO of deVere Group, as global equities retreat and sovereign bond yields surge across the US, UK, Europe and Japan amid mounting alarm over runaway government borrowing, structurally higher inflation, and a global repricing of risk.
Wall Street ended Friday sharply lower, with the S&P 500 falling 1.2%, the Dow Jones Industrial Average dropping 1.1%, and the Nasdaq Composite losing 1.5%. Europe’s STOXX 600 fell more than 1%, Japan’s Nikkei declined around 2%, while Hong Kong’s Hang Seng slid roughly 1.6%.
At the same time, bond markets delivered an increasingly stark warning.
The US 30-year Treasury yield climbed back above 5%, UK 30-year gilt yields hit their highest levels since 1998, and Japanese government bond yields pushed to multi-year highs as the Bank of Japan continued stepping away from ultra-loose policy.
Nigel Green says markets are waking up to a fundamental shift in the global financial system.
“Governments across the world are issuing extraordinary amounts of debt at precisely the moment inflation risks are becoming entrenched and investors are demanding higher compensation to lend.
“Bond markets are beginning to challenge the entire foundation of the equity rally.”
The scale of the debt story is enormous. According to the IMF, global public debt rose to almost 94% of world GDP in 2025 and is projected to reach 100% by 2029, earlier than previously forecast.
The OECD estimates governments and corporations will borrow around $29 trillion from markets in 2026 alone, up 17% from 2024 levels.
Nigel Green says investors can no longer ignore the consequences.
“For more than a decade, markets operated in an era dominated by artificially cheap money. Central banks suppressed yields, governments borrowed aggressively and investors were pushed deeper into equities and speculative assets because fixed income generated almost no meaningful return,” he explains.
“That world is disappearing rapidly, with investors now securing 4%, 5% and in some cases higher yields in sovereign debt and investment-grade fixed income.
“Once that happens, the incentive to take extreme equity risk changes dramatically.”
The deVere CEO says the repricing is global and increasingly self-reinforcing.
“This is not confined to one country or one region. Britain, the US, France, Italy and Japan are all dealing with rising borrowing costs, elevated deficits and growing refinancing pressure at the same time,” says the deVere CEO.
“In Britain, markets are worried about weak growth, stubborn inflation and limited fiscal flexibility.
“In Europe, governments face widening deficits just as the European Central Bank steps back from bond purchases.
“Japan is critically important because rising domestic yields there could encourage huge pools of Japanese capital to move back home from overseas markets.”
Inflation remains central to the story.
Higher oil prices following renewed Middle East tensions have intensified fears that inflation could remain structurally above pre-2020 norms for years. Brent crude has surged sharply in recent weeks while long-dated bond yields across G7 economies have climbed to their highest levels in more than two decades.
“Markets increasingly recognise that the old ultra-low inflation era is over,” says Nigel Green.
“Trade fragmentation, tariffs, defence spending, labour shortages, energy security concerns and massive AI and tech infrastructure investment are all contributing to persistent inflationary pressure.”
He warns that rising yields are now feeding directly into broader financial conditions.
“Higher sovereign yields raise the cost of capital across the entire system. Mortgage rates remain elevated, corporate refinancing becomes more expensive, leveraged sectors come under pressure and equity valuations face far greater scrutiny.”
The deVere chief executive also notes that the current stock market rally has become increasingly concentrated in a narrow group of AI and tech giants.
“Strong earnings and AI optimism have kept markets moving higher, but leadership has narrowed significantly.
“Bond markets are now testing whether those valuations remain sustainable in a world where capital is no longer effectively free.”
Nigel Green concludes: “Fixed income has become genuinely attractive again. Investors are once again being paid properly to own sovereign debt.
“Markets are shifting from a liquidity-driven cycle into one increasingly dominated by debt, inflation and bond market discipline.
“The rise in global bond yields is fast becoming one of the defining investment stories of 2026.”
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