Interest rates continue to rise while the stock market sees life through rose-colored glasses, Benoît Peloille, chief strategist at asset manager Natixis, told the Bloomberg news agency.
“Starting to feel uncomfortable”
With leading Wall Street indexes hovering around historic record levels amid the AI boom and following a strong earnings season, Peloille warns that reality could soon catch up with investors - if interest rates continue to rise.
This is starting to feel uncomfortable, says Dan Niles, founder of asset manager Niles Investment Management, to CNBC, about the situation in the financial market.
And in the Financial Times, columnist Katie Martin writes that she can smell overheating in the financial markets and that the feeling that something is not right is gnawing at her.
“Many investors, bankers and analysts are not wondering if a market correction is coming, but what will trigger it,” she writes.
Concerns that the energy price shock resulting from the ongoing Iran war - causing historic disruptions to the oil industry around the Persian Gulf - will push up inflation and pressure central banks to tighten with interest rate hikes have pushed up market interest rates around the world this week.
Highest 30-year interest rate since 1999
The yield on a two-year US government bond is the highest since early 2025. In Japan, the yield on 30-year bonds has skyrocketed to 4.02 percent - the first readings above 4 percent since 1999. And British long-term interest rates are hovering at their highest levels in 28 years as a result of the crisis of confidence in Prime Minister Keir Starmer’s government.
The upward pressure on long-term interest rates was also evident at the end of the week in countries such as Germany and Sweden, where the yield on a ten-year government bond rose to 2.89 percent, up from 2.72 percent just a week earlier.
Long-term market interest rates normally affect the interest rates on fixed-rate mortgages - as banks largely finance their longer-term mortgages with mortgage bonds on the fixed-rate market.
Mortgages with variable interest rates, on the other hand, are primarily affected by the Swedish Central Bank's policy rate and the interest rates banks charge each other for short-term interbank loans.
