28 MAY 2026
Bond markets tend to set the tone for broader risk assets with sharp increases in US Treasury yields and credit spreads typically a harbinger of equity market unrest.
This was the case in 2021/22 when intense inflation fears sparked a sudden spike in borrowing costs. A major sell-off in stock markets soon followed.
Encouragingly, these two charts show that neither US Treasury yields (blue line), nor high yield credit spreads (red line) have reacted adversely to the Middle East turmoil.
This orderly behaviour suggests underlying liquidity conditions remain supportive.
Central Bank rate cuts may be off the table for now, but policymakers continue to provide “backdoor” support to prevent a disorderly unwind in bond markets.
And for as long as investors believe that bond yields are effectively capped, we are unlikely to witness the sort of fixed income weakness that normally precedes a major equity bear market.
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