The Week in Markets
Two hot inflation prints jolted markets this week: CPI hit a three-year high of 3.8% and producer prices jumped 1.4% on the month, the steepest since 2022. Bonds sold off all week — the 10-year Treasury yield climbed to 4.56% and Washington sold 30-year debt at 5.046%, the first 5%-plus auction since 2007. Equities set records mid-week before a 1% Friday slide; Brent held above $108. AllianceBernstein flagged that real household paychecks have been flat for a year, leaving the Warsh-led Fed facing a supply-shock conundrum. Northern Trust has scrapped its forecast Q4 rate cut, noting three FOMC members dissented against easing as the savings rate hit a three-year low.
US inflation has started to rise
Source Alliance Bernstein
UK borrowing costs hit their highest since 2008 this week as traders braced for Andy Burnham to challenge Keir Starmer. The 10-year gilt rose to 5.18% and the 30-year reached 5.85%, its highest since 1998, while sterling fell to a one-month low of $1.334. Impax Asset Management argued the rout reflects a convergence of Bank of England quantitative tightening, the energy shock and political instability. J.P. Morgan Asset Management warned that heavy overseas ownership leaves Britain "relying on the kindness of strangers." Royal London Asset Management grouped the UK with Italy and France as the "BIFs" — a supply story, not a solvency one — but sees gilts closer to value than vulnerability.
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The AI trade went global this week. Cerebras' Nasdaq debut closed 68% up for a near-$70bn valuation — the year's biggest IPO — while Fervo's $9.8bn geothermal listing underlined AI's power hunger. Europe's chip stocks have surged (the Stoxx semiconductor index is up 74% in 2026) and Korea's Samsung and SK Hynix posted blockbuster profits. Platinum Asset Management, sitting on a ~600% one-year gain in SK Hynix, has begun trimming — "taking some chips off the table." Allianz Global Investors estimated investment-grade credit will fund $1.5tn of the AI buildout. TrinityBridge cautioned that breadth is widening but only 6% of OpenAI's users pay.
Japan's Nikkei 225 fell about 2% this week to close at 61,409, pulling back from record highs as Japanese government bond yields climbed to multi-decade highs — the 10-year up 23 basis points to 2.70% — and the yen languished near ¥159. Amova Asset Management pushed back on the idea a weak yen powered the rally: dollar/yen is up just 6% over the year against a 60%-plus surge in the Nikkei, with currency depreciation adding only 0.3–2.8% to big exporters' profits — the real driver is the global semiconductor capex boom. HSBC Asset Management noted the retreat fits a fraying "Bliss Trade," where fiscal-led equity gains meet restless bond markets.
The Financial Stability Board published its Report on Vulnerabilities in Private Credit on 6 May, flagging opacity risks, while KBRA research showed middle-market borrowers' earnings growth no longer translating into liquidity, with payment-in-kind toggles climbing. Janus Henderson Investors highlighted a recent flash-point: a major non-traded retail BDC effectively suspended redemptions in early 2026 and sold ~$1.4bn of loans to return capital, exposing a liquidity mismatch. Columbia Threadneedle Investments dissected the systemic plumbing — US bank lending to nonbank lenders has jumped from $200bn to $1.5tn over a decade, now ~11% of total bank loans, and is positioning for credit spreads to widen.
📅 Monday, May 18, 2026
📅 Tuesday, May 19, 2026
📅 Wednesday, May 20, 2026
📅 Thursday, May 21, 2026
📅 Friday, May 22, 2026
Source: Bloomberg, All times GMT/UTC+1
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