Global long-term government bonds are facing a sell-off, with the yield on the 30-year U.S. Treasury rising to about 5.31%, the highest since 2007; the yield curve spread between 2-year and 30-year U.S. Treasuries has widened to 113 basis points.

The U.S. Treasury recently issued $42 billion in 10-year and $25 billion in 30-year bonds, with awarded yields of 4.683% and 5.216%; the latter is the highest financing cost for that maturity since 2001, reflecting investors' demand for higher term compensation.

The yield on France's 30-year government bonds has risen to nearly 4.9%, the highest since mid-2008; the UK's long-term bond yield is close to 6%, while Canada's 30-year yield has reached its highest level since 2010, and Germany's yield is at its highest since 2011.

The yield on Japan's 10-year government bonds has risen to about 2.93%, the highest since 1996; the 30-year yield is around 4.06%, close to the historical high set in May. Expectations of potential interest rate hikes by the Bank of Japan, yen pressure, and massive government debt are driving up long-term financing costs.

The rise in U.S. long-term Treasury yields occurs against a backdrop of relatively mild inflation data and market expectations that the Federal Reserve will remain on hold in the short term, indicating that the sell-off is driven not only by recent policy rate expectations but also reflects a repricing of long-end term premiums, supply, and fiscal risks.

Contributing factors include the nearly $2 trillion annual fiscal deficit in the U.S., a national debt close to $40 trillion, ongoing expansion of long-term government bonds, and increased corporate financing demand driven by the AI investment boom; traditional long-term bond buyer demand has weakened, further diminishing the absorption capacity for new supply.

In market mechanisms, when the government simultaneously increases long-term bond issuance, inflation remains persistently above central bank targets, and investors are concerned about fiscal sustainability, buyers will demand higher yields to compensate for term, inflation, and credit dilution risks. Rising yields mean falling bond prices and will elevate the discount rates for housing mortgages, corporate bonds, private credit, infrastructure financing, and stock valuations. Beneficiaries include holders of cash and short-term bonds that can lock in high coupons; those under pressure include highly leveraged governments, refinancing companies, long-duration growth stocks, and assets reliant on low-rate valuations.

Source: Public Information