Why are world bond markets selling off again?
TLT•Government bond yields in the United States, France, Britain and Japan have reached multi-decade highs as inflation fears, rising borrowing needs and debt concerns weigh on markets. The 10-year U.S. Treasury yield hit 5.34%, up almost 90 basis points in the third quarter.
1. Yields hit new highs
The 10-year U.S. Treasury yield reached 5.34%, its highest since 2002, and rose almost 90 basis points in the third quarter—the biggest quarterly increase so far this century. French 10-year yields reached their highest since 2002, Britain’s 30-year borrowing costs touched 6% for the first time since 1998, and Japanese yields reached multi-decade peaks.
2. Inflation and borrowing needs
A renewed oil price rise amid U.S.-Iran tensions has added to inflation fears and expectations of further interest rate hikes. Governments’ borrowing and spending needs are also weighing on markets: U.S. debt has topped $40 trillion, while debt as a share of economic output is at or above 100% across G7 economies except Germany. Higher yields can raise borrowing costs for governments, households and companies.
3. AI debt and policy options
Alphabet, Amazon, Meta, Microsoft and Oracle have issued $220 billion in debt this year to fund investments in data centers and models, more than double last year’s total, with further issuance expected. U.S. Treasury buybacks have not stopped long-dated yields from rising. Investors say durable relief depends on governments reducing debt burdens or boosting growth; central banks can also buy bonds under certain conditions.
