The bond market bandits are back with a vengeance in 2025. Despite central banks repeatedly cutting short-term policy rates, financial markets have forced a huge increase in the long-term cost of capital around the world.

This awkward juxtaposition between the conflicting moves in short- and long-term rates is being driven by investor concerns around profligate political spending, tight labour markets, brisk wage growth, sticky inflation, poor productivity, and risks relating to Donald Trump’s policy platform (and the spectre of a tariff-induced trade war, in particular).