Bonds rising, economy slowing?

Since August, government bonds have recovered in value, while global demand has weakened. Are investors sensing a slowdown or simply hedging against risks?

In recent months, the bond market has undergone a transformation. After a long period dominated by high yields and depressed prices, bonds are returning to the spotlight—both in the United States, where the rally began in the summer, and in Europe, where the trend has continued since early October. It's a resurgence that reveals much more than meets the eye: behind the rise in bond prices are the fears (and hopes) of the global economy.

1. The summer of the return to Treasuries

In August, the yield on the 10-year US bond was hovering around 4.4% ; today it has fallen to around 3.95% , returning to April levels. This 55 basis point decline, translated into price terms, represents an average increase of +3%-+4% for intermediate-term Treasuries and up to +8% for 30-year bonds. In practice, those who bought US bonds in August have already seen their portfolios appreciate.

Behind this trend lies a shift in perspective. Traders have begun betting that the Federal Reserve has not only ended its tightening phase, but may even cut rates in 2026. The market, in short, is anticipating an economic slowdown and preferring to return to safe haven assets.

Institutional demand has also resumed growth: US bond funds have seen inflows of over $25 billion since the beginning of September, the highest level in a year. This is a sign that sentiment has changed.

2. The European echo: the rally of Bunds and BTPs

The American wake has crossed the Atlantic. Since the beginning of October, European government bond yields have fallen by around 30–40 basis points : the 10-year German Bund has gone from 2.75% to 2.55% , while the Italian BTP of the same maturity has fallen from 3.60% to 3.34% . Here too, translated into prices, we are talking about gains of between 2 and 5% in just a few weeks.

The driving force is twofold: on the one hand, the perception that the ECB will not be able to maintain current rates for long; on the other, growing macroeconomic uncertainty has driven capital back to "safe haven" assets. The result is a synchronized movement between the US and Europe: bonds rise because investors seek protection—and this usually happens when confidence in growth begins to weaken .

3. The slowdown in global demand

Outside of financial markets, real economy indicators paint a consistent picture. Brent crude oil , a barometer of global demand, fell from $74 a barrel in early August to around $62 in the third week of October: a 16% decline in two months. This isn't a speculative collapse, but a structural signal: global energy consumption growth has slowed to less than 0.7 million barrels per day in 2025, down from 2 million last year (IEA data).

China , the engine of global industry, also disappointed expectations: in the third quarter, GDP grew by 4.8% , compared to 5.2% in the previous quarter. This slowdown weighs on exports, raw materials, and global confidence. At the same time, some maritime transport and manufacturing production indices have returned to negative territory: fewer goods in movement means less effective demand.

4. New threats to US-China trade

Adding to the situation are trade tensions between Washington and Beijing. The new US administration has threatened tariffs of up to 100% on some Chinese technology and metallurgical products if an agreement isn't reached by November. China's response was swift: restrictions on exports of rare earths and critical materials, essential for electronics and the green transition.

According to WTO estimates, the risk of a lasting escalation could reduce global GDP by up to 7% in the long term. And already, over $35 billion in additional tariffs are weighing on American, European, and Asian companies. It's no surprise, then, that markets are reacting by seeking refuge in bonds: trade tensions act as an invisible tax on future growth.

5. Slow down or just be cautious?

At this point, the question is inevitable: are bond markets anticipating a real global slowdown , or is it just temporary caution ?

The arguments in favor of the first hypothesis are solid:

• the synchronized decline in yields across all maturities;

• the decline in oil and real indicators;

• increasing demand for defensive assets such as gold and government bonds.

On the other hand, we are not yet facing a full-blown recession:

• growth remains positive in the US and China, albeit slower;

• domestic consumption holds up;

• Central banks have room to ease monetary tightening.

In other words, it's not a red alert yet , but a flashing yellow signal: investors are hedging before they know if the storm is actually coming.

What this could mean for wallets

For investors, this phase could represent a tactical opportunity . Bonds are once again offering yield and protection, especially high-quality ones (Treasuries, Bunds, and Italian government bonds). At the same time, the weakness of commodities and cyclical markets suggests maintaining a prudent and well-diversified strategy, avoiding excessive exposure to sectors most sensitive to global trade.

Whether premonition or caution , the market's message is clear: confidence in continued expansion is eroding. And when bonds rise again, it's often not a coincidence—but a warning.