{"id":23887,"date":"2026-04-20T12:41:10","date_gmt":"2026-04-20T10:41:10","guid":{"rendered":"https:\/\/creandgroup.com\/quarterly-report\/la-principal-afectacion-en-los-activos-de-renta-fija-durante-el-principio-de-ano-ha-sido-el-alza-de-tipos-de-interes\/"},"modified":"2026-04-21T11:41:21","modified_gmt":"2026-04-21T09:41:21","slug":"the-main-factor-affecting-fixed-income-assets-at-the-start-of-the-year-has-been-the-rise-in-interest-rates","status":"publish","type":"quarterly-report","link":"https:\/\/creandgroup.com\/en\/quarterly-report\/the-main-factor-affecting-fixed-income-assets-at-the-start-of-the-year-has-been-the-rise-in-interest-rates\/","title":{"rendered":"The main factor affecting fixed income assets at the start of the year has been the rise in interest rates"},"content":{"rendered":"\n

In 2026, a number of significant developments have already taken place: the Supreme Court of the United States has struck down tariffs, AI has disrupted certain sectors, uncertainty around private debt has persisted, and, more recently, the conflict in Iran has escalated. The latter has led to a marked increase in energy prices and, consequently, a rebound in global inflation. As the war in Iran has dragged on, an increasing correlation has emerged between equities and government bonds. This can be explained by the rise in oil prices, which on the one hand weighs on equity market risk sentiment, and on the other raises medium-term inflation expectations, negatively impacting government bonds.<\/p>\n\n\n\n

Geopolitical risk has had a direct effect on fixed income assets. We are observing a more pronounced increase in short-term yields than in longer maturities, resulting in a flattening of the yield curve (commonly referred to as \u201cbear flattening\u201d, reflecting expectations of higher inflation and tighter monetary policy in the short term).<\/p>\n\n\n\n

One year forward implied market rates based on current expectations:<\/u><\/em><\/u><\/em><\/p>\n\n\n\n

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Long-term yields have also risen amid concerns of higher inflation driven by the conflict in Iran. This has been more pronounced in countries lacking energy independence, such as the United Kingdom, where yields are approaching 5%. By contrast, the US 10-year Treasury, currently at 4.38%, has only edged slightly above the levels observed for most of January, indicating that investors expect any inflationary uptick in the United States to be temporary. The German Bund has exceeded the 3% threshold on several occasions, a level previously anticipated for the latter part of the year. Real yields remain at elevated levels, making inflation-linked bonds more attractive.<\/p>\n\n\n\n

Evolution of 10-year benchmark yields (G4)<\/u><\/em><\/u><\/em><\/p>\n\n\n\n

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This has been the key factor affecting bond prices in the early part of the year, and any recovery will depend on the duration and intensity of the conflict in the Persian Gulf, as well as on the trajectory of oil prices. Inflationary pressures are becoming evident in recent data releases and the OECD expects G20 inflation to be higher in 2026 than previously projected, reflecting the rise in global energy prices. However, medium-term inflation expectations remain relatively stable on both sides of the Atlantic for the time being. This stability is helping to ensure that these shocks have only a moderate impact on financial markets.<\/p>\n\n\n\n

5y5y inflation (US and Eurozone)<\/u><\/em><\/u><\/em><\/p>\n\n\n\n

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If a lasting resolution to the current conflict with Iran is reached in the near term, attention is likely to shift back to fiscal policy. Markets have grown accustomed to expecting this type of support. Spain, Italy, Ireland, Greece, France and Germany have already announced temporary support measures in response to the latest energy supply shock. As a percentage of GDP, these figures are not particularly high, but they reinforce the market trend of anticipating increased spending\u2014especially as the situation also highlights the need for higher defence budgets.<\/p>\n\n\n\n

The increase in bond supply, particularly at a time when fixed income may offer less protection within portfolios alongside heightened economic uncertainty, means that investors are demanding greater compensation for holding longer-dated bonds, pointing to higher term premiums. By way of example, the yield achieved at the UK 10-year government bond auction in mid-April (4.9158%) is the highest offered to investors in such an auction since 2008.<\/p>\n\n\n\n

In short, the evolution of fixed income markets in 2026 will depend to a large extent on the resolution of the conflict in Iran and on governments\u2019 fiscal responses. Investors will need to remain attentive to both geopolitical dynamics and shifts in inflation and public spending expectations, which will continue to shape the premiums demanded in debt markets.<\/p>\n\n\n\n

Date of report: April the 20th 2026<\/sup><\/p>\n\n\n\n

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