Key facts
- Global bond yields are rising due to inflation concerns and fiscal pressures.
- Japan's 10-year government bond yield reached a 30-year high.
- US 10-year Treasury yields are around 4.3%, and German 10-year bund yields saw a significant single-day jump.
- Germany's increased military spending is contributing to market jitters.
- Japan's Prime Minister Takaichi is open to a Bank of Japan rate hike.
Government bond yields across Asia rose Tuesday morning, with Japan's benchmark 10-year yield hitting a 30-year high, as a global selloff in sovereign debt intensified amid concerns over inflation and mounting fiscal pressures. The surge in yields is being felt worldwide, with US Treasury rates and German bunds also experiencing significant increases.
In Japan, the benchmark 10-year yield approached 3%, nearing a 30-year high, driven by inflation worries and the sense that the Bank of Japan is behind the curve on stagflation risks. Prime Minister Sanae Takaichi has signaled she would accept a BOJ rate hike as soon as September 16, a notable shift from previous stances, as a weak yen imports inflation. The government's fiscal policy, including potential consumption tax cuts and increased spending, is also spooking bond markets.
Globally, US Treasury Secretary Scott Bessent's department faced higher yields on debt auctions, with investors demanding more to finance Washington's nearly $40 trillion debt. This pressure is rippling outward, pushing yields higher across major economies. The selloff was exacerbated by Germany's plan to significantly increase military spending, raising concerns about borrowing requirements and leading traders to scale back expectations of European Central Bank rate cuts.
Analysts note that the current bond market pressure is strong enough to override individual data surprises, with investors wary of a repeat of the 2023 regional bank panic. The combination of inflation outrunning wages, particularly in Japan, and geopolitical uncertainty, such as the ongoing Middle East conflict, is compounding pressure on government bond yields.