Global bond markets have experienced sharp fluctuations this year amid growing concerns over central bank fiscal policies, government budgets, and the impact of tariffs alongside the US deficit linked to the “massive tax bill.”

Record High Yields

The yield on the 30-year US Treasury bond rose above 5% on Wednesday morning for the first time since July, while Japan’s 30-year bonds hit an all-time high, rising 100 basis points since the start of the year due to inflation and declining real interest rates.

In Europe, the UK 30-year bond yield reached its highest level since 1998, while France’s 30-year bonds surpassed levels unseen since 2008 amid declining investor confidence due to plans to reduce the structural deficit. German bonds also recorded their highest yield in 14 years following a global downturn.

Global Economic Risks

Calum Pickering, Chief Economist at Peel Hunt, told CNBC: “Rising interest rates constrain policy options and crowd out private investment, increasing the risks of financial instability.”

Jonas Goulterman, Deputy Chief Economist at Capital Economics, pointed to three main factors behind the rise in long-term bond yields:

Goulterman added that some European countries like the UK and France face “complex budgetary accounts” requiring a mix of tax increases and spending cuts to maintain fiscal stability and support markets.

Role of Central Banks and Inflation

Markets face additional pressure due to declining demand from traditional buyers of long-term bonds amid ongoing concerns about rising interest rates and inflation. Strategists at ING Bank confirmed that uncertainty over US tariffs is not the main cause of the recent bond sell-off, explaining that investors are focusing on financial pressures and global monetary policies.

They explained that “long ends of yield curves remain under upward pressure due to a mix of financial concerns and central bank independence,” especially after previous US administration attempts to influence the Federal Reserve.