Global Bond Sell-Off Deepens Amid Inflation Fears and US-Iran Tensions
Government borrowing costs have surged to multi-year highs worldwide, sending shares lower across Asia-Pacific and Europe, as US-Iran airstrikes push Brent crude to $97 a barrel. IMF managing director Kristalina Georgieva has warned that rising advanced-economy yields threaten developing nations.
Written by Olivia Bennett
(1h ago)
Developing
What happened?
Global bond yields surged to multi-year highs on Wednesday, with the Nikkei 225 falling 2.7%, South Korea's KOSPI dropping 3.3%, and European futures pointing sharply lower at the open.
Why it matters
IMF managing director Kristalina Georgieva warned G20 finance ministers in North Carolina that rising advanced-economy yields are a 'particular concern' for emerging and low-income nations.
Live updates
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FTSE 100 slips in early London trading as Computacenter leads declines
The FTSE 100 dropped 39 points, or 0.36%, in early trading on Tuesday. Computacenter, the technology and services group, was the session's sharpest faller, shedding 3.5%. Sportswear and leisure retailer JD Sports followed, down 2%.
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Bond market turmoil to compound UK fiscal pressures ahead of October budget, analyst warns
Rising bond market volatility is set to deepen the fiscal challenges facing the government ahead of the autumn budget, according to Roger Lee, head of equity strategy at Cavendish. Lee said US air strikes on Iran and the subsequent retaliation had pushed oil prices to roughly $95 a barrel, a five-week high, adding to a broad sell-off in government bonds concentrated on countries with high deficits or elevated debt levels. Gilts, he noted, are seen as particularly exposed given the UK's current fiscal position. With bond yields at their present levels likely to erode most of the Treasury's
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Bond yield spike driven by inflation fears and rising debt supply, says Principal AM chief
Mike Goosay, chief investment officer and global head of fixed income at Principal Asset Management, has set out his explanation for the bond market sell-off. He says the sharp climb in global yields reflects investors revising their views on inflation risks, monetary policy direction, and the expanding volume of government debt coming to market. Goosay identifies structural forces as well as cyclical ones, pointing to elevated issuance, persistent fiscal financing pressures, and a rising term premium as longer-term drivers. Despite the turbulence, he argues that higher yields are
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UK borrowing costs hit 17-year high as gilt sell-off extends
UK government borrowing costs climbed sharply at the open as the bond market sell-off ran into a further session. Ten-year gilt yields rose four basis points to 5.268 per cent, their highest level since June 2008, according to Reuters. Thirty-year yields gained five basis points to nearly 5.89 per cent, close to the peaks seen the previous day. Bond yields move inversely to prices and serve as a proxy for a government's cost of borrowing. The moves, though relatively contained, intensify the financial strain on Andy Burnham's government, narrowing the fiscal headroom available to Chancellor
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German 10-year bond yield reaches highest point since April 2011
Germany's benchmark 10-year government bond yield has climbed to its highest level since April 2011, rising 3.8 basis points to 3.3763%. The move reinforces the character of a broad global bond rout, with sovereign debt weakening across the United States, Japan, India and Australia simultaneously.
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Bond market rout shows no sign of easing, analyst warns
The sell-off in bond markets is intensifying with no clear floor in sight, IG chief market analyst Chris Beauchamp has cautioned. Governments globally are feeling the strain from rising borrowing costs, but Britain faces a particularly acute challenge. Andy Burnham's economic reform ambitions are set to collide with high debt levels and sharply rising gilt yields, Beauchamp said, leaving taxpayers likely to shoulder the bill for expansive spending plans. He added that the case for a Bank of England rate rise grows stronger with every dollar added to the oil price, compounding the fiscal
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Ryanair warns of sharply higher European fares as it cuts passenger target
Ryanair has cautioned that short-haul fares across Europe could rise considerably next year if oil prices remain at current levels. The budget carrier has trimmed its passenger forecast for the current financial year by two million, from 216 million to 214 million, as it seeks to reduce fuel cost exposure during the loss-making winter months. The airline said fares would need to rise materially to reflect sustained crude prices, unless the oil market eases. It also suggested that rivals with weaker hedging arrangements could face serious difficulties over the winter period.
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IMF chief warns rising advanced-economy bond yields pose threat to developing nations
Kristalina Georgieva, managing director of the International Monetary Fund, has cautioned that climbing bond yields in advanced economies present a significant risk to lower-income and emerging-market countries. Speaking to G20 finance ministers and central bank governors in North Carolina, she described the surge in global borrowing costs as a particular concern. While acknowledging gradual improvement in the sovereign debt position of emerging and low-income nations — driven by domestic policy efforts and international cooperation — she stressed that progress had been uneven. Persistent
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European equities face lower open as futures point to broad declines
European stock markets are poised to begin Tuesday's session in negative territory. Futures data reported by Reuters indicate the Eurostoxx 50 is tracking 0.36% lower ahead of the open, with Germany's DAX on course to shed 0.46%. In the UK, FTSE 100 futures are pointing to a fall of 0.37%. Trading is due to begin in approximately 40 minutes.
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Oil reaches near six-week high after US-Iran exchange of airstrikes
Brent crude climbed to $97 a barrel on Tuesday, its highest level since 24 July, after the United States and Iran exchanged airstrikes. The move builds on a 4.6% jump recorded in the previous session. Analysts at ING warned clients that the escalation had brought risks to regional oil supply back into sharp focus, noting that while crude flows through the Strait of Hormuz had continued despite the ongoing stand-off, rising tensions placed those crossings in jeopardy. The spike in oil prices risks compounding inflationary pressures already contributing to elevated bond yields in global markets.
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Australian 10-year bond yields reach 15-year high at 5.22%
Yields on Australian 10-year government bonds have climbed to 5.22%, their highest point in more than 15 years, according to Reuters. The move reflects the broader global sell-off in sovereign debt, which has pushed borrowing costs sharply higher across multiple markets.
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India's 10-year bond yield touches 7% for first time in three months
The global bond sell-off reached India on Wednesday, with yields on 10-year government bonds momentarily crossing the 7% threshold — a level not seen in three months, Reuters reports. The move signals widening pressure on emerging market debt as the rout in sovereign bonds continues.
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Markets slide across Asia-Pacific as bond turmoil and Iran tensions weigh
Equity markets across the Asia-Pacific region are under renewed pressure, extending the turbulence that gripped global markets on Tuesday. Tokyo's Nikkei 225 has fallen 2.7%, South Korea's KOSPI is down 3.3%, and China's CSI 300 has lost 1.4%. US markets also closed weaker overnight, with the Russell 2000 index of smaller companies dropping 1.2%. Rising tensions between the United States and Iran are pushing oil prices higher, compounding investor anxiety. The declines follow a volatile session in bond markets on Tuesday, during which UK long-term borrowing costs rose to their highest level
Government borrowing costs across major economies have surged to their highest levels in years, as inflation fears, renewed geopolitical tensions, and rising oil prices combined to unsettle global financial markets on Wednesday.
In Asia-Pacific, the sell-off was sharp. Tokyo's Nikkei 225 slumped 2.7%, South Korea's KOSPI fell 3.3%, and China's CSI 300 lost 1.4%. Wall Street closed lower the previous session, with the Russell 2000 index of smaller American companies declining 1.2%. European markets were set to follow suit at the open, with Eurostoxx 50 futures down 0.36%, Germany's DAX on course for a 0.46% decline, and FTSE futures off 0.37%.
The proximate cause of the latest lurch in oil prices was a fresh exchange of airstrikes between the United States and Iran, which pushed Brent crude to $97 a barrel — its highest since 24 July and a rise of 4.6% in a single session. ING analysts warned clients that the development had brought "risks to regional oil supplies back into focus", adding that while oil flows through the Strait of Hormuz had continued despite ongoing tensions, "rising tensions clearly put crossings at risk". Higher energy prices risk amplifying the inflationary pressures that analysts identify as already driving bond yields upward.
IMF warns of spillovers to the developing world
Speaking at a gathering of G20 finance ministers and central bank governors in North Carolina, Kristalina Georgieva, managing director of the International Monetary Fund, described the rise in global borrowing costs as a "particular concern". She said the sovereign debt landscape for emerging and low-income countries had "gradually improved in recent years", but cautioned that "persistent risks and uncertainty in the global economy, including spillovers from the significant increase in yields in advanced economies, call for policy discipline and underscore the importance of building buffers".
Georgieva noted that as key advanced-economy yields rise to multi-year highs, they "lift most of the world's yield curves up with them", a dynamic she described as especially damaging for some emerging markets.
Record levels across multiple markets
The scale of the bond market dislocation was visible in individual country data. Australia's 10-year government bond yield reached 5.22% on Wednesday, its highest in more than 15 years, according to Reuters. India's equivalent briefly touched 7% for the first time in three months. The previous session saw the UK's long-term borrowing costs jump to their highest level since early 1998, while Japan's 10-year bond yield hit its highest point since 1996.
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Source: The Guardian