Bond yields rise to multi-year or multi-decade highs across major economies

ECB September hike priced at 85%; oil up 6% on Iran conflict

Government bond yields climbed on Monday across the world’s largest advanced economies to levels not seen since the 2008 financial crisis — or, in Japan’s case, since 1996. The 30-year US Treasury yield reached 5.29%, its highest level since 2007, the year of the credit crunch that preceded the 2008 crisis, LSEG data cited by The Guardian showed.

The Guardian reported that concerns over rising prices and government spending pushed up the cost of debt issued by Paris, Berlin, Washington, Tokyo and London, as investors fretted that rising prices would push up interest rates.

In Europe, France’s 30-year government bond yield rose to 4.8558%, the highest since September 2008, while its 10-year yield climbed to 4.0516%, the highest since June 2009. The equivalent German 10-year bond yield rose to 3.2138%, the highest since 2011. UK and Italian government bond prices also dipped as their yields rose, The Guardian reported.

Japan’s 10-year government bond yield touched a three-decade high of 2.93%, the highest level since September 1996, before easing slightly after Japan’s latest GDP report showed growth was weaker than expected in April through June. Investors anticipated that the Bank of Japan would need to raise interest rates as soon as September to prop up the value of the yen, The Guardian reported.

“Persistent yen weakness and inflation pressures are strengthening the case for action, while uncertainty over how the government will fund its proposed food tax cut adds another layer of fiscal concern,” Axel Rudolph, a chief technical analyst at IG, told The Guardian. “Japan’s bond market is clearly becoming less forgiving, and the BoJ may soon have to choose between supporting a fragile economy and containing inflation.”

The Guardian reported that the moves came as the ongoing Middle East conflict pushed oil prices up 6% last week. Brent crude rose further on Monday as the US and Iran struggled to end the conflict and Donald Trump again threatened to bomb Oman if it “gets in the way” of his effort to end the war.

The Guardian attributed the rise in yields to investor fears that central banks would continue tightening monetary policy to prevent inflation from running out of control, with traders seeking a higher rate of return for holding government debt. Money markets priced in an almost 85% chance that the European Central Bank would raise interest rates in September, LSEG data cited by the newspaper showed.