FT News Briefing Bond woes spill over into equities
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Sep 3, 2025 Global markets are feeling the heat as a significant sell-off in government bonds triggers declines in equities. Eurozone inflation creeps up to 2.1%, raising eyebrows among investors. Meanwhile, European banks are rallying for fewer barriers to cross-border banking, highlighting the fragmented financial landscape in the Eurozone compared to the US. The discussion spotlights the mounting challenges posed by rising borrowing costs and the imperative for regulatory reforms to boost competitiveness.
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Bond Sell-Offs Pressure Stocks
- Government bond sell-offs are spilling into equities as rising long-term yields disturb investor sentiment.
- Markets worry that higher sovereign borrowing costs could materially pressure stock valuations if the trend continues.
Yield Curve Steepening Explained
- Long-term borrowing costs are rising faster than short-term rates, creating a steeper government yield curve.
- Reduced demand from pension funds and insurers plus record government issuance are driving the move higher in long-dated yields.
Watch Fiscal Wiggle Room
- Monitor fiscal wiggle room when assessing sovereign risk exposure, especially ahead of major budget events.
- Expect governments with reduced fiscal buffers to face pressure for tax rises or spending cuts that can affect markets.