Global Bond Yields Soar as Inflation Risks Skyrocket

Global bond yields have reached their highest level since the 2008 global financial crisis as investors grow concerned about rising energy prices and inflation risks. The average yield on the Bloomberg Global Treasury Index has climbed to 3.68%, while UK gilt yields have recorded their longest run of daily closes above 5% in almost two decades.

The selloff has intensified after Brent crude surged above $100 a barrel, pushing up inflation risks for central banks ahead of key policy decisions from the Federal Reserve, Bank of Japan, and Bank of England. The US 30-year yield is trading just below its highest level since 2007, while Japan's 40-year yield rose 10 basis points on Friday to move above 4%.

Market expectations for Federal Reserve policy have shifted from rate cuts toward possible increases, with traders assigning a roughly one-in-three probability to a hike at the July 28-29 meeting. This has led to increased uncertainty around the next decision, contributing to the ICE BofA MOVE Index reaching a two-month high on Thursday.

Investors may view the global increase in yields as a broader risk for corporate financing costs, equity valuations, and governments carrying heavy debt burdens. UK markets are assessing expectations for two additional rate increases by year-end, while Australia's benchmark yields are the highest in the developed world and may climb further depending on upcoming inflation figures.