Tumbling global government bonds put yields on brink of 4%

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Photo by Getty Images/iStockphotoA worsening bond selloff is pushing the average yield on global government debt to within a whisker of four per cent, a level not seen since 2007.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountYields on Bloomberg’s Global Aggregate Treasuries index rose eight basis points to 3.99 per cent on Wednesday. Treasuries have been a major driver of the losses, as strong economic data, stubborn inflation and mounting fiscal concerns reinforce expectations that interest rates will stay higher for longer.The selloff threatens to raise borrowing costs for governments, businesses and households while making stocks less attractive as higher yields chip away at the value of future corporate earnings. A five-year U.S. debt auction this week ranked as the second-worst by one measure in data recorded since 2018, showing the pressure on Washington as it faces the rising cost of servicing around US$40 trillion of debt.Canada's best source for investing news, analysis and insight.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Investor will soon be in your inbox.We encountered an issue signing you up. Please try again“Inflation is still high and sticky in a lot of places, labour markets are tight for various reason, 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.”Global government bonds have lost around 2.4 per cent this year, compared with a 6.8 per cent gain last year, according to the Bloomberg index. The gauge posted its biggest one-day loss since May on Wednesday.The pressure spread to Asia on Thursday. 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 four per cent.Japan’s 10-year yield hit its highest since 1996 as the market reopened after a three-day break and caught up with the global selloff.“There is still a lack of demand even from the locals — from pension funds to the banks to the lifers — in terms of supporting the JGB market,” Carol Lye, portfolio manager at Brandywine Global Investment Management, said in a Bloomberg TV interview.Strategists at JPMorgan Chase & Co. and KKR & Co. see scope for U.S. yields to climb further as energy-driven inflation, heavy government borrowing and the risk of additional central-bank tightening continue to percolate.U.S. five-year yields topped five per cent on Wednesday for the first time since 2007, while those on 10-year 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 United States Federal Reserve tightening.Swaps now fully reflect three quarter-point hikes over the next year, with significant hedging for a fourth. A $70 billion five-year Treasury auction on Wednesday drew the highest yield since 2006.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Damien Loh, chief investment officer at Ericsenz Capital, said while short-dated bonds look cheap, he would avoid trading against the market’s momentum and price action. For investors looking to fade the selloff, he favors yield-curve steepeners such as 2s10s or 5s30s as a better risk-reward trade.Rising volatility is adding to the gloom, making investors more hesitant to step in even as higher yields make bonds more attractive. The ICE BofA MOVE Index, which measures US bond market swings, climbed Wednesday to the highest level since March.“Most fixed income will like higher yields, but want them to be stable there — afraid of catching a falling knife,” said Hans Mikkelsen, strategist at TD Securities.With assistance from Matthew Burgess and Paul AllenNotice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.