Bond Markets Plummet as Inflation and Energy Prices Soar
Global bond markets are experiencing a sharp selloff as investors demand higher returns due to rising inflation and energy prices. The Middle East conflict has pushed up oil prices, contributing to fears about inflation and ballooning government debt.
The yield on 10-year US Treasury notes rose to a near three-year high of 4.81% on Wednesday, with a further climb toward 5% likely to unsettle already jittery stock markets. Japan's 10-year yield was perched above 3%, a 30-year high, while Australia's 10-year government bond yields rose to 5.198%, their highest level in over 15 years.
Charu Chanana, chief investment strategist at Saxo, said that bond investors are increasingly demanding a higher premium for inflation, fiscal risks, and the sheer amount of debt coming to market. This means that the selloff can overshoot, with 5% on the US 10-year looking increasingly plausible before yields become sufficiently attractive to bring buyers back.