Global Bond Markets Reel Under High Yields, Japan Struggles with Slowing Economy

Global bond markets are in turmoil as yields on long-term debt surge to their highest levels since the financial crisis. The yield on 30-year US Treasury bonds hit a record high of 5.3 per cent on August 17, up from 4.8 per cent just six days earlier.

The average yield on long-term debt across the G7 advanced economies is also at its highest since 2008. Several factors are contributing to this increase, including the surge in longer-dated debt issued by technology companies and growing concerns about governments' ballooning public debts.

However, experts point to a more significant factor: the Federal Reserve's reluctance to raise interest rates despite prolonged above-target inflation and a resilient US economy. This lack of action is driving up yields on long-term debt, according to Citadel Securities.

In Japan, the situation is particularly dire. The country's economy grew at an annualised rate of just 1.1 per cent in the second quarter, far below expectations. With its central bank under pressure to raise interest rates more sharply to combat inflation, investors are pricing in a faster pace of increases.