(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 to the impact.
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The rout was led by longer-dated bonds that are the most vulnerable to accelerating inflation. In the US, 10-year yields rose 10 basis points to 4.58%, the highest in a year, 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 jumps hit markets around the developing world.
The selloff came as crude oil prices climbed and the US and Iran show little signs of ending a conflict that’s cut off key shipments through the Strait of Hormuz. That’s compounding worries sparked by back-to-back US reports that showed 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.”
The rise in bond yields is increasing borrowing costs for other governments, as well, and exerting a drag on the pace of global economic growth by rippling through to the cost of business and consumer loans. Investors are also beginning to express concerns 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.
While bond yields gradually moved higher in recent days, the selloff gathered pace on Friday, with yields in Germany, Spain, Australia and New Zealand also pushing up.
“The restablishment of trades favoring bonds have been placed under pressure again this week with inflation data globally higher than expected,” and oil prices rising, said John Briggs, head of US rates strategy at Natixis North America. He said that 10-year Treasury yields may continue to push higher.