{"slug": "bonds-face-a-bigger-threat-than-the-fed-as-global-rates-climb", "title": "Bonds Face a Bigger Threat Than the Fed as Global Rates Climb", "summary": "Global bond markets face a greater threat from rising rates outside the U.S. than from the Federal Reserve, with traders pricing in about 400 basis points of rate hikes across seven major markets over the next year, according to Bloomberg data. Two-thirds of 32 swap markets tracked are priced for hikes, led by South Korea at over 100 basis points, as central banks grapple with higher oil prices from the Iran war, heavy government spending, and an AI investment boom. Fidelity International portfolio manager George Efstathopoulos said bonds no longer provide diversification, noting the firm has very little government debt exposure.", "body_md": "(Bloomberg) -- As investors debate whether and when the Federal Reserve will raise interest rates, market expectations for further tightening are building around the world — and spelling trouble for bonds.\n\nMost Read from Bloomberg\n\n-\n[Anthropic Revenue Surges to Over $11.5 Billion in Second Quarter](https://www.bloomberg.com/news/articles/2026-08-14/anthropic-revenue-ahead-of-ipo-surges-over-14-fold-in-second-quarter?utm_campaign=bn&utm_medium=distro&utm_source=yahooUS) -\n[Bond Traders Are Agonizing Over $70 Billion of Shadow Credit Backstops For AI Companies](https://www.bloomberg.com/news/articles/2026-08-15/bond-traders-agonize-over-ai-companies-70-billion-of-shadow-credit-backstops?utm_campaign=bn&utm_medium=distro&utm_source=yahooUS) -\n[Selena Gomez Accused of Fraud by Mental-Health Startup Investors](https://www.bloomberg.com/news/articles/2026-08-13/selena-gomez-accused-of-fraud-by-mental-health-startup-investors?utm_campaign=bn&utm_medium=distro&utm_source=yahooUS)\n\nTraders see borrowing costs rising faster in Japan, Canada, the UK and the euro zone than in the US over the next year. Of the 32 swap markets tracked by Bloomberg, two-thirds are priced for rate hikes, with South Korea leading the pack at more than 100 basis points.\n\nIt marks a shift from the Fed-dominated rate cycle of recent years. This time, central banks are facing overlapping pressures from higher oil prices from the Iran war, heavy government spending and an AI investment boom that's supercharging growth. Inflation across countries in the Organisation for Economic Co-operation and Development recently hit a two-year high.\n\nThat leaves investors with an uncomfortable prospect: bonds are supposed to cushion portfolios when things go wrong — for example, if the AI-driven stock rally reverses or another trade war hits growth. If central banks outside the US are forced to tighten more aggressively, those bonds could instead add to losses, undermining one of the foundations of traditional diversification.\n\n\"From a diversification perspective, it doesn't do the job,\" said George Efstathopoulos, portfolio manager at Fidelity International, which oversees over $1.1 trillion in assets. He has very little exposure to government debt, holding only some Treasury inflation-protected securities and Brazil paper.\n\n\"In a world of just more geopolitics developments, more energy dependence, sticky inflation, big fiscal stimulus — you're probably going to see more inflation resistance,\" he added.\n\nTraders are pricing in about 400 basis points of rate hikes across seven major markets over the next year, data compiled by Bloomberg show. If they're right, the implications may ripple beyond bonds, weighing on richly-valued stocks by reducing the present value of future earnings, tightening financial conditions and disrupting currency trades.\n\nHigher rates also raise the return investors can earn simply by holding cash, giving them more alternatives for their money, according to Ed Al-Hussainy, portfolio manager at Columbia Threadneedle. That means governments and companies have to offer higher yields to compete for capital, he said.", "url": "https://wpnews.pro/news/bonds-face-a-bigger-threat-than-the-fed-as-global-rates-climb", "canonical_source": "https://ca.finance.yahoo.com/news/bonds-face-bigger-threat-fed-120000846.html", "published_at": "2026-08-16 12:00:00+00:00", "updated_at": "2026-08-16 13:11:58.613675+00:00", "lang": "en", "topics": ["ai-infrastructure"], "entities": ["Federal Reserve", "Bloomberg", "Fidelity International", "George Efstathopoulos", "South Korea", "Organisation for Economic Co-operation and Development", "Columbia Threadneedle", "Ed Al-Hussainy"], "alternates": {"html": "https://wpnews.pro/news/bonds-face-a-bigger-threat-than-the-fed-as-global-rates-climb", "markdown": "https://wpnews.pro/news/bonds-face-a-bigger-threat-than-the-fed-as-global-rates-climb.md", "text": "https://wpnews.pro/news/bonds-face-a-bigger-threat-than-the-fed-as-global-rates-climb.txt", "jsonld": "https://wpnews.pro/news/bonds-face-a-bigger-threat-than-the-fed-as-global-rates-climb.jsonld"}}