Key facts
- Global bond sell-off intensifies due to inflation fears and US-Iran tensions.
- 10-year UK gilt yields reached their highest level since mid-2008.
- 30-year US Treasury yields hit their highest level since 2007.
- Oil prices have risen to about $95 a barrel amid renewed fighting in the Middle East.
- Investors are demanding higher compensation for holding long-dated debt due to fiscal, geopolitical, and policy uncertainty.
- Corporate bonds from tech firms funding AI infrastructure are competing with government bonds for investor attention.
A global bond sell-off has intensified, pushing government bond yields higher across major markets as investors anticipate further monetary tightening amid elevated oil prices and waning hopes for a swift resolution to the US-Iran conflict. The yield on 10-year UK government bonds, or gilts, jumped to just below 5.3%, its highest level since mid-2008, while the 30-year US Treasury yield hit its highest level since 2007 at 5.34%. The 10-year US Treasury yield neared the highest level of President Donald Trump’s second term at 4.74%.
In France and Germany, 10-year bond yields reached their highest levels since 2008 and 2011, respectively. Japan's 10-year yield hit a 30-year high, with its benchmark yield topping 3.1%. Average asking prices for existing condominiums in central Tokyo have fallen for four consecutive months through August amid rising interest rates.
Investors are selling bonds, pushing prices lower and yields higher, driven by concerns over inflation, hefty government deficits, and increased competition from corporate bonds, particularly from tech firms funding AI infrastructure. The US-Iran conflict has exacerbated these fears, pushing Brent crude oil to around $95 a barrel and increasing expectations that central banks will raise interest rates. Analysts warn that higher gilt yields have significantly reduced the UK government's fiscal headroom, forcing difficult decisions on tax increases or spending cuts.