Key facts
- Government borrowing costs in France, Germany, the US, UK, and Japan have reached multi-year highs.
- 30-year French bond yields hit 4.8558%, the highest since September 2008.
- US 30-year Treasury yields reached 5.29%, the highest since 2007.
- Japan's 10-year government bond yield hit 2.93%, its highest since September 1996.
- The market is pricing in an 85% chance of a European Central Bank rate hike in September.
- The Middle East crisis contributed to a 6% rise in oil prices last week.
Government borrowing costs across several advanced economies, including France, Germany, the United States, the UK, and Japan, have surged to their highest levels since the 2008 financial crisis, or even earlier. This escalation is driven by investor fears that the ongoing Middle East crisis will sustain high inflation, leading to persistent central bank tightening.
In France, the yield on 30-year bonds reached 4.8558%, its highest point since September 2008, while the 10-year yield climbed to its highest since June 2009. Germany's 10-year bond yield hit a 2011 high, and US 30-year Treasury yields touched 5.29%, a level not seen since 2007. UK and Italian government bond prices also declined.
Japan's 10-year government bond yield reached a three-decade high of 2.93%, its highest since September 1996. This surge occurred despite a weaker-than-expected GDP growth report for April-June. Investors anticipate the Bank of Japan may raise interest rates as soon as September to support the yen and combat inflation.
The market is pricing in a nearly 85% probability of a European Central Bank rate hike in September, reflecting broader concerns about inflation. The Middle East conflict has exacerbated these fears, contributing to a 6% rise in oil prices last week. President Donald Trump also issued threats regarding Oman's involvement in efforts to end the conflict.