U.S. 4.8% · Japan 3%... Global bond markets reel from Middle East inflation

【Financial News, New York = Correspondent Lee Byung-chul】 Fear of inflation originating from the Middle East has gripped the global bond market.As international oil prices surged again due to the renewed conflict between the U. S. and Iran, expectations that central banks of major countries would raise interest rates spread, leading to a simultaneous sell-off in U. S., Japanese, and European government bonds. In particular, with the yield on Japan's 10-year government bond—a symbol of the world's ultra-low interest rates for 30 years—surpassing 3%, analysts suggest that the global bond market has entered a structural turning point. According to Reuters and CNBC on the 1st (local time), the U. S.
79% during trading, reaching its highest level since January 2025. 01%p) from the level just before the U. S. Treasury intervened in the market last month.
Last month, the U. S. Treasury doubled the scale of some bond buybacks to calm the surge in long-term yields. Although the 30-year yield fell rapidly at the time, it has since reversed about two-thirds of that decline.
The movements in the Japanese government bond market are even more dramatic. The Japanese 10-year government bond yield surged by more than 6 basis points, surpassing 3%. This is the first time in 30 years since 1996. 26%.
Considering that the Bank of Japan (BOJ) has artificially kept interest rates low through large-scale government bond purchases for over a decade, this level would have been unimaginable until recently. Europe is no exception. 21%, marking its highest level since 2008. 25%, reaching its highest level since 2008.
In the UK, yields surged by approximately 10 basis points as the market reflected the global rate hikes all at once, as the bond market was closed the previous day for a public holiday. The direct trigger for the surge in global government bond yields came from the Middle East. International oil prices began to rise again as the U. S.
and Iran exchanged direct attacks for the first time in a month. On this day, Brent crude rose 2% to surpass $92 per barrel, and European natural gas prices also climbed to their highest level since last March. Rising energy prices could once again stimulate inflation in various countries. If inflation is not easily brought under control, central banks must further raise interest rates, which leads to a decline in existing government bond prices and a rise in yields.
In fact, as the Eurozone's inflation rate exceeded 3% in August, market expectations that the European Central Bank (ECB) will raise rates in September have strengthened. The situation in the United States is similar. Long-term interest rates briefly showed signs of stabilization after Federal Reserve Chair Kevin Warsh delivered a tough message on inflation at Jackson Hole last week. However, the situation reversed again as the conflict between the U.
S. and Iran resumed and energy prices surged. The problem is that the current rise in government bond yields cannot be explained solely by the situation in the Middle East. As major countries around the world continue to face massive fiscal deficits, competition for global investment capital is intensifying as Big Tech firms, having jumped into AI investment, are issuing massive amounts of corporate bonds.
U. S. national debt has already surpassed $40 trillion. With the U.
S. government needing to continue issuing massive amounts of government bonds, Big Tech firms expanding investments in AI data centers and infrastructure are also aggressively entering the bond market. It is a structure where the government and companies compete for the same investment funds, leading to an increase in the supply of bonds and a rise in the interest rates demanded by investors.
S. government needing to continue issuing massive amounts of government bonds, Big Tech firms expanding investments in AI data centers and infrastructure are also aggressively entering the bond market. It is a structure where the government and companies compete for the same investment funds, leading to an increase in the supply of bonds and a rise in the interest rates demanded by investors.
S. government needing to continue issuing massive amounts of government bonds, Big Tech firms expanding investments in AI data centers and infrastructure are also aggressively entering the bond market. It is a structure where the government and companies compete for the same investment funds, leading to an increase in the supply of bonds and a rise in the interest rates demanded by investors.S. government needing to continue issuing massive amounts of government bonds, Big Tech firms expanding investments in AI data centers and infrastructure are also aggressively entering the bond market. It is a structure where the government and companies compete for the same investment funds, leading to an increase in the supply of bonds and a rise in the interest rates demanded by investors.
S. government needing to continue issuing massive amounts of government bonds, Big Tech firms expanding investments in AI data centers and infrastructure are also aggressively entering the bond market. It is a structure where the government and companies compete for the same investment funds, leading to an increase in the supply of bonds and a rise in the interest rates demanded by investors.
S. government needing to continue issuing massive amounts of government bonds, Big Tech firms expanding investments in AI data centers and infrastructure are also aggressively entering the bond market. It is a structure where the government and companies compete for the same investment funds, leading to an increase in the supply of bonds and a rise in the interest rates demanded by investors.
[email protected] Correspondent Lee Byeong-cheol Reporter