Iran and Inflation Fears Hit Global Bonds

追加: 2026-06-02

[00:00:00]What does the sell-off in bonds tell you just about the way that global investors are thinking about US debt in particular? There are a couple things going on here. We've had periods of bond sell-offs in the past. I mean, during the pandemic, David, for example, bonds sold off. During previous moments of volatility, bonds sold off. But now there's a feeling that this sell-off is signifying that investors are starting to crystallize on several issues coming together at once. And that is the US government borrowing position. Too much borrowing, too much spending. Investors are saying you're going to have to pay up to keep borrowing from us. That's the fiscal story in the US. And then secondly, there's this kind of penny drop moment where investors are saying, "Hang on, US interest rates might be higher for longer now because of what's going on in the inflation story." That's the Iran dynamic, but it's also the AI boom that's driving up the cost of goods here. Tariffs have had some impact.

[00:00:51]You've got the whole changing supply chain story or deglobalization that's making trade more expensive. You've got the demographic story. There's a range of issues there that investors are saying will mean interest rates will need to be higher than they were now for longer. So there's this kind of feeling that what happened this week, why now?

[00:01:08]Well, it's a penny drop moment.

[00:01:09]Investors seem to be casting judgment on all of these issues at the same time.