Global bond yields have surged to multi-decade highs as growing inflation fears and expectations of monetary tightening by central bankers drive investors away from risk assets. According to Reuters, the yield on 10-year US Treasury notes rose to a near three-year high of 4.81%, while Japan's 10-year yield was perched above 3% for the first time in 30 years, reaching 3.01% on Wednesday morning hours. Australia's 10-year government bond yield rose to 5.198%, its highest level in over 15 years, as reported by Business Standard. Back home, the yield on India's 10-year government bond also rose 4 basis points to 7% in Wednesday's session, touching its highest level in three months. U.K. 10-year gilt yield reached 5.268%, its highest level in approximately 18 years on Wednesday, while the 30-year gilt yield remained near 5.9%, around its highest point since 1998. Brent futures topped the $96 per barrel mark as supply disruption fears strengthened following a fresh exchange of fire between the US and Iran, with Brent Crude futures rising 1% to $95.61 per barrel continuing to drive global bond yields higher.
Economic data released Tuesday provided mixed signals for market sentiment, with the Institute for Supply Management's manufacturing PMI falling to 54.6 in August from 55.6 in July, which was the highest reading since May 2022. According to The Economic Times, economists polled by Reuters had projected it would dip to 55.2, making the actual reading slightly weaker than expected. Separately, the Labor Department's Job Openings and Labor Turnover Survey (JOLTS) showed job openings rising by 89,000 to 7.271 million by the last day of July, below the estimate of 7.300 million in a Reuters poll. The JOLTS report marks the first in a string of readings on the labor market this week, culminating with the release on Friday of the government's monthly payrolls report, which could shape expectations for the Federal Reserve's monetary policy.
Rising oil prices continue to drive global bond yields higher as Brent Crude futures rose 1% to $95.61 per barrel on Wednesday, after gaining nearly 6% in the previous session. According to The Economic Times, energy cost pressures continue to dog policymakers as the Middle East conflict pushes up energy prices, playing into investor fears about inflation and ballooning government debt. US Consumer Price Inflation has stayed above the Federal Reserve's 2% target for 65 months in a row as of July 2026. The national average for gasoline in August has been above $4 per gallon every day of the month for the first time ever, with August being the most expensive August at the pump on record, outpacing even the enormous supply chain crunch during the COVID-19 pandemic in 2022. Higher energy prices have fueled already elevated inflation, which remains well above the Federal Reserve's 2% target, with the government's next report on prices coming out just days before the Fed meeting that could play an outsize role in determining whether the central bank acts.
The bond selloff has been driven by a reassessment of Federal Reserve policy, with Fed Chair Kevin Warsh's "We have got work to do" remark at the Jackson Hole symposium have put the chatter of a rate hike by the central bank in two weeks from now, back on the table. According to The Economic Times, traders have priced in a rate hike in Europe next week and about a 68% chance of a U.S. rate hike the week after that. Expectations for a hike of at least 25 basis points from the central bank at its September 15-16 meeting stand at 67%, from a 35% to 40% probability last week before Warsh's address, according to the CME FedWatch tool. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes was at a positive 39.7 basis points, seen as an indicator of economic expectations. The unemployment rate remains low at 4.1%, but the job market stalled unexpectedly last month as inflation continues to squeeze businesses and households, creating a tough situation for the Federal Reserve which has to balance fighting inflation with supporting full employment.
Former U.K. Prime Minister Liz Truss warned on September 2 that rising government debt and borrowing costs could eventually force Britain to introduce emergency spending cuts, as U.K. 10-year gilt yield reached 5.268%, its highest level in approximately 18 years. According to The Economic Times, Truss attributed the pressure partly to money creation by the Bank of England and what she described as currency "debasement." Economists at Pantheon Macroeconomics estimated that higher borrowing costs could reduce the government's fiscal headroom from about £23.6 billion at the previous Spring Statement to approximately £13 billion. The government is due to present its budget on October 28, with updated forecasts determining whether ministers need to raise taxes, reduce planned spending or change other policies to meet their fiscal rules. The 30-year gilt yield rose from about 3.38% when Truss became prime minister to almost 5% during the market turmoil, with current yields higher than the peaks recorded during her brief tenure.
Bitcoin traded near $76,500 on September 2, down about 2% over 24 hours, retreating from its recent high above $81,000 as higher government bond yields make interest-paying assets more attractive relative to Bitcoin and gold, which do not produce fixed income. According to The Economic Times, Bitcoin and gold are sometimes presented as protection against currency depreciation or excessive government borrowing, but their recent declines show that the relationship is not consistent over short periods. Gold followed a similar reversal, climbing toward $4,700 per ounce but later retreating to approximately $4,300. The global nature of the bond selloff makes it difficult to attribute the U.K. move solely to domestic debt or Bank of England policy, with Britain's inflation exposure, large refinancing needs and fiscal rules making its public finances particularly sensitive to sustained increases in yields.
