Higher rates matter less than investors assume
The US economy appears more resilient to higher rates than in past cycles because housing has already adjusted, consumers remain supported by wealth effects, and the AI-driven capex boom is being driven by overwhelming demand rather than financing costs. In this environment, higher yields may slow growth at the margin, but have yet to meaningfully dent spending, investment, or corporate earnings.
Central bank interest rate hikes and concern over rising public debt have pushed long-term bond yields up across major economies. Poor fiscal profiles do not necessarily translate into a bond crisis though, according to Anshul Pradhan, head of US Rates Research. The US, borrowing in the world’s reserve currency, has a unique position that provides it greater fiscal flexibility, Pradhan points out.
