Global Bond Markets Plunge as Inflation Fears Reach Fever Pitch

Global bond markets are experiencing turmoil as inflation and fiscal worries take center stage. The US 30-year Treasury yields have reached their highest level since 2007, surpassing 5%. In Japan, 10-year borrowing costs have touched a three-decade high just under 3%.

The surge in oil prices, up 50% this year, has fueled inflation concerns. Additionally, US-Iran peace hopes have faded, adding to the anxiety. Kjersti Haugland, chief economist at DNB Carnegie, notes that bond markets are entering an era of greater uncertainty and upside risks.

The high level of government debt in many countries, particularly Japan, the US, France, and the UK, is also a concern. Competition for capital from AI hyperscalers has exacerbated the selling, along with rising budget deficits and concerns about clear communication from the Federal Reserve under new Chair Kevin Warsh.