Global Rates Moving Higher
May 18, 2026
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Equities began last week on firm footing, reaching record highs by Thursday, with the S&P 500 Index closing above 7,500.1 However, Friday’s rate-driven selloff erased nearly all of the S&P 500’s prior gains for the week.2 The Consumer Price Index (CPI) and Producer Price Index (PPI) inflation readings were hotter than expected.3 Global rates moved higher, driven in part by Japanese inflation data and UK political headlines. The 10-year U.S. Treasury closed at 4.59%, potentially entering a higher trading range going forward, while the 30-year U.S. Treasury closed at 5.12%.4 Notably, the U.S. government issued a 30-year bond with a coupon above 5% for the first time since 2007.5 Yields also surged abroad, with Japan’s 30-year exceeding 4% and UK gilts reaching their highest rates in almost 28 years.6
Global rates are stabilizing at higher levels this morning, but off the highs overnight.7 The U.S.-China summit was relatively uneventful from a capital markets perspective, while the ongoing closure of the Strait of Hormuz has pushed Brent crude oil above $110 per barrel over the weekend,8 also pressuring global rates higher.
Investment-grade corporate bond yields have returned to levels last experienced during their March peak, although spreads today are about 20 basis points tighter.9 Interestingly, the inflation reading relative to the current federal funds rate implies negative real rates, which is typically not a strong indicator for near-term equity returns.
In the week ahead, U.S. markets will be preparing for the start of summer with the Memorial Day holiday next Monday. Kevin Warsh will begin his tenure as the Federal Reserve Chair following last week’s confirmation. He will be starting in a challenging position, with elevated inflation and PPI pointing to more inflation in the near term, while the current administration is seeking rate cuts.
On the data front, Thursday’s housing starts report is expected to show a 5.3% month-over-month decline to 1.41 million housing starts.10 Friday will give investors the final look at the University of Michigan consumer sentiment May report, currently at a record low of 48.2.11 Earnings will also be in focus, with Nvidia and several major retailers on deck to provide further insight on the consumer.12
Sources:
1-4,6-12Bloomberg
5Financial Times – U.S. sells 30-year bonds at 5% yield for first time since 2007; 5/13/26
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