All long-term yields are moving at once, and this is not a technical episode in the debt market. The 30-year US Treasury yield exceeded 5.33% yesterday, a nineteen-year high. The German 10-year Bund is at 3.25%, its highest since March 2011. The Japanese yield is close to 3%, something unprecedented in thirty years. And the Spanish yield closed at 3.71%, near 52-week highs despite our fiscal picture improving, with debt at 100.2% of GDP and a deficit closing 2025 at 2.4%. Spain pays more even when doing its homework, because the cost of money is set elsewhere.
The era of free money is over, and capital is once again priced. For the stock market, the equation becomes more complicated because the higher the yield on a sovereign bond, the more the equity must offer to compensate for the risk, and the further away the profits of a company are, the less they are worth today.
The explanation lies in the volume of debt that needs to be placed in the market. The United States is heading towards $40 trillion in debt with a deficit of 5.8% of GDP, and the European Commission warns that the eurozone deficit will widen to 3.6% by 2027. The novelty is that states are no longer competing alone for that savings. Amazon, Alphabet, Microsoft, Meta, and Oracle will close 2026 by issuing about $250 billion in bonds and $400 billion in 2027, according to Goldman Sachs, to finance artificial intelligence. In Europe, rearmament will cost more than €380 billion in 2025. There lies the Achilles' heel of the technology sector, which was the worst performer on the European stock market yesterday, falling by 1.8%.
Central banks are already covering themselves. They bought 289 tonnes of gold in the second quarter, a record, and they did so while the price was correcting. The metal is currently around $4,355 per ounce. When the holder of reserves doubts the sustainability of the issuer of the reserve asset, they switch to something that has no counterparty risk.
The most concerning signal is that long-term rates are rising while the market cuts its bet on the Fed from two hikes to one for the remainder of the year. In Europe, the opposite is happening, with more than a 90% probability of a rate hike by the ECB in September. The problem is no longer just with central banks. The deficits, inflation, Brent near $90, the cost of artificial intelligence, and rearmament are all pushing in the same direction. For fifteen years, falling rates have pushed all assets up. If that dynamic reverses durably, the stock market will have to learn to rise without its best ally. And for the most expensive tech stocks, the bill could be particularly high.