Bond markets around the world are undergoing a selloff as investors grow increasingly nervous about rising levels of government debt and worried about America’s tariff regime.
Yields on 30-year British debt closed at 5.69% on Sept. 2, their highest level since 2006. Thirty-year German and Dutch yields settled at 3.40% and 3.57%, their highest levels since 2011.
At 4.49%, yields on French 30-year debt are at the most elevated level since 2009, while the Japanese 30-year yield eased to 3.206% after hitting its highest level since 2006.
However, the most dramatic moves are occurring in the U.S., which is the biggest government-bond market in the world.
The yield on the 30-year U.S. Treasury briefly traded right around 5% on Sept. 2, a level it has rarely surpassed since 2006.
Yields and prices move in inverse directions from each other. Essentially, yields rise when prices of bonds fall due to selling by investors.
Currently, investors around the world are evaluating a surge in spending in Germany and tax cuts for the rich in the U.S., both of which are fueling concerns about government debt levels.
The bond market is also having a negative reaction to political upheaval in France, the United Kingdom, and Japan.
A no-confidence vote on the French government’s plan for tackling the country’s debt is scheduled for Sept. 8 of this year.
Consequently, pension funds and central banks around the world have scaled back their purchases of bonds.
The U.S. Federal Reserve, the world’s largest central bank, currently holds $3.6 trillion U.S. of long-term American Treasuries versus $4.9 trillion U.S. in 2022.
Worries are particularly acute in the U.S., where the federal government’s budget deficit this fiscal year is expected to reach $1.7 trillion U.S.
Concerns about rising government debt have been exacerbated after an appeals court ruled that U.S. President Donald Trump’s tariffs, a growing source of government revenue, are illegal.
Fears of the tariff revenue being reduced or refunded is impacting the bond market within the U.S. and worldwide, say analysts.
U.S. tariff revenue totaled $94.4 billion U.S. from April through July this year compared to $24 billion U.S. over the same period of 2024.
President Trump has asked the U.S. Supreme Court to render a verdict in the tariff case.
