Bond sell-off that began in U.S. spreads from Japan to major European economies

The global bond sell-off that began in the United States has moved through Japan and into major European economies, driving yields higher and pushing governments’ interest burdens to levels not seen in decades.

In Tokyo, the 10-year Japanese government bond yield rose to 3.015%, one day after breaking above 3% for the first time since 1996. The five-year yield also climbed four basis points to a record 2.295%. Hawkish comments from Bank of Japan policy board member Hajime Takata, who called for faster interest-rate increases, added to the pressure. Reuters reported that some forecasts expect the 10-year yield to reach 3.2% next month, which would place it at twice the level recorded when Prime Minister Sanae Takaichi took office last October.

The surge in Japanese yields, after decades of low interest rates, is being viewed as evidence that the global economy is entering a period of higher borrowing costs. The 10-year U.S. Treasury yield jumped to 4.81%, its highest level in nearly three years. Some forecasts put it on course to reach 5%. The 30-year U.S. Treasury yield had already climbed into the 5.3% range, its highest since 2007. Britain’s 30-year yield reached a 28-year high, while Germany’s 10-year yield rose to its highest level in 15 years.

Renewed fighting between the United States and Iran has pushed oil prices higher, reviving fears of inflation. Bondholders are selling because they expect inflation to erode real returns. Governments are also issuing debt at higher rates as they seek to sell bonds, creating further upward pressure on yields. Large corporate bond sales by U.S. technology companies seeking funds for artificial-intelligence investment are adding to the supply of debt.