After being relatively quiet for much of 2025, developed market (DM) government bond markets have weakened anew this year. Prospects for better economic growth in a wide range of countries/regions, plus sticky DM inflation and accommodative monetary conditions bode poorly for bond market returns. So far, equity and credit markets have continued to ignore the warnings signs, but we doubt that the entrenched complacency will persist throughout 2026.
There is potential for negative bond market surprises to trip up risk asset markets at some point this year, much like occurred in 2022. We analyzed this tail risk in a recent research report.
