Monthly House Views - Rates tighten (again) - September 2026

Resilient growth

Despite a still uncertain geopolitical environment and persistent tensions on the energy markets, developed economies held up better than expected in the second quarter, with annualised growth of 1.5% in the United States and 1.3% in the euro area. Business surveys even point to a further acceleration in activity in the third quarter.

However, this resilience has its downside: it is slowing down the expected disinflation process, even as several supply shocks continue to exert upward pressure on prices. In this context, markets are now anticipating further increases in key rates from the main central banks, leading to a global movement of interest rate hikes across the entire curve..

An unfavourable imbalance in bond markets

This rise in yields can also be explained by a more structural factor: the growing imbalance between supply and demand for debt. On the supply side, sovereign issuance is growing under the effect of high public deficits. In addition, there is an ever-increasing need for private financing: companies most exposed to the rise of artificial intelligence are now making greater use of the bond market and private financing to support their massive investment needs in digital infrastructure, data centers and computing capacity.

On the demand side, quantitative tightening (QT) programmes led by several central banks, including the ECB, the Bank of England and the Bank of Japan, are continuing and emerging central banks are no longer accumulating foreign exchange reserves. The gradual withdrawal of these structural buyers comes precisely at a time when issuance volumes are reaching historically high levels, helping to maintain upward pressure on long-term rates.

Preference confirmed for equities

In an environment of resilient growth and more persistent inflation, we maintain our preference for equity markets over bonds. In particular, we favour US equities and emerging markets in Asia-Pacific, whose indices have particularly strong exposure to the AI theme. AI remains a powerful driver of investment globally. Spending on next-generation semiconductors, data centers, energy infrastructure and automation software is supporting earnings growth in a growing number of sectors. Finally, we expect additional support from the dollar in the near term, driven by economic momentum that should remain more robust in the US..

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