Happy Friday from Copenhagen.

The past week has been all about the long end of the yield curve and the spillovers to other asset classes. We are witnessing moves into uncharted territory—at least by the standards of the past couple of decades—in bonds, and it’s clearly the center of attention for investors, given the potential impact on other assets.

Much has changed since then, and one key development is the shift in interest rate sensitivity of the economy, particularly among large-cap companies, since the pandemic. Many of the largest firms are now cash-rich, making them positively exposed to higher bond yields.

Moreover, for the first time in many years—since before 2008—we’re seeing a steep yield curve in both the Eurozone and Japan. This represents a very different operating environment for banks, and mostly a positive one. At the same time, punitive capital legislation has been postponed by a year in Europe, effectively delaying the implementation of the so-called Fundamental Review of the Trading Book (FRTB).

Capital requirements under FRTB are expected to rise by 20–40% on average compared to Basel II.5, so this delay is supportive of credit growth. On the other hand, Basel III and FRTB would likely have nudged bank treasuries toward holding more sovereign bonds and less credit—so that shift is now also postponed.

All of this unfolds against the backdrop of the “big beautiful bill,” a reminder that “nothing stops this train” when it comes to deficit spending in the U.S. As a result, we now have to navigate and invest in a macro environment that features higher long-end bond yields as a trend.

Maybe the move in long bond yields was exactly why Trump felt the need to re-fuel his tariff saber-rattling against both Apple-Tim and the EU on Friday? We’ve kind of learned the stop-and-go playbook by now—threaten with HUGE costs to push negotiations forward and force outcomes. It’s probably a nothing burger again.

Chart of the week: (some) risk assets trade higher on rising bond yields now-a-days