Global bond markets warn governments over fiscal and inflation risks

The world’s bond markets are doing what bond markets do best: punishing governments that borrow too much, too fast, with too little regard for what comes next. Long-dated sovereign yields across the US, UK, and Japan have climbed to their highest levels since the global financial crisis, a collective repricing that amounts to a flashing warning sign about fiscal sustainability and inflation that refuses to fully cooperate. US 30-year Treasury yields have hit 5.20%, a level not touched since July 2007. That’s a climb of nearly 60 basis points driven in part by Iran-related geopolitical tensions that have pushed energy prices higher. Across the Atlantic, UK long-dated gilts have reached yields not seen since 1998. Japan, long the outlier with its ultra-low rate environment, is facing its own version of the same reckoning. The rally that wasn’t Coming into 2026, the consensus trade was relatively straightforward. Central banks were expected to ease, bonds were expected to rally, and investors positioned accordingly. For a brief window, the thesis looked correct. Then it fell apart. The global long-duration bond index has posted a 4.6% loss for 2026 year-to-date, a painful reversal fro...