Sovereign Debt Plummets as Inflation Fears Push Yields to Multi-Year Peaks
A global sovereign bond selloff continued for its sixth consecutive session on Wednesday, pushing borrowing costs to multi-year and multi-decade peaks. The relentless selling of fixed-income paper was driven by a toxic mix of military escalation in the Middle East, corporate debt issuance for artificial intelligence, and persistent central bank hawkishness.
In Europe, Germany's two-year Schatz yield rose to 2.983%, its highest level since 2024. Long-end core yields suffered an even sharper drop in price, with the benchmark 10-year bond climbing to a 2011 high of 3.370% and the 30-year bond advancing to 3.845%, also its highest since 2011.
Himanshu Sahay, co-Founder and chief revenue officer at Arch Lending, noted that when borrowing costs climb like this, people holding appreciating assets start asking a simple question: 'Why sell or take on more expensive debt when the asset itself can be collateral?'