Global wave of selling.. Extreme pressure on debt markets

Borrowing costs in major economies have reached their highest levels in years, as inflation and fiscal deficit concerns mount alongside a surge in artificial intelligence-linked corporate issuances, putting pressure on global government debt markets. The yield on Germany’s 30-year bonds rose 4 basis points to 3.78%, marking its highest level since the eurozone crisis in 2011. France’s 30-year bond yield climbed 3 basis points to 4.9%, its highest since 2008. Mohit Kumar, chief European economist at Jefferies, said long-term bond yields have largely tracked oil prices in recent days, adding that oil prices rising to $90 per barrel and above have brought inflation fears back to the forefront. In the UK, the 30-year government bond yield rose 4 basis points to 5.86%, nearing its highest level since 1998. In Japan, the 30-year bond yield increased 6 basis points to 4.14%, approaching its all-time high. Government borrowing costs have risen since the onset of the US-Iran conflict, with surging energy prices raising concerns about persistent global inflationary pressures. Brent crude closed above $90 per barrel for the first time in two weeks, reaching around $91.25, triggering a new wave of government bond selling. Kumar noted that concerns about government fiscal positions remain. Rising government debt levels have negatively impacted long-term borrowing costs in recent weeks, according to the Financial Times, as US debt approaches $40 trillion. Investors fear governments may need to increase spending to shield businesses and consumers from the economic fallout of higher energy prices. The wave of bond selling and rising oil prices coincided with a decline in equity markets, as futures for the S&P 500 and Nasdaq 100 indices fell by 0.5% and 1.2%, respectively.