President Bill Clinton's chief political adviser to the US once said that if he believed in reincarnation, he would not want to return as a religious leader or as a baseball star. «I'd like to return as the bond market, you can intimidate everyone.».
There is certainly an element of this in the recent rise in yields on US government bonds and debt markets worldwide.
The start of the war with Iran in late February launched oil prices and sparked a new wave of inflation concern.
Since then, bond markets have pushed interest rates higher, contributed to the rise of inflationary expectations to long-term highs and recalled that the fundamental budget of the world's largest economy and the debt that is approaching $40 trillion, only healthy cannot be considered.
Over the 5% level, the far end of the US government bond yield curve has already entered an area that HSBC analysts call «danger zone». However, despite this pressure on the bond market, the impact on shares remains relatively limited – at least until now.
Do bond returns no longer matter to the stock markets?
This is the question posed by HSBC's head strategygist in a bank report Thursday. His conclusion is that although there has been some damage «under the surface»There are two serious reasons why pain has not become even more intense and extensive.
Firstly, although the increase in bond yields is in a risk zone, the volatility of American interest rates is much lower than the corresponding rise in the yield of the 30-year bond observed in 2024 and 2025.
Simply, the rise took place slower and steadily, allowing investors to adapt and restructure portfolios.
Secondly, the unexpectedly strong period of corporate results of the first quarter in part has offset the damage caused by higher interest rates.
Over half of the S&P 500 weighting consists of technology and Artificial Intelligence shares and the rate of excess of estimates for profits per share approaching 100%, combined with the possible predictions for the future, acts as a pillow for Wall Street.
The upward revisions of profit estimates coincided with the increase in yields on American treasuries and this has provided support for shares, corporate bonds and generally so-called risk assets.
HSBC analysts have also come to another conclusion: the major policy changes by the Trump government in the last year, such as the relaxation of tariff policy or the cessation of attacks on Iran, have been dictated mainly by developments in the bond market rather than by some weakness of the stock market.
High yields of bonds, threatening to move even higher, could strangely have a positive effect if they force the parties involved in the Middle East to reach an agreement to end hostilities.
