\u00a0Long-term borrowing costs from the United States to Japan and Germany hit their highest levels in decades on Tuesday, as renewed inflation worries added to nagging concerns about the fiscal pressures facing some of the world\u2019s biggest economies. <\/p>\n
Thirty-year bond yields in the United States, the world\u2019s most systemically crucial government bond market, hit their highest since \u20602007 as oil \u200bprices — up 50 per cent so far this year — rose back above US$90 a barrel, fanning inflation worries as U.S.-Iran peace hopes faded. <\/p>\n
In Japan, inflation angst and expectations that Japan could hike interest rates as early as September pushed 10-year borrowing costs to a three-decade high just under 3 per cent.<\/p>\n
In Europe, Germany\u2019s 10-year Bund yield touched its highest since 2011, French yields were at their highest since 2009 and Britain\u2019s 30-year borrowing costs neared peaks hit in May that \u200bmarked the highest levels since 1998. When a bond\u2019s yield rises, its price falls.<\/p>\n
Kjersti Haugland, chief \u200ceconomist at investment bank DNB Carnegie, said bond markets are entering an era where the inflation and rates outlook is more uncertain and the upside risks are greater, leaving behind the post-financial crisis period of low rates and subdued inflation.<\/p>\n
\u201cIt coincides with the very high level of government debt in many countries, particularly Japan, the U.S., France and the UK,\u201d she said. <\/p>\n
Competition for capital from AI hyperscalers \u2014 the technology giants building huge data centers \u2014 combined with rising budget deficits and, in the United States, concern about clear communication \u200cfrom the Federal \u200bReserve under new Chair Kevin Warsh, exacerbated the \u200cselling, analysts said.<\/p>\n
The selloff in government bond markets ripples through economies, as sovereign debt sets the benchmark for borrowing costs for companies and other loans \u200bsuch as mortgages.<\/p>\n
Rising borrowing costs also tighten financial conditions in general, threatening to curb the \u2060economic growth that has helped drive stock markets to record highs.<\/p>\n
U.S. 10-year Treasury yields, at around 4.74 per cent, are \u2060trading at levels that in the past have attracted the attention of U.S. officials, with 5 per cent now in focus.<\/p>\n
\u201cThis will be very important, not just for bond markets, but also other financial \u200bassets as any break higher is likely to undermine confidence,\u201d said Zurich Insurance Group\u2019s chief market strategist Guy Miller.<\/p>\n
\u201cGiven the importance of this level, we are likely to see it defended by the U.S. Treasury.\u201d<\/p>\n
Some analysts reckon the Treasury\u2019s unusual decision to sell euros and not dollars in recent joint intervention with Japan to bolster a weak yen suggests it does not want bond market strains worsened by foreign central banks selling Treasuries to fund currency-support operations. <\/p>\n
Foreign holdings of U.S. Treasuries slid in June, Treasury Department data showed \u2060on Monday, led by declines in the holdings of Japan \u2014 the biggest foreign holder of U.S. bonds \u2014 the UK and China.<\/p>\n
Two recent Treasury auctions also drew attention for their yields as the sale of 10-year notes cleared at a yield of 4.683 per cent, the highest in 19 years, while the 30-year bond auction stopped at 5.216 per cent, a 25-year peak. <\/p>\n
Rising tariff refunds have meanwhile put U.S. public finances under further strain, after the Supreme Court struck down the emergency tariffs imposed by President Donald Trump last year.<\/p>\n
CHANGING DYNAMICS IN JAPAN Rising bond yields in Japan, where 30-year borrowing costs are just above 4 per cent, are also \u2060starting to draw in Japanese investors, traditionally big buyers of U.S. debt, creating another headwind for \u200bthe U.S. bond market.<\/p>\n
Charu Chanana, chief investment strategist at Saxo Bank in Singapore, said Japanese bond yields were at much more competitive levels, and she noted the \u2060fall in Japan\u2019s U.S. bond holdings in June.<\/p>\n
\u201cThat doesn\u2019t mean Japan is abandoning Treasuries, but it does mean Washington can no longer assume that foreign demand will absorb additional supply at yesterday\u2019s yields.\u201d<\/p>\n
For some bond \u200cinvestors, rising yields were making the market attractive.<\/p>\n
\u201cWe are long on duration. I don\u2019t expect it (the current bond selloff) will last,\u201d said Pictet senior investment adviser Christopher Dembik. In \u200bEurope, where high government spending and high debt have weighed on France and Britain, concern that climate events will add to spending pressures was also a factor, along with inflation and stronger-than-expected growth.<\/p>\n
\u201cIt\u2019s not just oil that people are looking at, but there\u2019s a broader inflation picture that kind of keeps the ECB (European Central Bank) hawkish,\u201d said ING senior rates strategist Benjamin Schroeder.<\/p>\n
\u201cAnd then you\u2019ve got those supply chain disruptions \u200bin Germany with the heat waves leading to those extreme lows in the Rhine levels.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"\u00a0Long-term borrowing costs from the United States to Japan and Germany hit their highest levels in decades on…\n","protected":false},"author":2,"featured_media":76254,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[22309,22300,22310,212,22294,22311,1368,22293,22305,22306,22302,22295,22292,191,251,1729,22304,22299,22321,22296,22297,2752,8,22301,500,2164,22312,22298,22316,22317,33,22319,22314,22318,16714,22315,1258,14783,22308,180,22307,22313,3631,907,501,22303,8559,213,22320],"class_list":["post-76253","post","type-post","status-publish","format-standard","has-post-thumbnail","category-japan","tag-alberta","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-japan","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-newfoundland-and-labrador","tag-nihon","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts\/76253","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/comments?post=76253"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts\/76253\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/media\/76254"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/media?parent=76253"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/categories?post=76253"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/tags?post=76253"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}