Global bond markets slid again Wednesday, pushing borrowing costs to levels not seen in decades as the Middle East conflict fuels higher energy prices and deepens fears over inflation and ballooning government debt.
Sovereign bond yields are a reference point for asset prices across financial markets, and the higher price of money means elevated mortgage rates for consumers and tough choices for government spending as funding costs climb.
The yield on 10-year U.S. Treasuries – which sets the tone for borrowing costs across the world economy – hit a three-year high. It is nearing the 5% level that could unsettle already jittery stock markets.
Japan's 10-year yield was perched above 3% for the first time in 30 years, while rising gas prices meant German 10-year Bund yields were stuck at their highest since 2011 and Britain's equivalent was at its highest since 2008. Yields rise as prices fall and vice versa.
A confluence of factors was at play, said State Street's head of macro strategy, Michael Metcalfe, with rising energy prices causing traders to bet on rate hikes, pushing up short-dated yields.
