The global bond sell-off intensified on Tuesday, 1 September, as Japan’s 10-year government bond yield reached 3% for the first time since 1996, driving borrowing costs higher across major economies.
The move reflected renewed concern over energy-driven inflation, rising government debt and the prospect of tighter monetary policy. Falling bond prices push yields higher, increasing the cost of financing for governments, companies and households.
Japan’s Ministry of Finance reported that a 10-year bond auction held on Tuesday produced a lowest accepted yield of 3.011%, with the weighted average yield just below the 3% mark at 2.995%.
The rise in Japanese yields was accompanied by sharp moves elsewhere. Britain’s 10-year gilt yield climbed to 5.25%, its highest level since 2008, while Germany’s equivalent yield reached 3.35%, a level not seen since 2011. The US 10-year Treasury yield rose to 4.796%.
Investors have been unsettled by the prospect of higher energy prices following renewed fighting in the Middle East. Eurostat’s flash estimate showed eurozone inflation rising to 3.3% in August from 2.9% in July, strengthening expectations that the European Central Bank could raise interest rates this month.
Japanese yields add to pressure on global policymakers
Japan’s five-year government bond yield also reached a record high of 2.26%, while the two-year yield rose to 1.795%, its highest level in 31 years, according to Reuters market data.
Higher Japanese yields could encourage domestic investors to shift money back into Japanese assets, reducing demand for overseas bonds and adding to pressure in markets such as Australia and the United States.
The increase also carries particular significance for Japan, where higher interest costs threaten to add to the burden of servicing one of the developed world’s largest public debt piles.
In the United States, concern has focused on the scale of government borrowing and the supply of Treasury debt, as well as heavy bond issuance by technology companies raising funds for artificial-intelligence investment. Longer-term US borrowing costs have remained close to their highest levels in years.
