A global bond sell-off intensified on Monday as U.S. Treasury yields surged to their highest levels since 2025, with the 2-year note touching 4.354%. The 10-year yield advanced to 4.780%, while the 30-year climbed to 5.273%, reflecting mounting investor concern over persistent inflation and geopolitical risks.
In Europe, German government bond yields also climbed, with the 2-year Schatz yield rising to 2.936%—its highest since July 2024—marking a fifth consecutive session of gains. The 10-year Bund yield jumped to 3.352%, the highest since 2011, while the 30-year yield reached 3.841%, also a 2011 high. France’s 10-year OAT yield escalated to 4.15%, the highest since November 2008.
Yields in Japan surged as well, with the 10-year Government Bond (JGB) yield spiking to 3.000%, a level not seen since late 1996. The two-year JGB yield hit a record 1.800%, underscoring the Bank of Japan’s tightening grip on monetary policy amid rising inflation pressures.
The bond rout followed a weekend of escalating Middle East tensions, including direct U.S.-Iranian military strikes in the Persian Gulf. Missile exchanges targeted sites on Larak Island, while retaliatory strikes hit U.S. bases in Jordan. Crude oil prices breached $90 per barrel, adding to inflation concerns and reinforcing expectations of tighter monetary policy.
Money markets now assign a 60% probability to a 25-basis-point Federal Reserve rate hike at the September 16 meeting, up from earlier estimates. The European Central Bank is widely expected to raise rates at its September 10 policy meeting, while the Bank of Japan faces growing pressure to tighten policy further.
Federal Reserve Chair Kevin Warsh, speaking at the Jackson Hole symposium, reiterated that central bankers "have work to do" to curb inflation. Upcoming economic data, including the Euro zone’s August CPI report and the U.S. July JOLTS job openings report, will be closely watched for signs of persistent price pressures ahead of Friday’s nonfarm payrolls release.
The broad-based rise in yields reflects a shift in investor sentiment, with markets pricing in a more hawkish global monetary policy stance amid stubborn inflation and geopolitical uncertainty.
