Overview
- This week government bond yields climbed across developed markets with the U.S. 10‑year around 4.8% and Japan’s 10‑year above 3%, levels not seen in years.
- The sell‑off has been driven by large fiscal deficits and heavy sovereign issuance, a jump in corporate borrowing to finance AI infrastructure, and higher energy prices tied to the U.S.–Iran conflict.
- The U.S. Treasury announced on Aug. 19 that it will at least double long‑dated buybacks starting Sept. 9, a tactical step that briefly eased yields but has not convinced markets it will reverse the trend.
- Higher yields are already raising mortgage costs, pressuring equity valuations and increasing government interest bills, which will add to budget strains for countries with large debt stocks.
- Markets now price a materially higher chance of a Fed rate increase in September, and analysts warn the repricing could mark a longer‑lasting shift to higher borrowing costs unless fiscal paths or demand for credit change.