The Bank for International Settlements published its Quarterly Review, finding that investor risk appetite remained broadly resilient from June 1 to Sept. 3 despite geopolitical tensions, fiscal concerns and rising interest rates. Long-term sovereign yields increased by 31 basis points in the United States, 34 basis points in Germany, 27 basis points in Japan and 24 basis points in the United Kingdom. Higher term premiums, driven mainly by fiscal and other real risks rather than inflation expectations, contributed to the rise, while uncertainty over monetary policy increased volatility at the short end of the US yield curve. Artificial intelligence-driven equity momentum weakened as investors questioned technology valuations, debt-financed investment and future profitability, but capital shifted toward other sectors, non-US markets and emerging market economies. Credit spreads remained compressed, although investors favored higher-quality borrowers and issuance slowed in riskier segments. The review also highlights financial stability risks from leveraged relative value trades in core bond markets and from leveraged exchange-traded funds and related products that can amplify movements in underlying equities. The review’s analytical articles find that technology companies drove much of US private credit growth after 2020, with their share of direct lending rising to 44% by 2025, although weaker borrower fundamentals and narrower pricing dispersion raise risk concerns. Other findings support longer deferral periods for bank executive compensation as a means of reducing risk, document rapid post-crisis growth in international credit to Africa and show that central banks increasingly communicate a broader range of core inflation measures, creating added complexity when indicators diverge.
2026-09-14Bank for International Settlements
Bank for International Settlements finds risk appetite resilient despite rising yields and geopolitical tensions
The Bank for International Settlements found that risk appetite held firm despite rising sovereign yields, geopolitical tensions and concerns over fiscal sustainability and technology valuations. Investors shifted toward higher-quality credit, non-US equities and emerging markets, while leverage in bond and equity products remained a financial stability concern. Separate studies examine technology-driven private credit growth, bank compensation deferrals, international credit to Africa and central bank communication on core inflation.