Bank of America strategist Michael Hartnett noted in his latest report that the market is currently gripped by the "bond bubble endgame" logic. He believes that the most favorable event for risk assets before year-end would be a Federal Reserve rate hike in October, which would proactively tighten short-term rates to suppress long-term yields from continuing to spiral out of control. Hartnett emphasized that the real risk lies in high interest rates forcing a repricing of fiscal policy, elections, AI capital expenditure, and capital flows. He pointed out that global central banks have, on a net basis, shifted back to tightening, with 54 rate hikes since 2026, while the US stock market is still up 13.4% year-to-date, government bonds are down 4.4%, and cash returns have outperformed government bonds. BofA interest rate strategists believe the market is mispricing the probability of an October rate hike (currently only 17%), and if US data remains strong, the Fed will face a choice between hiking rates or enduring steeper bond yields. Additionally, BofA Chief Global Economist Claudio Irigoyen noted that the interest rate shock is exposing the unsustainability of fiscal policies in developed economies, with French bond spreads widening to 140 basis points, returning to the stress levels seen during the Eurozone debt crisis.