Global bond rout deepens as Japan yield hits key threshold

Global bond rout deepens as Japan yield hits key threshold REUTERS PUBLISHED 2 HOURS AGO COMMENTS SHARE SAVE FOR LATER Listen to this article Learn more about audio Log in or create a free account to listen to this article. Japan’s benchmark 10-year bond yield struck the key 3-per-cent barrier for the first time since 1996 on Tuesday, amid a deepening global debt selloff as traders fret about oil-driven inflation, monetary tightening and worsening fiscal conditions. With the ⁠Middle East ​crisis stoking price pressures globally, yields have been spiking from Tokyo and Sydney to New York and London as investors anticipate the need for central banks to raise interest rates. The bond market is also under pressure from a deluge of issuance as hyperscalers aggressively raise money to fund the AI boom, in an environment where the U.S. debt load ​has passed $40 trillion and Japan’s ministries are likely to request a record amount ‌in an initial budget for next fiscal year. Yields rise when bond prices fall. The sharp rise in yields creates a conundrum for policymakers with markets now extremely sensitive about perceptions of fiscal profligacy. For Japan in particular, it increases the cost of servicing the developed world’s biggest debt pile at a time when Prime Minister Sanae Takaichi is planning aggressive investment. “Investors are increasingly demanding greater compensation to own duration ‌as sovereign issuance ​and corporate funding needs compete for the ‌same pool of capital,” said Masahiko Loo, senior fixed income strategist at State Street Investment Management in Tokyo. “Bond investors are ​less worried about growth and increasingly focused on inflation and supply.” The 10-year ⁠Japanese government bond yield reached 3 per cent for the first time since September 1996, while the five-year rate hit ⁠a record high 2.26 per cent and the two-year yield notched a 31-year peak at 1.795 per cent. U.S. 10-year Treasury yields also pushed to the highest since January of ​last year at 4.786 per cent in Tokyo trading hours. Australian 10-year yields notched their sharpest rise in five months, with traders attributing part of that to the market’s sensitivity to Japanese demand amid speculation higher local yields mean fewer Japanese buyers of Australian debt. European yields also climbed in early trading on Tuesday, with Germany’s 10-year yield, the benchmark for the euro zone at 3.34 per cent its highest since 2011. Seen as a psychologically…