Bond Markets Plummet Amid Global Debt Crisis

Global bond markets are experiencing a significant repricing due to governments issuing more debt and persistent inflation. This has led to yields on major sovereign bonds approaching multi-decade highs, increasing borrowing costs and raising questions about policy credibility.

The 10-year US Treasury yield climbed to around 5% in mid-September as the global bond sell-off continued, fueled by concerns over inflation, geopolitical conflict, and weakening investor demand. The 30-year yield reached its highest level since 2008.

In Japan, the 10-year bond yield moved above 3% for the first time since 1996 after US Treasury Secretary Scott Bessent met with Japanese officials at a G20 meeting. The Bank of Japan is expected to lift its key interest rate in an attempt to contain inflationary pressures.

The European Central Bank raised its three key interest rates by 25 basis points (0.25 percentage points) on September 10, but central banks now face a complex challenge in setting interest-rate policy due to persistent inflation and geopolitical tensions.