The global bond market is experiencing a deepening selloff, with longer-term yields rising sharply due to tighter expected policy paths and increasing real term premia, according to Brown Brothers Harriman’s Elias Haddad and Deutsche Bank’s Jim Reid [1][2]. The Bank of International Settlement (BIS) analysis cited by BBH suggests that the rise in real term premia is influenced by crowding-out effects from large tech bond issuance and concerns over sovereign debt sustainability, with France planning to raise bond issuance to a record amount next year, highlighting fiscal pressures for heavily indebted governments [1].
In the US, Deutsche Bank reports that the 10-year Treasury yield rose by 4.9 basis points to a post-2007 high of 5.28%, while the 30-year yield increased by 6.3 basis points to a post-2002 high of 5.63% [2]. The Franco-German 10-year spread widened to a post-2012 high of 127 basis points [2]. Despite dovish PCE revisions, the long-end selloff persisted, with the 2-year Treasury yield closing 1.1 basis points higher at 4.89% after trading as low as 4.825% following the PCE release [2].
The relentless rise in yields has weighed on risk assets and fixed income, with equities softening after an initial post-PCE rally. The S&P 500 ended the day down 0.25%, despite trading up 0.68% earlier, as the bond rout continued to pressure markets [2]. Month-end positioning effects and higher Oil prices, along with resilient economic growth, have contributed to the ongoing bond market stress [2].
Forward-looking, BBH notes that higher debt servicing costs are adding to fiscal pressure for governments, particularly those with heavy debt loads, as exemplified by France’s record bond issuance plans [1]. The BIS analysis underscores the broader challenge for sovereign debt sustainability amid rising yields and increased competition from corporate issuers [1].
CONCLUSION
The global bond selloff has intensified, with US Treasury yields reaching multi-decade highs and sovereign spreads widening. Market sentiment remains negative as higher yields pressure equities and raise concerns about debt sustainability for governments and corporates. The outlook suggests continued volatility and fiscal challenges as investors demand greater compensation for holding longer-term bonds.