Soaring bond yields are not necessarily a bad thing? Experts say this signals strong economic performance and a normalization of interest rates

⑴ The yields on 10-year government bonds worldwide have reached multi-decade highs—Japan is at a thirty-year peak, Germany at its highest point in fifteen years, and the UK at an eighteen-year high. However, some economists believe this may not be a negative development; instead, it reflects the resilience of the underlying economic fundamentals.⑵ Economists point out that the current rise in yields essentially signals a normalization of the interest rate market following the functional downturn after the 2008 financial crisis. With annual growth in household income and expenditure around 7%, combined with robust capital demand brought by artificial intelligence infrastructure investments, both factors support an upward shift in the interest rate center.⑶ Despite market discussions about fiscal deficits driving up interest rates, so far, no signs of slowdown have appeared in US economic data. With the Federal Reserve Chair making a hawkish statement, the likelihood of a September rate hike has increased. Against the backdrop of consumer spending and corporate investment being much less sensitive to credit conditions, this can be interpreted more as a positive signal.⑷ Institutional strategists also believe the rise in interest rates will not become an insurmountable obstacle for the stock market. Their core logic is that higher yields precisely reflect stronger economic momentum. Coupled with robust earnings delivery, upward revisions to earnings per share, and a continued rebound in the Purchasing Managers Index, they maintain a positive outlook for global equities through year-end.⑸ The Eurozone PMI has risen for three consecutive months, reinforcing the value of international equity allocation. The dollar may be peaking and could decline, which would be favorable for emerging markets and non-dollar assets. After more than a 20% correction, gold has room for a rebound. With US valuations relatively elevated, emerging markets—benefiting from a stabilization in memory trade and expectations for economic recovery—offer superior cost-effectiveness.⑹ In the future, attention will be on policy signals released during the global finance ministers' meeting. If inflation data does not deteriorate beyond expectations, actual central bank tightening may be less than current market pricing suggests. At that point, yields on bonds may temporarily peak, potentially triggering a valuation recovery in risk assets.