NEW YORK – A worsening bond selloff is pushing the average yield on global government debt to within a whisker of 4 per cent, a level not seen since 2007.
Yields on Bloomberg’s Global Aggregate Treasuries index rose eight basis points to 3.99 per cent on Sept 23.
Treasuries have been a major driver of the losses, as strong economic data and a five-year US debt auction that ranked as the second-worst by one measure in data going back to 2018 sent yields across much of the curve to multi-year highs.
“The move is likely far from over,” Padhraic Garvey, ING Groep’s regional head of research, Americas, wrote in a note. “It’s not impossible that we get through the coming months without another significant move higher in long-end yields.”
The losses are deepening as a prolonged Iran war, stubborn inflation and mounting fiscal concerns reinforce bets that interest rates will stay higher for longer, keeping investors wary of government debt even with yields at these elevated levels.
The pain extends well beyond bonds, as higher yields ratchet up borrowing costs for companies to homeowners, while also chipping away at the value of future corporate earnings, putting stocks under pressure too.
“Inflation is still high and sticky in a lot of places, labour markets are tight for various reasons, and despite higher fuel and everything prices, economies are still growing well,” said Amy Xie Patrick, a money manager at Pendal Group. “Given all of this, bonds are actually behaving rationally with respect to the economic fundamentals.”
The pressure spread to Asia on Sept 24.
Yields on policy-sensitive three-year Australian government debt jumped 13 basis points to 5.07 per cent, its highest since May 2011. New Zealand’s two-year yields climbed as much as 17 basis points to just under 4 per cent. Japan’s 10-year yield also rose as the market reopened after a three-day holiday.
Strategists at JPMorgan Chase & Co and KKR & Co see scope for US yields to climb further as energy-driven inflation, heavy government borrowing and the risk of additional central-bank tightening continue to percolate.
“Most fixed income will like higher yields, but want them to be stable there, afraid of catching a falling knife,” said Hans Mikkelsen, a strategist at TD Securities.
US five-year yields topped 5 per cent on Sept 23 for the first time since 2007, while those on 10-year yields jumped the most since the Liberation Day tariff shock in April 2025.
Strong economic data and surging oil prices prompted traders to ramp up bets on further Federal Reserve tightening.
Swaps now fully reflect three quarter-point hikes over the next year, with significant hedging for a fourth. That would take the central bank’s target rate as high as 5 per cent. A US$70 billion (S$90 billion) five-year Treasury auction on Sept 23 drew the highest yield since 2006.
Rising volatility is adding to the gloom. The ICE BofA MOVE Index, which measures US bond market swings, climbed on Sept 23 to the highest level since March.
“This wasn’t simply an inflation shock,” said Chris Weston, head of research at Pepperstone. “The focus has been squarely on the rampant selloff and a buyers strike across the US Treasury curve.” BLOOMBERG
