Government bond yields jumped across major markets Tuesday, with borrowing costs in Japan and the U.K. touching multi-decade highs and U.S. Treasury yields surging, as renewed Middle East hostilities reignited inflation concerns.
The U.S. 10-year Treasury note yield rose 3 basis points to 4.7880%, a 20-month high. Japan's benchmark 10-year note yield jumped more than 6 basis points to 3% for the first time since 1996, while Japan's 2-year government bond yield touched a 31-year high of 1.81%.
- U.K. 10-year Gilt yields rose more than 9 basis points to 5.2341%, the highest since June 2008.
- The U.K. 30-year Gilt yield soared 9 basis points to 5.8856%, its highest level since March 1998.
- Germany's 10-year bund yield rose more than 3 basis points to 3.3546%, a new 52-week high, while its 2-year bund yield reached 2.9496%, its highest since July 2024.
- France's 2-year government bond yield rose to its highest level since April 2024.
The moves followed retaliatory strikes by the U.S. and Iran around the Strait of Hormuz in recent days, which drove energy prices higher. Brent crude was last seen about 2.2% higher at $92.38 per barrel, while West Texas Intermediate futures were up 2.61% at $88.05.
Treasury Secretary Scott Bessent, speaking to CNBC on Monday on the sidelines of the G20 finance ministers' meeting in Asheville, North Carolina, said the U.S. bond market remains "the best performing market" in the world, citing Fitch Ratings' reaffirmation of its AA+ rating on U.S. government debt last month.
Steve Englander, head of global G10 FX research and North America macro strategy at Standard Chartered, told CNBC's "Squawk Box Europe" that the six-month conflict, combined with a Supreme Court tariff ruling he said removed roughly 40% of additional tariff revenue, had added pressure on bonds. He said yields across the curve will remain under upward pressure and that the U.S. is not alone in facing a deficit problem. "I think 'best performing', as Bessent said, isn't the same as well performing," Englander said. "Everybody has a deficit problem — I don't think there's any reason to cheer."
The rise in U.K. borrowing costs comes as Prime Minister Andy Burnham, who became the U.K.'s seventh prime minister in 10 years in July, is reportedly set to tell lawmakers that greater public control is the only way to boost the country's growth. The Guardian reported Tuesday that Burnham is mulling legislation to make it easier to take struggling utilities into public ownership. U.K. bond yields were also playing catch-up with global peers after a public holiday on Monday.
Source: CNBC
