Global Bond Yields Surge Amid Higher Oil Prices and Inflation Concerns

Bond yields around the world are rising in response to higher oil prices, inflation, and government debt. Japan's 10-year sovereign bond yield is nearing 3 percent, while Australia's 3-year bond surged to its highest level since 2011 at 5.05 percent. In Europe, yields have also increased, but it's the US where investors are most concerned.

Higher oil prices are a significant factor, with both WTI and Brent crude topping $100 per barrel this week. The Producer Price Index rose 5.4 percent year-over-year in August, largely due to energy costs. Meanwhile, Consumer Price Index numbers were hotter than expected, leading some experts to predict inflation will reach 3.75 percent by the end of Q4.

The Trump administration's tariffs and promises of cash handouts have also driven up prices. This week, President Trump suggested giving $5,000 to every American if they deliver a GOP majority in both houses of Congress, which would add over $1 trillion to the national debt. The US Treasury Secretary's attempts to rein in long-term bond yields have failed so far.

The FOMC is expected to raise rates after its September 15-16 meeting, with betting markets giving an 80 percent chance of a hike. However, some experts argue that raising short-term interest rates won't address the root causes of inflation and may even cause more problems in the months ahead.