Surging US Treasury yields trigger bond sell-off across Japan and Europe

The bond rout that began in the United States is moving across the world’s major economies, pushing up borrowing costs for governments and other borrowers. In Japan, the 10-year government bond yield approached 3.03% on Wednesday before closing at 3.018%, one day after crossing 3% for the first time since 1996.

The five-year Japanese government bond yield also rose four basis points to a record 2.295%. The move followed calls from Hajime Takata, a hawkish member of the Bank of Japan’s Policy Board, for more flexible interest-rate increases. Some analysts expect the 10-year Japanese yield to reach 3.2% next month, twice its level when Sanae Takaichi became prime minister last October.

The shift is especially notable for Japan, where interest rates stayed low for decades. Analysts cited by the Hankyoreh described the sharp increase as a sign that the global economy may be entering a period of persistently high interest rates.

US yields have also climbed sharply. The 10-year Treasury yield reached 4.81% on Tuesday, its highest level in nearly three years, while forecasts of 5% are adding to market pressure. The 30-year Treasury yield recently rose above 5.3%, its highest level since 2007. Yields on Britain’s 30-year government bond and Germany’s 10-year government bond reached 28-year and 15-year highs, respectively.

Renewed hostilities between the United States and Iran have lifted oil prices and revived inflation fears, prompting investors to sell bonds because of concerns about weaker real returns. Governments are also offering higher yields on new debt to attract buyers, while major US technology companies are issuing large amounts of corporate debt to finance artificial-intelligence investment.