- Bond sell-offs accelerated after Trump escalated tariff threats toward Europe, pushing the 10-year U.S. Treasury yield to ~4.31% and the 30-year to ~4.95%.
- Japan’s curve steepened as the 40-year JGB yield topped 4% for the first time, reflecting fears of bigger deficits and heavier long-bond issuance.
- Long-dated yields also jumped across Europe, with UK 30-year gilts above ~5.2% and Bunds, French and Italian bonds rising.
- Markets are repricing sovereign risk as global debt (~235% of GDP) and persistent deficits (~5% of GDP) collide with higher rates and geopolitical uncertainty.
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The recent bond market sell-off reflects a confluence of geopolitical, fiscal, and monetary pressures that are reshaping yield curves around the world. Chief among these is President Trump’s tariff rhetoric, particularly aimed at European allies in connection with Greenland, which has rattled global trading partners and triggered the largest U.S. Treasury sell-off in months. The 10-year Treasury yield has climbed to approximately 4.31 %, with the 30-year reaching near 4.95 % as long-dated debt is under heightened pressure.
In Japan, the yield curve has steepened sharply. The 40-year yield breached 4.0 % for the first time, while the 10-year and 20-year JGB yields rose significantly following fiscal policy signals: a proposed ¥135 billion (about US$900 billion) stimulus, a snap election, and a 2-year suspension of the food sales tax. These policies suggest a willingness to run larger deficits and issue more long-dated bonds, which investors are pricing with higher risk premia.
Europe is experiencing parallel stress. UK 30-year gilt yields have risen above 5.2 %, while German Bunds and other euro-area long bonds are also seeing material yield upticks. The UK, in particular, now bears the highest long-term government borrowing costs among G7 nations.
The global macro backdrop compounds these market moves. As of September 2025, total debt stands at about 235 % of world GDP — private debt has eased somewhat, but public debt has continued to rise, now nearing 93 % of GDP. Fiscal deficits average around 5 % globally. Elevated deficits, coupled with higher interest rates, create a vicious cycle: refinancing costs rise even as yields increase, pressuring government finance and heightening risk of policy missteps.
Strategically, the rising yields pose significant implications: borrowing costs for governments, corporates, and consumers will increase; asset valuations—especially for long-duration fixed income and equities—may need to fall; foreign investment flows may shift; and creditors may demand greater fiscal discipline. Markets will be watching government budget proposals, policy signals (especially on trade and taxation), central bank responses, and the extent of foreign investor participation in sovereign bond markets. Open questions include how much European lenders might divest U.S. Treasurys in response to tariff threats, how Japan’s debt holders will respond to JGB yields eroding their price, and whether bond markets may provoke policy adjustments before fiscal stress becomes unmanageable.
Supporting Notes
- The yield on the U.S. 30-year Treasury jumped to about 4.95 %, and the 10-year rose to around 4.31 %, following Trump’s tariff threats toward European countries tied to Greenland.
- Japan’s 40-year government bond yield reached ~4.2 %, the first time above 4 % since its 2007 inception, driven by fiscal expansion under PM Takaichi.
- UK 30-year gilt yields added about 9 basis points to reach ~5.25 %; 10-year gilt yields rose ~7 basis points.
- European bond yields rose broadly: German Bund 10-year up ~4 bps to ≈2.883 %; 30-year Bunds up nearly 6 bps to ~3.512 %. French, Italian, Swiss and Australian government bonds also moved higher.
- Global debt stands above 235 % of world GDP; public debt rose to nearly 93 % of GDP; global fiscal deficits average about 5 % of GDP.
- Japan’s debt-to-GDP ratio is roughly 235 % at end-March 2025; domestic holders such as the BoJ and insurers hold over 88 % of government debt.