High interest rates favour bonds more than equities in equity markets, thus diminishing the demand for equities and forcing the stock prices downward. This tends to squash IPO activity since companies will postpone an IPO if they do not feel they could be able to arrive at a favourable valuation in a rising-rate environment. High interest rates favour bonds more than equities in equity markets, thus diminishing the demand for equities and forcing the stock prices downward. This tends to squash IPO activity since companies will postpone an IPO if they do not feel they could be able to arrive at a favourable valuation in a rising-rate environment.