Rising Bond Yields Spark Global Market Concerns

Yields on government bonds are rising at an alarming rate across developed countries. This trend is prompting investors to worry about a potential spiral of instability, as they fear that if yields continue to rise, it will prompt them to liquidate their bond holdings. The burden of public debt continues to increase, making it difficult for governments to implement fiscal consolidation measures.

The situation in Japan stands out, where yields on government bonds have risen by 90 basis points since the start of the year, approaching 3%, a level not seen in the last 30 years. With public debt exceeding 200% of GDP, the debt burden will rise rapidly in the coming years.

US Treasury yields have also risen significantly, increasing by 60 basis points over the course of 2026, with the debt burden steadily growing and now surpassing US military spending. In Europe, the UK is experiencing a concerning situation, where 10-year yields have risen above 5%, the highest level since the 2008-2009 financial crisis.

The explanation for these rising yields lies in inflation expectations, which have increased due to concerns that commodity prices will remain high for an extended period. This has led to the expectation of higher interest rates and longer periods of elevated rates before inflation returns to its target level of 2%.