A global bond sell-off intensified on Thursday, pushing US 10-year government borrowing costs to a 24-year high and briefly driving UK 30-year gilt yields above 6% for the first time since 1998, according to the Guardian.
Key facts
- US 10-year government borrowing costs reached their highest level in 24 years.
- UK 30-year gilt yields briefly rose above 6% for the first time since 1998, a 28-year high for long-term borrowing costs.
- Fears that the US deficit is reaching unsustainable levels helped drive the sell-off.
- The persistently high cost of oil raised concerns about renewed inflation.
- Investors expect central banks to raise interest rates in the coming months.
The turmoil in global bond markets intensified on Thursday, with government borrowing costs climbing to multi-decade highs on both sides of the Atlantic, according to the Guardian.
In the United States, 10-year government borrowing costs rose to their highest level in 24 years during what the Guardian described as a frantic day’s trading. The move was driven in part by fears that the US deficit is reaching unsustainable levels.
In the United Kingdom, long-term borrowing costs climbed to a 28-year high. The 30-year gilt yield briefly rose above 6% for the first time since 1998, the Guardian reported.
The sell-off was fuelled by the threat of a renewed round of inflation stemming from the persistently high cost of oil, which has spooked investors on both sides of the Atlantic.
With price pressures building, investors believe central banks will be forced to raise interest rates in the coming months to prevent price increases from becoming embedded, according to the Guardian.
The combination of mounting concern over US government debt and rising oil prices has put bond markets under sustained pressure, lifting yields to levels not seen in decades.
Why it matters
Rising government borrowing costs make it more expensive for governments to fund their spending and can feed through to mortgages, loans and business borrowing. Yields at multi-decade highs signal deep investor anxiety about debt levels and inflation, which could prompt central banks to raise interest rates further.
Frequently asked questions
How high did US borrowing costs go?
US 10-year government borrowing costs rose to their highest level in 24 years during Thursday's trading, according to the Guardian.
What happened to UK gilt yields?
UK long-term borrowing costs hit a 28-year high, with the 30-year gilt yield briefly rising above 6% for the first time since 1998.
What is driving the bond sell-off?
The Guardian reports the sell-off was driven by fears that the US deficit is unsustainable and by the threat of renewed inflation from the persistently high cost of oil, with investors expecting central banks to raise rates.