Global Government Bond Prices Plunge in Tandem, Raising Interest-Rate Alarm for Households and Companies

[Financial News] Government bond prices around the world are expected to plunge in succession, increasing the interest burden on households and companies.
According to foreign media outlets, including The Wall Street Journal and CNBC, the yield on U.S. 10-year Treasury notes stood at 4.788% on the morning of the 1st (local time), up 0.03 percentage points from the previous session. It was the highest level since January 14, 2025. Government bonds traded in the market are priced by discounting their value at maturity using secondary-market yields, so their prices fall as yields rise. The yield on 30-year U.S. Treasuries also rose 0.02 percentage points to 5.272% that day, approaching its highest level since 2007.
In Japan’s government bond market, the 10-year yield rose to 3% during the session, reaching its highest level in about 30 years, since October 1996. Concerns over Japan’s plans for large-scale government spending and expectations of further interest-rate hikes by the Bank of Japan are believed to have fueled the rise in government bond yields.
Long-term government bond yields also surged in the United Kingdom. The yield on 30-year U.K. government bonds rose as high as 5.919% during the session, its highest level since 1998. The 10-year yield reached 5.224%, its highest since 2008. Germany’s 10-year government bond yield also climbed as high as 3.339% during the session, reaching its highest level since 2011.
Secondary-market government bond yields are not only a benchmark for government bond prices; they also serve as a measure used by private financial institutions to set lending rates. Long-term government bond yields, in particular, serve as reference rates that affect the cost of long-term financing, including mortgage loans and corporate bonds.
As a result, higher secondary-market government bond yields increase the interest-payment burden on indebted households, companies, and governments. In the United States, total national debt surpassed $40 trillion last month, while the fiscal deficit continues. Japan also faces a massive government debt burden exceeding twice its gross domestic product (GDP), making the interest burden from rising government bond yields substantial.
The recent plunge in government bond prices has been driven by a combination of factors. First, concerns about rising prices stemming from the intensifying war in Iran reduced demand for government bonds. In addition, increased corporate bond issuance by companies worldwide to fund artificial intelligence (AI) investment, along with increased government bond issuance by governments struggling with fiscal deficits, contributed to the decline in government bond prices. Francis Cheung, head of foreign-exchange and interest-rate strategy at OCBC in Singapore, noted of the recent trend, "In Europe and the United Kingdom, rising inflation expectations are the larger factor, whereas in the United States, the rise in long-term rates is still being driven by higher real rates."
Moreover, if rising secondary-market yields on Japanese government bonds push up interest rates on other financial assets in Japan, Japanese investors who had invested in overseas bonds could shift back into Japanese assets. In that case, further declines in overseas bond prices are expected. Prashant Nounaha, a senior interest-rate strategist at TD Securities in Taiwan, called it "a true regime shift," adding, "Japanese government bonds have long served as the anchor of global bonds, but now the situation has been reversed."
If rising government bond yields also pull up other interest rates, they are expected to hurt stock markets as well. Derek Halpenny, head of European research in the global markets research division at MUFG in Japan, said, "We have already entered the danger zone," adding that the risk of a sharp stock-market decline grows as interest rates rise.
 
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