Jennifer Sor
4 min read
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Treaurys are getting a lot of attention, but they're not the only bond market seeing yields jump.
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Long-dated bonds in the UK, Germany, and Japan have sold off as traders fret over fiscal outlooks.
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Governments are running large deficits and borrowing more, which adds to inflation fears and pressures growth.
The sell-off that's hit the bond market in recent weeks isn't just a US phenomenon — in fact, it's even more pronounced in other countries this year.
Bond investors globally seem jittery, in part due to concerns about deficit spending and fears that governments will continue to spiral deeper into debt.
This was on display this week when key US bond yields jumped as politicians debated a sweeping budget bill that economists think could add trillions to the US deficit.
The 10-year Treasury yield spiked as high as 4.61% this week, up 63 basis points from its low in early April. The 30-year Treasury yield climbed as high as 5.13%. That's up 74 basis points from its April low and 31 basis points from the start of the year.
However, the 10-year Treasury is nearly flat for the year despite recent gyrations, and observers should look globally to get a better sense of the bond market's situation.
The yield on the UK's 30-year government bond spiked as high as 5.54% this week, up 40 basis points year-to-date.
The UK is on track to post a budget deficit equivalent to $185.5 billion this fiscal year, slightly lower than last year's levels, according to an estimate from its Office for Budget Responsibility. It expects the budget to remain in a deficit through the end of the decade.
Germany's 30-year bond rose as high as 3.16% this week, up 57 basis points this year.
According to provisional estimates from its Federal Statistical Office, Germany's government posted a budget deficit equivalent to $134.5 billion in 2024, up $16.9 billion from the prior year. Interest payments on its debt also climbed 24% last year.
Finally, Japan's 30-year bond yield rose as high as 3.16% this week, up 89 basis points since January and touching its highest level since 1999, according to Bloomberg.
The move higher in global yields is a sign that the bond market is dismayed at high levels of government borrowing and deficit spending.
"To be honest, it's not only a US problem. We're running huge deficits pretty much everywhere, whether that be in the United States or here in the UK," Michael Brown, a senior research strategist at Pepperstone, told Business Insider. "I think the big issue for market participants is we've known that this has been a problem for years."
