Why are world bond markets selling off again?

• US 10-year Treasury yields rose nearly 90 basis points in Q3, the biggest quarterly jump this century, while mortgage rates pierced 7% and the US debt pile exceeded $40 trillion
• AI companies are contributing to supply pressure, with five major hyperscalers (Alphabet, Amazon, Meta, Microsoft, Oracle) issuing $220 billion in debt this year, more than double last year's total
• Major economies now spend more on interest expense than global investments in AI, defence, or clean energy combined, with Britain's interest bill doubling to 4% of output versus pre-pandemic levels

Global Bond Market Selloff: Rising Yields Spark Economic Concerns

Key Developments

Global government bond yields have surged to multi-decade highs, raising concerns about inflation, debt sustainability, and economic growth. The 10-year US Treasury yield hit 5.34% on Thursday—its highest level since 2002—posting the largest quarterly increase of the century with a 90 basis point jump in Q3. French 10-year yields also reached 2002 levels, while British 30-year and Japanese bonds hit multi-decade peaks.

Primary Drivers

The selloff stems from multiple factors:

• Oil price spikes due to US-Iran tensions, stoking inflation fears
• Rising government debt burdens: US debt has exceeded $40 trillion
• AI-related corporate borrowing: Five tech giants (Alphabet, Amazon, Meta, Microsoft, Oracle) have issued $220 billion in debt this year—double last year's total—to fund data centers and AI infrastructure

Market Implications

Higher yields increase borrowing costs across the economy, from mortgages to government debt. The US mortgage rate surpassed 7% last month for the first time since early in President Trump's term. Britain's interest expense now consumes nearly 4% of GDP—double its pre-pandemic average. Major economies now spend more on interest payments than global investments in AI, defense, or clean energy combined.

Policy Response

US Treasury Secretary Scott Bessent downplays debt concerns, citing economic strength. The Treasury has announced buyback programs to stabilize yields, though long-dated bonds continue rising. Central banks retain emergency purchase powers, but investors warn lasting relief requires either lower debt burdens or stronger economic growth. Traditional Treasury buybacks and potential central bank interventions have yet to calm longer-dated debt markets.