Global bond markets remained under pressure on Wednesday, with the yield on the 30-year US Treasury rising to 5 per cent for the first time since July, amid investor nerves over a glut of sovereign issuance and persistent inflation.
Longer-dated bonds bore the brunt of the selling, with the yield on the 30-year Treasury up as much as 0.03 percentage points to 5 per cent, before retracing to 4.98 per cent. Japan’s 30-year bond yield hit a record high of 3.29 per cent.
Fund managers said a surge in issuance, as government debt sales got going again after the summer break, was helping to drive yields higher, including a record £14bn 10-year syndication in the UK on Tuesday.
Mike Riddell, a fund manager at Fidelity International, pointed to a “deluge of corporate and government bond issuance” that was helping to push long-term debt prices down in recent days.
In the UK, long-term borrowing costs initially climbed further after reaching their highest level since 1998 in the previous session. The 30-year gilt yield rose as high as 5.75 per cent, up 0.06 percentage points, but was flat on the day at 5.69 per cent by late morning. Yields move inversely to prices.
Roger Hallam, head of global rates at Vanguard, said the recent weakness in gilts was partly a reflection of nerves ahead of the Autumn Budget and a revival in bond supply.
“We were coming out of quite a low-supply period for gilts,” he said, adding that a “favourable technical backdrop” had now dropped away.
There have been growing strains across sovereign bond markets over the past year as record levels of borrowing among rich nations combine with some weakness in demand for the longest-dated debt from traditional buyers such as pension funds and life insurers, after most central banks pulled back from their crisis-era bond purchases.
That has been exacerbated by inflation that remains stubbornly above central bank targets in many economies, which is especially bad for long-term bond returns, and the political difficulties that governments in the UK, France and elsewhere have faced in trying to balance the books.
“It’s almost a perfect storm of concerns over current fiscal policies becoming inflationary, potentially more global issuance and not enough demand,” said Mitul Kotecha, head of emerging markets macro strategy at Barclays.
President Donald Trump’s attacks on Federal Reserve independence have fed fears that global markets are entering a period of “fiscal dominance” where interest rates are kept artificially low to keep borrowing costs down in the short term, at the risk of fuelling longer-term inflation.
All this uncertainty has driven an increase in long-term government bond yields compared with short-term rates, which are more tied to central bank policy rates.
The 10-year US Treasury yield – the more closely watched yardstick of US borrowing costs – is at 4.29 per cent, below where it started 2025, but up from 3.84 per cent a year ago.
But the gap between 30-year and 10-year rates has risen to 0.7 percentage points, its highest since 2021, underlining the pressure on longer-term debt.
Concerns over US deficits were reignited this week after an appeals court ruled late on Friday that most of Trump’s US tariffs were illegal, threatening hundreds of billions of dollars in potential government revenue. Congress’s fiscal watchdog said last month that Trump’s tariffs would cut US deficits by $4tn over the coming decade.
“Sovereign assets are becoming more risky because there are fewer guardrails for politicians, they need to increase budget deficits and have lower rates,” said Alicia García-Herrero, chief APAC economist at French bank Natixis.
The unease in government bond markets continued to rattle stock markets in Asia trading, with Japan’s Topix down 1.1 per cent and Australia’s S&P/ASX 200 down 1.8 per cent.
The Stoxx Europe 600 rose 0.7 per cent, with a similar rise in US futures, as global markets calmed during the European session.
In Japan, which has been one of the worst-hit countries in this year’s bond sell-off, investors fear that Prime Minister Shigeru Ishiba might soon be forced to step down following a review of his ruling Liberal Democratic party’s losses in upper house elections in July.
Traders in Tokyo said the potential ousting of Ishiba raised the possibility that a new prime minister would emerge with a more openly populist agenda, including plans for higher government spending.
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