Global Bond Sell-Off Deepens: Inflation Fears Drive Yields to Multi-Year Highs

Ekhbary News Agency

London — Global bond markets experienced a sharp sell-off on Tuesday, driving borrowing costs in the United Kingdom to their highest levels since 2008 and Japanese yields to peaks not seen since the 1990s. Investors anticipate central banks will accelerate interest rate hikes, a direct response to persistent inflation concerns exacerbated by rising energy prices and escalating tensions in the Middle East.

Yields Soar Across Major Economies

The UK's 10-year bond yield surged by 0.09 percentage points to 5.24%, marking its highest point since the global financial crisis. Similarly, the 30-year bond yield climbed 0.1 percentage points, reaching 5.89%, a level not witnessed since the late 1990s. In Asia, Japan's 10-year bond yield hit 3%, the highest since 1996, while US 10-year Treasury yields also edged up to 4.79%. Deutsche Bank analysts attributed the global bond sell-off primarily to the weekend's escalation in the Middle East, a sentiment widely echoed.

Monetary Policy Tightening Expected

Expectations for tighter monetary policy intensified following a hawkish speech by new US Federal Reserve Chair Kevin Warsh last week at Jackson Hole. Markets now price in roughly a two-thirds probability of a Fed rate hike this month. This surge in borrowing costs places considerable pressure on UK Prime Minister Andy Burnham ahead of the upcoming budget, and on Japanese Prime Minister Sanae Takaichi, who faces scrutiny over financing ambitious economic stimulus plans. To be fair, global stock markets also reacted negatively, with the Stoxx Europe 600 dropping 0.7% and S&P 500 futures declining 0.5%. US Treasury Secretary Scott Bessent, after meeting Japanese finance officials, suggested Tokyo should raise rates, further fueling speculation of a Bank of Japan hike to 1.25% by September 18.