Global bond markets head for worst month in years as yields surge

The world’s largest sovereign bond markets are heading for their worst month in years as soaring energy costs fan inflation and AI-related growth lifts the outlook for rates, Reuters reported from London on 29 September.

Sharpest September move in years

Two-year US Treasury yields have surged almost 60 basis points in September and are poised for the biggest monthly jump since early 2023. Two-year borrowing costs in France, Germany, Britain and Australia are also set for their largest monthly rises since March, when the Iran war sparked a fresh energy shock. Japanese government bond yields remain near multi-decade highs.

Ten-year US Treasury yields, which have pushed above 5% for the first time since 2007, are on track for their biggest monthly increase since 2022 — a rise of around 50 basis points — Reuters said. The ICE BofA MOVE index of bond-market volatility has jumped almost 30% in September, its largest increase since March.

Higher for longer

Societe Generale’s Kenneth Broux said markets are adjusting to the view that the energy and inflation story will not fade quickly. Hyperscaler tech firms have more than doubled bond sales this year to over $200 billion, according to LSEG data cited by Reuters, adding supply competition for government debt. October will bring US jobs and inflation data, French budget talks and a UK budget that could keep fiscal risk in focus; France’s 10-year yield gap over Germany has widened to the widest since 2012.