Nigel Green says higher returns from government bonds are creating serious competition for equities as global borrowing fears intensify
Surging bond yields could threaten the current global stock market rally as investors increasingly shift towards fixed income assets offering stronger returns and lower volatility, according to Nigel Green, CEO of deVere Group.
The warning comes as global equity markets retreated sharply while sovereign bond yields climbed across the United States, United Kingdom, Europe and Japan amid growing concerns over government debt, inflation and rising borrowing costs.
Wall Street ended Friday lower, with the S&P 500 falling 1.2%, the Dow Jones Industrial Average dropping 1.1% and the Nasdaq Composite sliding 1.5%.
Elsewhere, Europe’s STOXX 600 fell more than 1%, Japan’s Nikkei declined around 2%, while Hong Kong’s Hang Seng dropped roughly 1.6%.
At the same time, bond markets signalled increasing investor concern about the global economic outlook.
US 30-year Treasury yields climbed back above 5%, UK 30-year gilt yields reached their highest levels since 1998, while Japanese government bond yields also pushed to multi-year highs as the Bank of Japan continued moving away from ultra-loose monetary policy.
Nigel Green said markets are now confronting a major shift in the global financial system.
“Governments across the world are issuing extraordinary amounts of debt at precisely the moment inflation risks are becoming entrenched and investors are demanding higher compensation to lend,” he said.
“Bond markets are beginning to challenge the entire foundation of the equity rally.”
According to the IMF, global public debt rose to almost 94% of world GDP in 2025 and is projected to reach 100% by 2029, earlier than previously forecast.
Meanwhile, the OECD estimates governments and corporations will borrow around $29 trillion from markets in 2026 alone, marking a 17% increase compared with 2024 levels.
Green says investors are now reassessing the balance between risk and reward.
“For more than a decade, markets operated in an era dominated by artificially cheap money,” he explained.
“Central banks suppressed yields, governments borrowed aggressively and investors were pushed deeper into equities and speculative assets because fixed income generated almost no meaningful return.
“That world is disappearing rapidly, with investors now securing 4%, 5% and in some cases higher yields in sovereign debt and investment-grade fixed income.”
The deVere chief executive argued that the pressure is global rather than isolated to one market.
“This is not confined to one country or one region,” he said.
“Britain, the US, France, Italy and Japan are all dealing with rising borrowing costs, elevated deficits and growing refinancing pressure at the same time.”
He added that inflation remains central to the story, particularly following renewed Middle East tensions and rising oil prices, which have fuelled fears inflation could remain structurally higher for years to come.
“Markets increasingly recognise that the old ultra-low inflation era is over,” Green said.
“Trade fragmentation, tariffs, defence spending, labour shortages, energy security concerns and massive AI and tech infrastructure investment are all contributing to persistent inflationary pressure.”
He also warned that higher bond yields are tightening financial conditions across the wider economy by increasing mortgage costs, corporate refinancing pressures and scrutiny around equity valuations.
The current stock market rally, he said, has become heavily concentrated around a relatively small group of major AI and technology companies.
“Strong earnings and AI optimism have kept markets moving higher, but leadership has narrowed significantly,” he said.
“Bond markets are now testing whether those valuations remain sustainable in a world where capital is no longer effectively free.”
Green concluded: “Fixed income has become genuinely attractive again. Investors are once again being paid properly to own sovereign debt.
“The rise in global bond yields is fast becoming one of the defining investment stories of 2026.”
