Government-bond yields are rising rapidly around the world, causing concern for governments and other borrowers. In the US, ten-year Treasury bonds now have yields over 5%, while German bunds offer 2.6% – a significant increase from December’s levels. The situation is particularly dire in Britain, where gilt yields reached almost 5% in recent days, their highest since 2008.
This surge in yields is bad news for governments, which must pay more to service debts. It also affects other borrowers, including mortgage-holders whose bills ultimately depend on government borrowing costs. The rising costs are a result of increased interest rates and decreasing investor appetite for bonds.
The consequences of this trend will be far-reaching, with potential implications for the global economy and financial markets. As investors seek higher returns, they are driving up yields, which in turn makes it more expensive for governments to borrow money. This can lead to a range of negative outcomes, including higher inflation, reduced economic growth, and increased risk of debt crises.
Source: https://www.economist.com/finance-and-economics/2025/01/12/why-global-bond-markets-are-convulsing