UK Government Bond 10Y

A global bond selloff that pushed yields to two-decade highs has made government debt the main concern on Wall Street, overshadowing the AI boom. Yields surged in the U.S., U.K., France, Germany, and Japan as investors lost patience with persistent deficits and heavy government borrowing. The Treasury Department announced increased buybacks of long-dated bonds, but yields resumed their climb as investors doubted the move would stem the tide. Economists including RSM's Joseph Brusuelas and Capital Economics analysts said markets are now demanding higher term premiums for fiscal, geopolitical, and policy uncertainty, and warned that continued populist spending and tax cuts could eventually trigger banking or currency crises.

Bond markets around the world are facing one of the largest selloffs of long-term government bonds in history, pushing yields sharply higher and driving long-term borrowing costs for governments and the private sector to their highest levels in a decade. In the United States, the yield on the 30-year Treasury bond climbed to 5.32 percent, its highest level since mid-2007, while French government borrowing costs surged to 4.87 percent, the highest since 2008. German and UK government bonds also hit multi-year highs, and Japan saw yields rise close to 4.07 percent. The main factors driving this crisis include geopolitical risks that are pushing energy prices higher, persistent inflation that is forcing central banks to keep interest rates elevated for longer, and concerns about fiscal discipline among governments that are issuing large amounts of debt. At the same time, the structure of global bond holders is changing, as pension funds and the public sector reduce their holdings of long-term bonds and shift more into equity markets. This leaves the market more reliant on price-sensitive private investors, raising the risk premium for holding long-term bonds, and the higher interest burden will be passed on to businesses and households through more expensive borrowing costs.

Global bond yields have reached levels last seen in July 2008, before Bitcoin existed, and the cryptocurrency is not benefiting. A Bloomberg gauge of long-dated government debt hit its highest yield since July 2008 in May, while Bitcoin has fallen 46% over the past year compared with gold's 32% rise. UK 10-year gilts pay 5.05%, Germany sits at 3.21%, and Japan pays 2.88% after decades near zero. The US 10-year real yield reached 2.41% on August 14, meaning investors can now beat inflation with government debt and take almost no risk, while Bitcoin pays nothing. Barclays strategist Patrick Coffey attributed the move to fiscal realities, persistent inflation risks, and political uncertainty.