Spanish stocks are under pressure as investors shift their attention from artificial intelligence to rising global bond yields. The US 10-year Treasury yield has climbed above 5% for the first time since 2007, while Spain’s 10-year yield has crossed 4%. Fund managers across Europe are bracing for more volatility as these moves threaten to reshape investment strategies. Reuters reported that the US 10-year Treasury yield hit 5% on September 14, 2026, its highest since October 2023; Spanish 10-year bonds reached about 3.9% in early September, their highest since last autumn.
A recent Bank of America survey of managers overseeing $512 billion in assets shows a clear shift in sentiment. Now, 33% see a disorderly jump in bond yields as the biggest threat to markets, overtaking fears of an AI bubble, which have fallen to 28% from a high of 45% in July. The survey, conducted in early September, came before the latest calls to slow AI model development. Concern about debt markets had already overtaken worries about the tech sector. Reuters says the shift is reflected in asset reallocations and a more cautious mood among global investors.
"In September, the yield on 10-year German Bunds reached its highest point since 2011, highlighting that the surge in long-term rates is a pan-European phenomenon, not just a US story."
Reuters
Investment strategies are shifting so. The share of managers overweight in equities has fallen to 49% from 56% in August. Meanwhile, underweight positions in bonds are at their highest since 2022, at 48%. Managers are moving toward healthcare, with industry and banking also attracting allocations, while cash holdings have risen from 3.5% to 3.9%. Reuters, citing BofA/Investing.com data, reports that the rise in cash reflects a broader retreat from riskier assets as borrowing costs increase and markets grow more volatile.
Expectations for Central Bank moves are also changing. The Federal Reserve is expected to raise rates by 25 basis points, but managers say the institution, led by Kevin Warsh, is behind the curve for the first time since September 2022. Many hope for a flatter yield curve, but few believe recent US Treasury bond buybacks will stop yields from rising. CNBC and CNN report that 5% on US Treasuries is seen as a basic threshold for mortgage rates and credit costs; it could also affect overall market sentiment more if yields stay high.
Political uncertainty in the US is adding to the mix. With midterm elections approaching, 44% of surveyed managers expect Congress and the Senate to be split between Democrats and Republicans. If Democrats win both chambers, most expect bond yields to jump again and stocks to correct.
"The recent surge in bond yields has been closely linked to rising oil prices and persistent inflation fears, prompting expectations of tighter monetary policy across major economies. This environment has led to a broad reassessment of risk and borrowing costs, particularly in rate-sensitive sectors."
Reuters
In Europe, optimism about stocks is fading. Investors still expect European equities to return about 6.3% over the next year, but confidence is concentrated in a few sectors: basic resources and technology, with industry also among the favored areas. Notably, 29% of respondents warn that a correction in US stock valuations tied to AI could trigger a wider market downturn.
Despite the change in risk perception, most managers do not expect hyperscalers to cut capital spending this year. The share holding this view has risen from 71% to 79%. Appetite for risk remains, but has turned more cautious, and the exuberance seen just weeks ago has faded.
These shifts echo developments in Spain’s consumer sector, where inflation and higher costs have already forced companies like Mercadona to change course, as reported earlier. Fund managers’ quick pivot shows how fast market narratives can change when macroeconomic threats become impossible to ignore.
Investors and policymakers now have to face the end of cheap money. For Spain and the rest of Europe, risk management and sector rotation will shape performance, leaving little room to ignore the bond market.
