Global equities retreated sharply on Friday as sovereign bond yields surged across major economies, fuelling concern that rising fixed income returns could undermine the current stock market bull run and trigger a broader reallocation of capital away from equities.
Nigel Green, chief executive of financial advisory firm deVere Group, warned that a fundamental repricing of risk is now underway across the global financial system, with bond markets offering genuine competition to stocks for the first time in years.
“Bond markets are beginning to challenge the entire foundation of the equity rally,” Green said.
Wall Street closed Friday in the red, with the Standard & Poor’s (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 slid more than 1%, Japan’s Nikkei declined around 2% and Hong Kong’s Hang Seng shed roughly 1.6%.
Bond markets sent an even starker signal. The US 30-year Treasury yield climbed back above 5%, UK 30-year gilt yields reached their highest level since 1998, and Japanese government bond yields pushed to multi-year highs as the Bank of Japan continued retreating from ultra-loose monetary policy.
The borrowing figures behind the pressure are significant. The International Monetary Fund (IMF) estimates global public debt reached nearly 94% of world gross domestic product (GDP) in 2025 and is projected to hit 100% by 2029. The Organisation for Economic Co-operation and Development (OECD) forecasts governments and corporations will borrow approximately $29 trillion from markets in 2026 alone, up 17% from 2024 levels.
Green argued that the collapse of a decade-long era of artificially cheap money now drives the shift. Investors who once had little option but to pursue equity returns can now secure 4% to 5% yields, and sometimes higher, in sovereign debt and investment-grade fixed income. That change, he said, fundamentally alters the incentive to take on equity risk.
Inflation compounds the pressure. Higher oil prices linked to renewed Middle East tensions have deepened fears that inflation will remain structurally above pre-2020 norms for years. Long-dated bond yields across Group of Seven (G7) economies have climbed to their highest levels in more than two decades, with Green pointing to trade fragmentation, tariffs, defence spending, labour shortages, energy costs and artificial intelligence (AI) infrastructure investment as drivers of persistent price pressure.
He also cautioned that the current equity rally has grown increasingly narrow, concentrated in a small cluster of AI and technology giants whose valuations now face greater scrutiny in a world where capital is no longer effectively free.
