BIS Quarterly Review (September 2026): yields climb, yet risk appetite holds firmWorries about government debt pushed long-term rates up, but investors stayed bold
On September 14, 2026 the BIS published its Quarterly Review. It says flare-ups in geopolitical tensions tested the positive momentum of the first half of the year, with hostilities in the Strait of Hormuz heightening uncertainty about the inflation and monetary policy outlook. With concerns about fiscal burdens added, government bond yields rose and AI-led equity momentum wobbled, but investors’ risk appetite proved resilient on the whole.
- (1) Long ratesGovernment bond yields rose; higher term premia were one cause
- (2) AI momentumIt wobbled on valuation and overinvestment concerns, and money moved to other sectors and countries
- (3) Bond marketCredit markets were relatively unscathed even as big tech issued far more bonds
Key points
- Government bond yields rose, especially at longer maturities, on a tighter expected policy path and rising term premia, the compensation investors require to hold longer-term bonds; the rise reflected fiscal pressures rather than inflation concerns, and euro area sovereign spreads widened as energy price swings returned
- AI-led equity momentum wobbled amid concerns about the future profitability of AI investment fuelled by the increasing leverage of major US tech firms; a highly leveraged AI-focused hedge fund failed, but aggregate volatility stayed contained
- In the United States small caps outpaced tech firms, and non-US markets generally outperformed US ones; euro area equities gained helped by banks, emerging market markets performed well, and Korean markets whipsawed on heavy semiconductor exposure magnified by leveraged positioning
- Credit spreads remained compressed by historical standards while investors tilted towards higher-quality borrowers; large tech firms ramped up bond issuance, especially at longer maturities, while issuance slowed in riskier segments; gold extended its decline from early-year peaks
What to do in practice
- When long-term interest rates are rising, review borrowing terms, repayment plans and the choice between fixed and floating rates
- Check the details in the chapters of the original (long rates, risk assets, emerging market assets) and the boxes
The BIS, an international organisation, has summed up what happened in the world’s financial markets. Rising tension in the Middle East and worries that governments are borrowing too much pushed long-term interest rates up. Momentum in AI-related shares wobbled a little, but investors’ willingness to take risks stayed strong overall.
- ○Applies: Worries about government debt pushed long-term rates up
- ○Applies: Momentum in AI-related shares wobbled a little
- ×Does not apply: Investors’ willingness to take risks disappeared completely
- ○Applies: The market for companies’ borrowing was mostly calm
Points
- Worries that government debt may grow too much pushed long-term interest rates up
- Momentum in AI shares wobbled, but money moved to shares in other sectors and countries
- The market for companies’ borrowing was mostly calm
What the words mean
- long-term interest rate
- the rate of interest charged when money is borrowed for a long time
- term premium
- the extra yield investors require for holding long-term government bonds
In the review period flare-ups in geopolitical tensions tested the positive momentum that had characterised the first half of the year. Markets faced bouts of volatility as hostilities in the Strait of Hormuz heightened uncertainty about the inflation and monetary policy outlook. On top of that, lingering concerns about the sustainability of fiscal burdens added to the pressure.
- Bank for International Settlements (BIS): BIS Quarterly Review, September 2026
- Bank for International Settlements (BIS): BIS Quarterly Review, September 2026, Overview: Yields climb, yet risk appetite holds firm
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