Global bond markets experienced a significant sell-off on Tuesday, with yields soaring across major economies. The key U.S. 10-year Treasury note yield rose to 4.798%, its highest since January 2025, while Japan's benchmark 10-year bond yield jumped to 3% for the first time since 1996. Germany's 10-year yield reached 3.35%, a high not seen since 2011, and Britain's 10-year gilt yield climbed to 5.25%, its highest since 2008. These rising yields reflect investor concerns about energy-driven inflation, potential monetary tightening, and worsening fiscal conditions.
The sell-off is largely attributed to several factors: renewed U.S.-Iran tensions that have essentially shut down the Strait of Hormuz, driving Brent crude oil prices up 2% to $92.33; persistent inflation fears, which are negative for bonds; and increasing global government debt, with the U.S. debt surpassing $40 trillion two weeks prior. Analysts noted that higher yields signal that investors are demanding a greater return from Treasurys due to increased risk, and they also indicate higher borrowing costs for mortgages and other loans, which can hinder economic growth and investments.
The rising bond yields are putting significant pressure on stock markets. The S&P 500 fell 0.5%, the Dow Jones Industrial Average dropped 0.2%, and the Nasdaq composite was down 0.9%. Technology stocks were particularly affected, with Nvidia falling 1.1% and Micron Technology down 2.2%, partly due to concerns that higher borrowing costs will strain companies aggressively raising money in bond markets to fund AI investments. Traders are also increasing their bets on a Federal Reserve rate hike, with a 65% chance priced in for September, up from 40% a week ago.
