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Government borrowing costs surge across the US, Europe and Japan as investors reassess inflation, interest rates and fiscal risks
Global bond markets came under renewed pressure on Thursday, with government borrowing costs surging across major economies and the US 10-year Treasury yield climbing to 5.34 per cent, its highest level since 2002.
The latest sell-off added to concerns over rising government debt-servicing costs and tighter financial conditions, weighing on equities and credit markets.
France’s 10-year government bond yield jumped 10 basis points to 4.96 per cent, nearing the key 5 per cent threshold. The country’s bonds recorded their worst quarterly performance since 1987, while the cost of insuring French debt against default rose to its highest level since 2013.
Britain’s 30-year government bond yield also crossed 6 per cent, reaching its highest level since 1998.
In Japan, government bond yields posted their fifth consecutive quarter of double-digit gains as inflation pressures strengthen after years of deflation.
The US Treasury market has been particularly weak. The 10-year yield, a key benchmark for global borrowing costs and asset valuations, recorded its biggest quarterly rise this century during the three months to September.
Rising yields mean falling bond prices and translate into higher borrowing costs for governments, companies and households. For heavily indebted governments, higher interest payments can also put additional pressure on public finances.
More from BusinessMarkets have sharply scaled back expectations of US interest rate cuts. Traders now expect at least three more Federal Reserve rate hikes before mid-2027, while the European Central Bank is expected to raise rates further after two increases this year.
Analysts said there was no immediate trigger for Thursday’s bond sell-off. Oil prices remained above $100 a barrel, while recent strong US economic data and persistent inflation concerns continued to influence rate expectations.
The pressure also spread to other asset classes. The STOXX 600 fell 1.2 per cent to its lowest level since June, while European banking stocks dropped as much as 3 per cent. An index tracking credit-default swaps on junk-rated companies also climbed to its highest level since early April.
