Bond Yields Skyrocket Amid Inflation Fears and Rising Oil Prices

Global bond yields reached new highs on Tuesday as rising energy prices and renewed fighting in the Middle East sparked inflation fears. Japan's 10-year benchmark hit 3% for the first time in a generation, while the US Treasury yield broke resistance at 4.75% to stand at 4.78%, its highest since early 2025.

Ryutaro Kimura, a senior strategist at BNP Asset Management, said there's now a 'sense of resignation' about rising interest rates. Higher oil prices and US-Iran tensions are stoking worries about inflation, which is negative for bonds, just as Federal Reserve Chair Kevin Warsh has reset expectations for the rates outlook.

The 10-year U.S. Treasury yield is now at its highest level since early 2025, while Japanese borrowing costs have risen to 3%, matching the government's assumed long-run funding cost. This means real pressure on sovereign finances, already strained by Prime Minister Sanae Takaichi's spend-to-grow agenda.