Global investors are looking ahead to higher volatility, and with U.S. long-term bond yields above 5%, bonds are being reevaluated for their appeal. The view is emerging that bank earnings and the U.S. midterm elections could be turning points ahead.
Global investors are seeking to reassess their asset allocations against a backdrop of rising bond yields, and bonds are beginning to appear more attractive than equities in some situations. This trend is particularly pronounced in the United States, where the 10-year Treasury yield rising above 5% has drawn considerable attention.
The first potential turning point will be the July-September earnings of U.S. banks and their balance sheets. Unrealized losses on bond portfolios and losses on AI-related corporate bonds could affect the formation of premiums on corporate and government bonds going forward. JPMorgan is scheduled to announce earnings on 13 October.
The second potential turning point is the U.S. midterm elections on 3 November. The market is pricing in the possibility that asset prices could reach a turning point depending on the outcome, and there is a view that policy developments if the Democrats secure a majority will influence the investment environment.
In the worst-case scenario, if President Trump again refuses to accept the election results, an “uncertainty premium” could emerge in U.S. Treasuries, raising concerns about a negative impact on U.S. equities. There is also a view that interest in the Japanese market is increasing as a destination for current uncertainty.