UBS
May 25, 2026
Bonds: Stuck in the Gulf
Rates StrategyRates Govt BondsMacro Economic IndicatorsCommoditiesEnergyOther
UBS has increased its end-2026 bond yield forecasts due to the stalemate in the Iran conflict and closure of the Strait of Hormuz, but maintains that current market pricing for long-term high rates is overdone.
Key Takeaways
- 1.UBS has raised global bond yield forecasts to reflect inflationary risks from the prolonged closure of the Strait of Hormuz.
- 2.The market's persistence in pricing 'higher-for-longer' interest rates is viewed as excessive given that supply shocks also negatively impact growth.
- 3.Government bond valuations are currently at the cheap end of multi-decade ranges, offering attractive total returns.
Table of Contents
- Assessing the bearish bond narrative
- Agree - The balance of risks has clearly shifted toward hikes for most central banks
- Disagree - A permanently higher level of interest rates can be sustained
- Investment implications
- US
- Europe and the UK
- Asia Pacific
Document Preview
Access the Full Report
Get unlimited access to institutional research reports with a 14-day free trial.
Authors
Tom NashFrederick MellorsLeslie Falconio
Securities
US 10-year bondGerman 10-year BundUK 10-Year GiltJapan 10-year JGBAustralian Commonwealth Government Bond (ACGB)Crude Oil
Themes
Geopolitical escalation in the Middle EastStrait of Hormuz supply chain disruptionCentral bank policy pivot from easing to tightening
Regions
North AmericaEuropeUKUnited StatesGermanyUnited Kingdom