Why bond markets are unnerving rich-world politicians

Bond markets are currently causing concern among wealthy nations' political leaders. The Treasury announced on August 19th that it would start purchasing longer-term debt from next month, due to growing unease about interest rates, according to Deutsche Bank analysts. This unease was justified as the yield on 10-year Treasuries hit its highest level since January 2025 on August 18th. Moreover, 30-year yields briefly surpassed 5.3%, the highest since 2007.

Yields are not only rising in the United States but also in other developed countries like Britain, France, and Germany. Yields on their long-term bonds have reached levels not seen in over a decade. Even Japan, which traditionally had the lowest yields among major economies, now has 30-year yields nearing an all-time high.

The recent sharp rise in yields is primarily due to worries about government debt and deficits. The United States recently reached a historic milestone: its federal debt surpassed $40 trillion, equaling 130% of last year's GDP. The country's deficit is approximately 6% of GDP. These concerns are evident in the differences between countries' bond yields.

For instance, the spread between French and German 10-year yields has reached its widest level since 2012, indicating that investors believe politicians lack the determination to reduce spending or increase taxes.