Writing’s on the wall for the bond market – for those who can read it

There is a good deal more to the rapid rise in bond yields around the world, not least in Asia, than meets the eye. It suggests a recognition by financial markets that governments are spending beyond their means, tax revenues and borrowing power.The implication is that either taxes need to rise or public spending needs to fall, or alternatively that financial markets, stock markets in particular, must shift their priorities away from glamour stocks in the tech and artificial intelligence (AI) sectors towards investment in more basic public goods.That, in turn, points to a coming correction in richly valued stocks towards less glamorous sectors such as energy, infrastructure and health – seemingly pedestrian yet essential. Either way, recent developments suggest the need for a reorientation in investment priorities.