Global Government Bond Markets Suffer Second Consecutive Decline

Global government bond markets suffered their second consecutive monthly decline in August as inflation concerns and expectations of higher interest rates weighed on prices. The 10-year benchmark yields for all 18 tracked countries rose, with 15 experiencing double-digit increases.

The French 10-year government bond yield climbed the most, increasing by 18 basis points to 4.17%. Fitch affirmed France's A+ sovereign rating but projected a widening budget deficit of 5.2% of GDP in 2026 and annual inflation of 2.4% in August.

Germany's 10-year Bund yield rose 15 basis points to 3.31%, the third-largest increase among tracked markets. Despite this, Germany's economy expanded by 0.3% in the second quarter, and its manufacturing PMI reached its highest level since May 2022.

Roderick Joniaux, Head of European Government Bonds and Supranational Products at Tradeweb, stated: 'August extended the sell-off seen in July. Yields moved higher amid expectations that monetary policy may need to remain restrictive, but weaker activity in parts of Europe complicated the outlook.'