Global Bond Sell-Off Deepens Amid Inflation Concerns

A global bond sell-off has intensified due to inflation concerns, pushing government borrowing costs higher and equities lower. The latest escalation of tensions between the US and Iran has contributed to rising oil prices, stoking fears that central banks will raise interest rates.

The interest rate on 30-year UK government bonds reached its highest level since 1998, while the 10-year yield surged to a level not seen since the global financial crisis of 2007-08. Japan's 10-year bond yield touched a 30-year high of three percent, reflecting worries about massive government spending plans.

Deutsche Bank's Jim Reid said the 'main culprit' was the weekend escalation in the Middle East that saw the US and Iran exchange strikes for the first time since late July. Official data showed eurozone inflation hit a three-year high at 3.3 percent in August, cementing expectations that the European Central Bank would raise interest rates next week.

US President Donald Trump's threat to hit Iran 'hard' has added to supply worries, while traders await key economic data ahead of the US Federal Reserve's policy meeting on September 16. The jobs and consumer price index reports could play a major role in whether the bank lifts rates.