G-7 to Discuss Bond Selloff Sending Yields to Multi-Decade Highs

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(Bloomberg) — Group of Seven finance chiefs are set to discuss the selloff in government bonds that’s sending yields on some benchmark securities to their highest levels in decades, with at least one member viewing the move as temporary.

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Japanese Finance Minister Satsuki Katayama said Friday the G-7 are expected to talk about developments in bond markets at their May 18-19 gathering in Paris. She spoke a day after her nation’s 30-year government bond yields climbed to the highest since that tenor’s 1999 debut, while rates on 20- and 40-year debt also hit the highest in decades.

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“There’s been a global backup in bond yields as markets are pricing in, perhaps, inflation — a short term blip in inflation — that I believe is transient,” US Treasury Secretary Scott Bessent said Tuesday after meetings in Tokyo with Japanese policymakers.

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With the US-Iran standoff continuing to disrupt the flow of energy products through the Strait of Hormuz, oil futures have been climbing, in turn putting pressure on expectations for consumer prices round the world. Besides inflation, which erodes the value of bonds’ fixed payments, worries about unsustainable fiscal trajectories have undermined demand for the longest-dated debt.

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Katayama told reporters that Prime Minister Sanae Takaichi’s administration isn’t currently planning a supplementary budget to help households with the increase in the cost of living. In the UK, fears of a more expansive fiscal policy from any potential successor to embattled Prime Minister Keir Starmer have helped send 30-year gilt yields to the highest since 1998.

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In the US, the Treasury on Wednesday had to offer 5% yields for the first time since 2007 to sell 30-year bonds. US 10-year yields, which Bessent has identified as his key financial metric given its use as a benchmark for mortgages and other loans, are heading for their biggest weekly jump since the market turmoil of April 2025 spurred by President Donald Trump’s tariffs.

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“Bond yields have been rising across all three major markets,” Katayama said, citing declines in the US, UK and Japan. “These developments are interacting with each other and creating something of a compounding effect.”

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What the G-7 could do as a remedy remains to be seen. Since last year, some nations have moved to scale back the issuance of the longest-maturity government debt. The US has also relied on bills, which mature in up to a year, to meet its increasing borrowing needs, and put off plans for any increase in interest-bearing securities.

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As for inflation, Bessent said on Thursday that “we may get a series — one, two more hot inflation numbers but then I think we’re going to see substantial disinflation,” speaking on CNBC. The US on Tuesday reported that headline consumer prices jumped 3.8% in March from a year before, the most since 2023.

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Monday’s G-7 gathering comes just as the new chair of the US Federal Reserve  is expected to be sworn in, with Trump nominee Kevin Warsh taking the helm.  

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