The bond market is doing that thing again where it quietly rewrites the rules for every other asset class. Goldman Sachs Research flagged on May 22 that surging global long-term bond yields are creating a tightening effect across markets, one that could trigger meaningful corrections in equities and ripple into risk assets like crypto.
The 30-year US Treasury yield climbed above 5%, a level it hasn’t touched since 2007. Germany, Japan, and other major economies are seeing comparable maturity yields ranging between 3.5% and 6%, meaning this isn’t just an American problem.
Risk appetite at extreme levels
Goldman’s Risk Appetite Indicator hit the 99th percentile since 1991 during the week of May 22. In plain English: investors are behaving as if risk doesn’t exist, at the exact moment that the cost of borrowing is screaming otherwise.
US retail trading volumes have surged 28% since mid-April, suggesting everyday investors are piling into equities even as the bond market flashes yellow. Equity indices have reached record highs despite what Goldman characterizes as unfavorable underlying conditions. The firm noted that risk premiums, the extra return investors demand for holding stocks over bonds, are compressed to levels that leave very little margin for error.
