Global bond sell-off sends German, British and Japanese yields to decade highs

A broad sell-off in government bonds pushed borrowing costs higher across the world on Tuesday, as investors grew more concerned about inflation and the huge deficits carried by major economies.

Japan’s 10-year government bond yield touched 3% for the first time since 1996, a level that had previously seemed unthinkable after decades of artificially low interest rates. Germany’s 10-year yield climbed to 3.35%, its highest level since 2011. In Britain, borrowing costs reached a 16-year high of 5.25%.

The move is expected to put further pressure on households and companies. Markets are now pricing in additional interest-rate increases from central banks, while eurozone inflation rose above 3% in August, according to the figures cited.

US 10-year Treasury yields approached 4.8%, reaching a multi-month high. At the same time, US public debt had swollen to what the report described as $40 trillion.

Geopolitical uncertainty is adding to the strain. Conflicts in the Middle East and Ukraine pushed Brent crude above $92 a barrel, while initial direct attacks between the United States and Iran increased fears of an energy shock. Technology companies are also issuing large volumes of corporate bonds to raise money for artificial-intelligence expansion, adding to pressure in borrowing markets.

The report also pointed to concern over Fed chief Kevin Warsh’s decision to limit communication with financial markets. The resulting lack of clarity, it said, has led investors to restructure their portfolios pre-emptively.