Global bond yields are experiencing a significant surge, with the US 10-year Treasury yield reaching 4.78%, its highest level since January 2025, and the 30-year Treasury yield hitting 5.27%. This upward trend is not isolated to the US; 10-year bond yields in the UK climbed to 5.21%, German 10-year bonds reached 3.33%, and Japan's 10-year bond yield hit 2.99%, a level not seen since 1996. The 30-year UK bond yield surged to 5.86%, its highest since 1998, and Japan's 30-year bond yield reached 4.19%. These increases reflect widespread macroeconomic concerns, including inflation worries, and the ripple effects are already impacting consumer lending, with 30-year mortgage rates jumping to 6.77%.
The rise in yields is attributed to a confluence of factors. The US national debt recently surpassed $40 trillion, contributing to bond market nervousness. Energy price spikes are reinforcing inflation concerns, and there's a structural shift in the bond market where buyers are increasingly demanding higher rates. Washington itself is feeling the pinch, having spent $931 billion on net interest this fiscal year, exceeding the $804 billion allocated for national defense. The US Treasury Secretary Scott Bessent attempted an intervention by promising to double Treasury buybacks, but its effect was short-lived, with rates quickly surpassing pre-intervention levels.
Adding to the global pressure, Japan's bond yields are hitting three-decade highs. The 10-year JGB yield reached 3% for the first time since 1996, more than tripling over the past two years. This rise is significant because Japan has historically been a major buyer of US Treasuries and other sovereign debt. While there isn't yet a large-scale repatriation of Japan's $2.4 trillion in overseas debt, Japanese investors have already sold a net 3 trillion yen ($18.7 billion) in overseas debt this year. This reduction in demand from a key international buyer is contributing to higher term premiums globally, as Japan gradually ceases to be the marginal buyer of foreign bonds.
