Global financial markets are undergoing a notable shift in sentiment as a sharp rise in sovereign bond yields across the US, Japan, the UK, Germany, and France triggers a broad risk-off move across equities and commodities. Speaking to ET Now, market strategist Laurence Balanco from CLSA noted that markets are no longer primarily reacting to traditional risk signals like oil, but are now increasingly driven by movements in global bond yields. He highlighted that the recent rise—where US 2-year yields moved above 4% and 10-year yields crossed 4.5%, while longer-duration bonds also joined the uptrend—has tightened liquidity conditions and increased pressure on risk assets.According to him, this environment is now translating into corrective action across global equity markets, with further downside risk emerging as yield momentum continues.
Balanco added that the weakness is particularly visible in high-beta areas such as technology and semiconductors, which had led the rally since the March lows. He pointed out that semiconductor indices and key Asian benchmarks have started breaking below short-term moving averages, indicating a potential loss of momentum in the AI-led trade. At the same time, cyclical sectors and commodities are also coming under pressure as rising real yields weigh on valuations. He noted that base metals and precious metals are both facing headwinds, reinforcing the broader risk-off tone.
