Please see the below article from Tatton Investment Management discussing the renewed influence of bond markets, rising long-dated government yields, fiscal discipline returning to focus in the US and UK, and the rapid growth of China’s Unitree Robotics — received this morning – 24/08/2026.
The might of the bond markets returns
We start the week in a quiet frame despite Friday’s resumption of a US-Canada trade war. Last week, the underlying narratives were largely unchanged: strong tech earnings and simmering energy fears. However, for the first time this summer, the seasonally low trading liquidity and its role in the rise in government bond yields became a real issue for wider markets.
Government bond yields finally reached levels too high for equity investors to ignore, moving higher on Monday and Tuesday despite tame inflation data – probably because reduced summer liquidity limited the market’s ability to absorb supportive news. Global 10-year yields reached a new post-pandemic high, close to a 20-year peak; the global average real yield is now essentially at 2%. Equities sold off broadly from Monday, most sharply in the US and Japan; Europe held up better.
The US Treasury was less sanguine than bond traders. Scott Bessent announced on Wednesday that the US would at least double buybacks in the 10-to-30-year range, to at least $74bn from the $38bn programme flagged two weeks earlier. Yields fell 0.12% initially, before rising back 0.06% on Thursday; equities bounced. The dollar weakened against most currencies – a move which may prove more persistent than others. Coupled with rising gold and a surging Bitcoin, it suggests the seasonal summer liquidity drought may be ending.
Trump backed this intervention although his suggestion that the next bout may involve the military was perhaps not entirely thought through.
Had this been purely about bond liquidity, the implications might be ephemeral. But on Thursday Bessent told CNBC of “an increased focus on fiscal consolidation,” tasked by President Trump alongside Budget Director Russ Vought. His original “3-3-3” pledge – 3% growth, 3 million extra barrels of oil, a 3% deficit – has landed two out of three: the deficit has failed, never below 5%, with US debt passing $40 trillion this week.
Republicans seeking election in the mid-terms are likely to welcome a big focus on deficit reduction, especially if it delivers lower mortgage rates – the 30-year is back above 6.75% – given a housing market that has been dire since 2022.
For the UK, June’s positive balance data was followed by a disappointing £1.8bn monthly deficit, despite buoyant July receipts. Fiscal discipline is back in fashion in the West, though falling US yields should pull UK yields down too. Flash PMIs stayed expansionary, and consumer confidence improved.
Next week brings Nvidia’s results and the Fed’s Jackson Hole symposium of global central bankers, where balance sheet signals will be watched.
What’s gone wrong with bond yields?
Since the start of the year, yields of longer-maturity bonds have risen sharply – and not just in the UK. This summer has seen the developed world aggregate at levels not seen in 25 years.
What is driving this move?
Many commentators point to rising government deficits, corporate borrowing to fund AI investment, and inflation concerns coupled with less Federal Reserve guidance.
For example:
On August 18th, Jonas Goltermann of Capital Economics told Reuters: “Bond yields’ recent surge suggests investors are losing patience with fiscal profligacy.”
But there is no consensus on the most decisive driver. We think the shift has less to do with increased risk than with how bond investors and issuers are behaving as buyers and sellers this year.
Bond yields split into inflation expectations, a real “risk-free” return, credit risk, and a term premium – compensation for locking into a long- rather than short-term rate.
The inflation component has moved little (outside Japan), arguably vindicating Fed Chair Warsh’s inflation-fighting stance.
Fiscal concerns, measured against risk-free swap rates, rose 0.4-0.8% between 2022 and 2025, but are barely changed this year despite deficits still rising – a worry, but no worse than other components.
Where moves have been significant is in inflation-adjusted “real” yields, especially in Japan.
We note that substantial issuance of AI infrastructure bonds by hyperscalers is affecting supply and demand. Bloomberg reports investment-grade companies have sold nearly $1.5 trillion of bonds this year, a 36% jump, with big tech borrowing alone equivalent to 25% of the Treasury’s net issuance.
That keeps equity investors positive on profit growth, so few are swapping equities for bonds, despite the most tempting yields this millennium. The bond investor cohort is therefore static at best, with Chinese investors increasingly favouring domestic bonds over foreign ones.
Japanese bond holders are now suffering what Western holders endured four years ago, with the term premium at highs there and rising in the US too, as fewer long-bond investors face rising issuance – leaving more sellers than buyers and stressing liquidity.
Scott Bessent’s aforementioned announcement that the Treasury would increase its buying of long-maturity Treasuries, was therefore as notable as it was unusual, given its main job is issuing them.
Investors currently happy holding equities may need convincing that bonds are worth having again. But some of the illiquidity may be seasonal, with buyers tending to return as autumn begins.
Unitree: The $50 Billion Robot
On Wednesday last week, a ten-year-old company from China’s Hangzhou that makes robot dogs and dancing humanoids became one of the most valuable robotics businesses on earth. Unitree Robotics listed about 10% of itself on Shanghai’s STAR Market, valuing it at about $9bn – double its original target.
Demand was remarkable: 9.78m subscribers cut the retail allocation rate to 1 in 5,500. Shares closed the first day at CNY 845, up 460%, with a market cap above $50bn – one of the most oversubscribed IPOs in STAR Market history.
Unitree was founded in 2016 by Wang Xingxing, then 26, and grew in Hangzhou, the tech hub that also produced Alibaba and DeepSeek.
It sells robot components as well as complete quadruped and humanoid robots, claiming over 60% of the global quadruped market, with humanoids undercutting Western rivals’ pricing by an order of magnitude.
DeepSeek has taken a stake to collaborate on foundation models and “embodied AI” – the field on which Tesla’s valuation, via Optimus, increasingly rests too.
Unusually for an early tech company, Unitree is profitable: on the back of revenues of CNY 1.699bn last year, it generated a net profit of CNY 278m, through gross margins of near 60%.
China’s state is deeply invested – several state-owned enterprises hold stakes, and the company enjoys tax incentives under China’s SME support scheme.
Security concerns have followed it abroad: flaws have let robots transmit data to Chinese servers, prompting the Pentagon to add Unitree to its Chinese military companies list and the FCC to block new equipment approvals.
Britain and Europe favour a lighter, context-based approach – restricting use in policing, defence and infrastructure rather than banning Unitree outright – while European demand outstrips supply. The result is a bifurcating market: a protected domestic base plus Europe and the Global South, against a shrinking US position.
Unitree has proven humanoid robots can be built cheaply and profitably, but margins may be harder to hold: it is not even the biggest producer by volume across robot categories – that is AgiBot, with over 43% of global shipments in H1 2026 (according to Counterpoint Research), with rivals like Dexmal and Chery’s AiMOGA also emerging.
What remains open is whether they can be deployed usefully at scale — and how much of the world will be permitted to buy them.
Please continue to check our blog content for the latest advice and planning issues from leading investment management firms.
Marcus Blenkinsop
24th August 2026