Global bond yields hit 2008 highs, raising stakes for big borrowers | ReutersSkip to main contentExclusive news, data and analytics for financial market professionalsLearn more aboutRefinitivWorldBrowse WorldAfricaAmericasAsia PacificChinaEuropeIndiaIran WarIsrael and Hamas at WarJapanMiddle EastReuters/Ipsos PollsUkraine and Russia at WarUnited KingdomUnited StatesU.S. Midterm ElectionsReuters NEXTBusinessBrowse BusinessAerospace & DefenseAutos & TransportationDavosEnergyEnvironmentFinanceHealthcare & PharmaceuticalsMedia & TelecomRetail & ConsumerFuture of HealthFuture of MoneyTake FiveWorld at WorkMarketsBrowse MarketsOn the MoneyAsian MarketsCarbon MarketsCommoditiesCurrenciesDealsEmerging MarketsETFsEuropean MarketsFundsEcon WorldGlobal Market DataRates & BondsStocksU.S. MarketsWealthSustainabilityBrowse SustainabilityBoards, Policy & RegulationClimate & EnergyLand Use & BiodiversitySociety & EquitySustainable Finance & ReportingThe SwitchReuters ImpactCOP31MoreLegalGovernmentLegal IndustryLitigationTransactionalUS Supreme CourtCommentaryBreakingviewsROI: Reuters Open InterestTechnologyArtificial IntelligenceCybersecuritySpaceDisruptedInvestigationsSportsWorld CupAthleticsBaseballBasketballCricketCyclingFormula 1GolfNFLNHLSoccerTennisScienceLifestyleCulture CurrentCity MemoGraphicsChart of the WeekPicturesWider ImagePodcastsReuters World NewsReuters Morning BidReuters Econ WorldOn AssignmentViewsroomThe Big ViewLiveFact CheckVideoMedia CenterAnnouncementsAwardsInside the NewsroomPeople NewsSponsored ContentReuters PlusPress ReleasesSubscribeGlobal bond yields hit 2008 highs, raising stakes for big borrowersBy Tom Westbrook and Amanda CooperSeptember 15, 20267:40 AM UTCUpdated agoTextSmall TextMedium TextLarge TextXFacebookLinkedinEmailLinkSummaryCompanies10-year Treasury yield hits 5.041%, highest since 2007 earlier on TuesdayMoney markets expect Fed to raise rates to 3.75% to 4% on WednesdayAverage G7 10-year yield reaches highest since mid-2008SINGAPORE/LONDON, Sept 15 (Reuters) - Government borrowing costs hit their highest since the 2008 financial crisis on Tuesday, with 10-year U.S. Treasury yields now above 5%, increasing pressure on heavily ​indebted borrowers that so far have been shielded by resilient economic growth.The average 10-year yield for the Group of Seven largest economies hit 4.285%, the highest since ‌mid-2008 and a full percentage point above where it was prior to the start of the war in the Middle East. Sign up here.The widening conflict has sent oil back above $100 a barrel, which has heaped pressure on central banks to raise interest rates to tackle inflation - a major reason why bond yields are up. The Federal Reserve is expected to raise rates for the first time since 2023 on Wednesday, according to money markets, while the Bank ​of Japan is expected to hike on Friday, and the European Central Bank raised last week, and could deliver a string of rate increases over the coming months.The bond ​selloff has raised the cost for governments to borrow new money, but also left them with higher interest bills that siphon funds from social, ⁠defence and other programmes, which in turn raises questions as to the sustainability of their debt burdens."Yields at 5% aren't a problem if you're growing 6.5%. But if you're growing 5% ​with yields at 5%, that might be a different story," Samy Chaar, who is chief economist at Lombard Odier, said.The move in the 10-year Treasury yield above 5% is a headache for sovereign and corporate ​borrowers everywhere, given that it is a benchmark for virtually every other asset in financial markets.And while the U.S. economy may be growing quickly enough to sustain 10-year borrowing rates above 5%, other countries are less well equipped to do so.LACK OF VISIBILITYThe other problem that investors are dealing with is new Federal Reserve Chair Kevin Warsh's dislike of forward guidance, meaning uncertainty - and therefore, volatility - is picking up and investors are less willing ​to offer policymakers the benefit of the doubt.“All central banks are now following this new era of no forward guidance, just building up credibility and trust. And as you can see now ​in the bond markets, that currently isn't working," Shriya Samarth, head of EMEA rates at market maker StoneX, said."You've got AI capex throwing a spanner in the works. You've got fiscal anxiety. US debt is now ‌at $40 trillion. ⁠Historic high debt to GDP ratios in the UK and the euro zone, that's adding to complications," she said.Item 1 of 2 U.S. dollar and Euro banknotes are seen in this illustration taken March 24, 2026. REUTERS/Dado Ruvic[1/2]U.S. dollar and Euro banknotes are seen in this illustration taken March 24, 2026. REUTERS/Dado Ruvic Purchase Licensing Rights, opens new tabThe 10-year Treasury yield hit a high of 5.041%, the most since 2007, earlier on Tuesday and traders were waiting to hear from U.S. Treasury Secretary Scott Bessent when he appears before Congress.Global equities have surged this year, led by shares in the builders, suppliers and customers of the boom in artificial intelligence that has seen an explosion in capital expenditure and borrowing, but also in earnings growth.Rising bond yields may not offset these positive catalysts for stocks, but they nonetheless ​pose a risk, Khoon Goh, ANZ's head of ​Asia research in Singapore, said."If yields keep ⁠rising, then there's bound to be further spillover effects," he said.Bessent's Treasury Department has intervened in the markets in various ways in the past few weeks to contain the rise in longer-dated yields, from joint intervention to buy the yen to deter the Japanese government from selling U.S. bonds to ​do so, as well as upping the volume of paper the government will repurchase, but to little avail.Part of this week's bond selloff, ANZ's ​Goh said, was also ⁠attributable to a shift in expectations for short-term U.S. interest rates.Japan's 10-year bond yield hit a three-decade high above 3%.In Germany, the 10-year benchmark yield sat near its highest since 2009 at 3.55%, while French 10-year yields were hovering near an 18-year high and UK 10-year yields , at 5.45%, are at their highest since 2007.James Bilson, global fixed income strategist at Schroders, said fiscal policy and debt sustainability are crucial ⁠for bond markets ​and the current rise in U.S. yields is not yet a sign of increasing sovereign credit risk.The cost of ​insuring U.S. sovereign debt against the risk of default, as reflected by credit default swaps, has fallen to its lowest since February, for example."Combined policy is too loose to deliver sustained 2% inflation," he said. "This, in one line, is the ​root cause of the current weakness in bonds. Solve inflation, and many other problems become much easier too."Additional reporting by Harry Robertson in London; Editing by Thomas Derpinghaus, Elisa Martinuzzi and Ros RussellOur Standards: The Thomson Reuters Trust Principles., opens new tabSuggested Topics:Rates & BondsXFacebookLinkedinEmailLinkPurchase Licensing RightsTom WestbrookThomson ReutersTom reports from Singapore on financial markets in Asia, filing daily market reports and deeper pieces on stock, bond and foreign exchange trade. He contributes to the Morning Bid newsletter. He was previously a company and general news correspondent in Sydney and a reporter for News Ltd.
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Global government borrowing costs reached levels comparable to the 2008 financial crisis, as evidenced by the rise in global bond yields. Specifically, 10-year U.S. Treasury yields climbed to 5.041%, marking their highest level since 2007, and the average 10-year yield across the Group of Seven largest economies reached 4.285%, the highest since mid-2008. This increase in yields exerts significant upward pressure on heavily indebted governments and corporations, raising concerns about the sustainability of their debt burdens.

This yield inflation is compounded by geopolitical tensions, which have pushed oil prices above $100 a barrel, forcing central banks to consider raising interest rates as a means to combat inflation. Monetary policy responses are anticipated across major economies, with expectations for the Federal Reserve to raise rates and other central banks, such as the Bank of Japan and the European Central Bank, to increase rate hikes. The market reaction to these shifts involves a selloff in bonds, increasing the cost for governments to finance new borrowing.

While rising yields present a challenge for sovereign and corporate borrowers, some analysts suggest that the issue is context-dependent; for instance, high yields may not pose a crisis if underlying economic growth remains robust. However, the environment is complicated by several structural factors. The decline in bond market strength is partly attributable to changes in expectations for short-term U.S. interest rates and deeper uncertainties stemming from shifts in central bank communication, such as the discontinuation of forward guidance, which introduces greater volatility for investors.

Further complicating the macroeconomic landscape are factors like the massive capital expenditure associated with artificial intelligence, pervasive fiscal anxiety, and historically high debt-to-GDP ratios in regions like the United Kingdom and the Eurozone. Furthermore, while equity markets have surged, largely driven by the recent investment boom in AI, rising bond yields introduce a countervailing risk, potentially creating spillover effects that could temper stock performance. Although the U.S. Treasury Department has attempted market interventions to contain rising longer-dated yields, these efforts have been limited.

Experts suggest that the fundamental driver of bond market weakness is inflation, implying that addressing inflationary pressures is crucial for resolving the broader set of economic problems. The current situation underscores that the sustainability of fixed-income markets is intricately linked to fiscal policy and debt management, necessitating a focus on resolving underlying inflation issues to alleviate sovereign credit risks.