Global Bond Yields at Multiyear Highs on Mounting Inflation Risk

Mount Fuji and the Shinjuku skyline at sunset in Tokyo, Japan, on Friday, Feb. 14, 2025. Japan is scheduled to release its fourth-quarter gross domestic product (GDP) figures on Feb. 17. Photographer: Kiyoshi Ota/Bloomberg Photo by Kiyoshi Ota /Bloomberg

Article content

(Bloomberg) — Global bond yields hovered near multiyear highs as rising energy prices stoked inflation concerns. 

Article content

While the moves were subdued compared with the rout that swept markets on Friday, 30-year US yields were the most elevated since 2007 and the rate on similar-maturity German debt was the loftiest in 15 years. Japanese government bonds notched the biggest losses, with the 30-year yield surging to its highest since the maturity was first sold in 1999.

Article content

Article content

Article content

Weakness in bond markets from New Zealand to Europe and the US will take center stage as Group of Seven finance chiefs meet this week to discuss oil-fueled inflation risks facing the world economy. Brent crude oil traded above $110 a barrel on Monday, with the US and Iran seemingly far from a deal to reopen the Strait of Hormuz.

Article content

Article content

“Bonds are struggling to catch a break at the moment,” said Richard Carter, head of fixed interest research at Quilter Cheviot, who pointed to the continued closure of the Strait of Hormuz and little progress in negotiations. “Yields are very high, but they might go higher. The world is awash with debt.” 

Article content

Yields on 10-year Treasuries advanced as much as four basis points to 4.63%, the highest since February 2025, before paring losses during the London session. Those on 30-year US bonds have risen above 5%. 30-year German yields climbed three basis points to 3.71%. 

Article content

There were signs of a tentative recovery in the UK, but worries about the fiscal implications of a leadership challenge to Prime Minister Keir Starmer remain top of investors’ minds. 

Article content

Japanese Risks

Article content

Article content

The fragility was on full display in Japan, where the prospect of a supplementary budget to deal with rising commodity prices has fueled concern about heavier debt issuance. Shorter-maturity Japanese notes were also under pressure on Monday, and a sale of five-year bonds offering a record-high coupon of 2% met with weak demand.

Article content

What Bloomberg strategists say:

Article content

Don’t look now, but the accelerating selloff in Japanese government bonds is turning global debt markets on their head by bringing JGB yields substantially closer to their major peers. That’s a concern for the broader impact across assets because higher borrowing costs will provoke deep-pocketed local investors to bring more of the money they have long parked abroad.

Article content

— Garfield Reynolds, MLIV Team Leader. Read more on MLIV.

Article content

According to Kristina Hooper, chief market strategist at the world’s biggest publicly traded hedge fund Man Group, Japan’s lofty yields will eventually draw more domestic investors back home — though that could act as an additional headwind for the US market. 

Article content

“What it’ll do though is drive up yields elsewhere, especially, for example, US Treasuries,” said Hooper on Bloomberg Television.