Investors are still debating whether and when the Federal Reserve will raise interest rates, and that discussion is fueling market expectations for further tightening worldwide. Traders see borrowing costs rising faster in Japan, Canada, the UK and the euro zone than in the US over the next year, as global rates climb and bond markets feel the pressure.

Bloomberg’s survey of 32 swap markets shows two‑thirds are priced for rate hikes, indicating a strong global tightening bias. South Korea leads with more than 100 basis points of expected moves, while Japan, Canada, the UK and the euro zone also price faster hikes than the US, adding pressure on bond prices and prompting traders to reconsider duration strategies. The data suggests that monetary policy divergence is widening, with central banks outside the United States accelerating tightening while the Fed remains cautious.

The heightened borrowing costs are eroding bond yields and increasing volatility, making bonds a bigger threat than the Fed’s own actions. Investors are therefore reevaluating duration and seeking higher yields to offset the steepening rate environment, as global rates continue to climb. Higher yields could attract capital away from equities, further supporting the bond market’s adjustment to the new rate landscape.