Government borrowing costs in several advanced economies rose on Monday to their highest levels since the 2008 financial crisis, or earlier, as investors grew concerned that the Middle East crisis would keep inflation persistently high and prompt further interest-rate increases by central banks.
Government bond yields reach multi-decade highs as inflation fears mount
Government borrowing costs in several advanced economies rose on Monday to their highest levels since the 2008 financial crisis, or earlier, as investors grew concerned that the Middle East crisis would keep inflation persistently high and prompt further interest-rate increases by central banks.
The yield on 30-year French bonds rose one basis point to 4.8558%, its highest level since September 2008, according to LSEG data. France's 10-year bond yield climbed one basis point to 4.0516%, its highest since June 2009. The equivalent German 10-year bond yield rose 1.5 basis points to 3.2138%, its highest level since 2011.
The US 30-year Treasury yield rose to 5.29%, its highest level since 2007 — the year of the credit crunch that preceded the 2008 financial crisis. UK and Italian government bond prices also fell, as bond prices move inversely to yields.
Japan's 10-year government bond yield rose to 2.93%, its highest level since September 1996, before pulling back slightly after Japan's GDP report for the April-June period showed growth weaker than expected. Investors had anticipated the Bank of Japan would raise interest rates as soon as September in an effort to support the yen's value.
Money markets indicated an approximately 85% probability that the European Central Bank would raise interest rates in September. The ongoing Middle East crisis pushed oil prices up 6% last week, with Brent crude rising further on Monday as the US and Iran struggled to end the conflict. Donald Trump again threatened to bomb Oman if it 'gets in the way' of his effort to end the war, according to the source.
- The source does not state the exact date of the GDP report or the specific growth figures recorded for the April-June period.
- The source does not identify which central banks beyond the ECB and the Bank of Japan are expected to tighten monetary policy, nor give their projected timelines.
- The source does not state the specific level of UK or Italian bond yields or the scale of their price moves.
- The source does not state the current level of Brent crude or the exact price level it reached on Monday.
- The source does not state the current inflation rates in the affected economies.
- The source does not provide responses from any of the central banks mentioned — the ECB, Bank of Japan, or the US Federal Reserve — regarding the rise in yields or their monetary policy intentions.
Read the original at The Guardian US