(Bloomberg) — Government bond markets tumbled around the world, sending yields surging from Japan to the US on intensifying fears that the war-driven price shock will force central banks to raise interest rates to contain the impact.
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The rout was led by longer-dated bonds that are the most vulnerable to accelerating inflation, sending 30-year US Treasury yields to the cusp of their 2023 peak. US 10-year yields rose 12 basis points to 4.6%, capping the biggest weekly jump since President Donald Trump’s tariffs threw markets into a tailspin in April 2025.
Japan’s 30-year yield hit 4% for the first time since the bonds were issued in 1999. In the UK, where the selling was compounded by a political crisis that’s imperiling Prime Minister Keir Starmer’s leadership, 30-year gilt yields reached a 28-year high. Similar increases raced through markets around the developing world.
The selloff came as crude oil prices climbed and the US-Chinese summit failed deliver any breakthroughs toward ending the war in Iran. That’s compounding worries sparked by back-to-back US reports that revealed a sharp rise in consumer and wholesale prices, fueling speculation that the Federal Reserve and other central banks will need to shift to tightening monetary policy.
“Bond yields definitely feel like they are getting unhinged,” Subadra Rajappa, head of research at Societe Generale Americas, told Bloomberg Television. “The market is not only testing the Fed, it’s putting Congress on notice. The longer that interest rates remain high, financing costs go higher.”
In a sign the concern is spreading from markets to the corridors of power, Japanese Finance Minister Satsuki Katayama said she and her Group-of-Seven peers would discuss the selloff when they meet at the start of next week in Paris.
The rising bond yields are both lifting borrowing costs for governments and exerting a drag on the pace of global economic growth by rippling through to the cost of business and consumer loans.
Investors are beginning to express concern that it could reverse the run-up in equity prices. US stocks dropped Friday, pulling back from what has been a sharp rally since late March.
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“Any further rise at the long-end of the bond curve threatens to worsen valuation jitters and unsettle a rally increasingly driven by long-duration equities.”