Deficits, AI debt, and a renewed Middle East conflict pushed borrowing costs up together
Japan's 10-year government bond yield touched 3 percent on Tuesday for the first time since 1996.
Bloomberg reported UK 30-year yields at their highest level since 1998, and Germany's 10-year yield reached ground last seen in 2011, according to CNN.
The US 10-year Treasury yield rose 3.4 basis points to 4.792 percent after touching 4.798 percent intraday, its highest since January 2025, Reuters reported, adding that the yield has now climbed for five straight sessions, its longest run since March.
CNN put the 30-year US yield at 5.27 percent, a level Reuters described as six basis points below where it sat before the US Treasury intervened in August.
Brent crude settled 4.6 percent higher at US$94.65 a barrel and West Texas Intermediate settled 5.2 percent higher at US$90.22, per Reuters, which called both the strongest closes since late July.
The New York Times reported Brent trading roughly 30 percent above prewar levels, tying the increase to renewed US strikes on Iranian targets.
Laura Cooper, global investment strategist at Nuveen, told Bloomberg that yields are moving higher and term premium has to rise with them.
The increase compensates for the risks converging on the market, as per Cooper.
Euro zone inflation rose to 3.3 percent in August, in line with forecasts, with energy inflation surging to 14.3 percent, the Financial Times reported.
The New York Times described that reading as the fastest pace in nearly three years.
According to Reuters, expectations for a hike of at least 25 basis points from the US Federal Reserve at its September 15 to 16 meeting stood at 66.2 percent on CME Group's FedWatch Tool, up from 39.6 percent a week earlier.
The Financial Times reported that markets had already assigned a high probability to the Bank of Japan lifting rates by 0.25 percentage points to 1.25 percent on September 18.
The US gross national debt topped US$40tn for the first time in August, more than 120 percent of the size of the economy, the New York Times reported, putting French public debt above €3.5tn, or 117 percent of that country's economy.
Eric Robertsen, head of global research and chief strategist at Standard Chartered, told the Financial Times that borrowing is rising as funding costs climb.
Fiscal positions are not improving anywhere, and until that shifts, "the long end doesn't have an anchor," he said.
Bloomberg reported that a surge in borrowing by US technology firms to fund artificial intelligence is potentially crowding out demand for sovereign bonds, and the Financial Times cited investors making the same point about hyperscalers.
The S&P 500 fell 0.7 percent and the Nasdaq Composite fell 1 percent, according to CNN, with Bloomberg noting the MSCI All Country World Index is down about 1 percent from its mid-August record.
Gold fell 2.69 percent to US$4,328.60 an ounce, Reuters reported, attributing the drop to elevated Treasury yields and a stronger US dollar.
“If we continue to have this grind higher [in yields], I think stocks are going to feel it a little bit more,” Natalia Lojevsky, managing director at CIFC Asset Management, told CNN. “It's definitely a headwind.”
September and October have been the worst months for the global bond index over the past decade, with the gauge losing more than 1 percent on average in each, Bloomberg reported, citing data it compiled.
Prashant Newnaha, senior rates strategist at TD Securities, told Reuters that Japanese government bonds anchored global fixed income for years.
That relationship has now flipped in what he called "a genuine regime change."
