The average yield on global government debt is approaching 4%, a benchmark not reached since 2007, largely due to a worsening bond selloff. The Bloomberg Global Aggregate Treasuries index saw yields rise eight basis points to 3.99% on Wednesday. This increase in yields is attributed to robust economic data, a poorly received $70 billion U.S. five-year debt auction, and expectations of sustained higher interest rates driven by a prolonged Iran war, stubborn inflation, and growing fiscal concerns. Analysts from JPMorgan Chase & Co. and KKR & Co. anticipate further increases in U.S. yields, citing energy-driven inflation and heavy government borrowing as key factors.
U.S. Treasuries have been a significant contributor to these losses, with five-year yields surpassing 5% for the first time since 2007, and 10-year yields experiencing their largest jump since April 2025. Traders are now fully pricing in three quarter-point interest rate hikes over the next year, with considerable hedging for a potential fourth. The pressure has extended to Asian markets; on Thursday, Australia's three-year government debt yields jumped 13 basis points to 5.07%, their highest since May 2011, and New Zealand's two-year yields climbed as much as 17 basis points to just under 4%.
The rising yields are making borrowing more expensive for governments, businesses, and households, while also squeezing corporate profits and making stocks less appealing. The ICE BofA MOVE Index, a measure of U.S. bond market volatility, reached its highest level since March, indicating investor hesitation. Damien Loh of Ericsenz Capital advises against trading against the market's momentum, but suggests yield-curve steepeners like 2s10s or 5s30s as a better risk-reward trade for those looking to fade the selloff.
