Global Sovereign Yields Jump Across US, Japan, Germany and France

US, Japan, Germany and France rise in lockstep

Oil-fueled inflation and fiscal strain compound pressure

Rate-hike bets hammer stocks

Government bond markets in major economies are convulsing as rising oil prices, fiscal strain and uncertainty over the policy outlook drive yields sharply higher. The shock in sovereign debt markets is also weighing on equities.

According to global bond trading platform Tradeweb, the benchmark 10-year US Treasury yield briefly touched 4.81% on September 2, the highest since January 2025. Rising yields mean falling bond prices. The 30-year Treasury yield climbed as high as 5.29%, the highest level since 2007. The policy-sensitive two-year yield jumped to 4.4%.

In Japan, the 10-year government bond yield rose to 3.03% on September 2 after reaching 3% a day earlier for the first time in 30 years. Thirty-year yields in Germany and France also surged to their highest levels since 2011. The Wall Street Journal said the sharp rise in sovereign borrowing costs is straining the global economy, pressuring homebuyers, credit-card users and governments that borrowed heavily in recent years.

The latest jump in global bond yields is being linked to a renewed military clash between the US and Iran in the Middle East that sent oil prices sharply higher. As the oil shock revives inflation pressure, expectations for interest-rate cuts by major central banks have receded. Investor concern over sovereign fiscal burdens has also intensified. Highly indebted countries face growing worries that rising yields could increase refinancing costs and force additional borrowing, deepening a debt spiral.

Expectations for a Fed rate increase later in September have also strengthened after Kevin Warsh, identified in the article as the Federal Reserve chair, recently said the fight against inflation was not over. Markets are also increasingly pricing in coordinated tightening by other major central banks, including the European Central Bank and the Bank of Japan. Derek Halpenny, head of global markets research for Europe at Mitsubishi UFJ, said markets had already entered a danger zone. Higher policy rates increase the risk of a stock-market collapse, he added.

South Korean stocks were also hit by the global surge in sovereign yields. The Kospi closed down 3.99% at 6,562.72 on September 2.

Kim Ju-wan, Hankyung.com reporter kjwan@hankyung.com