Borrowing costs for governments around the world are climbing at their fastest pace in years. The sell-off in bonds picked up speed this week as investors worried that inflation will stay stubbornly high. Yields on US government debt, which rise when bond prices fall, moved close to levels not seen since early 2025.
Oil pushes inflation fears higher
Oil prices are a large part of the story. US crude jumped more than 5 percent to settle above $90 a barrel after fresh American strikes on Iranian targets and Iranian threats against Gulf oil exports revived worries about supply disruptions. Brent crude rose to nearly $95. Higher energy costs feed directly into inflation, which makes investors demand higher returns on long-term bonds to protect their money. The 10-year Treasury yield reached about 4.8 percent, its highest since January 2025, and some analysts say a climb toward 5 percent is now possible. "The selloff can overshoot," said Charu Chanana, chief investment strategist at Saxo, pointing to inflation, fiscal risks and the large amount of new debt coming to market.
A global bond rout
The selling is not limited to the United States. Japan's 10-year government bond yield rose above 3 percent, a level not seen in three decades. Australia's 10-year yield hit about 5.2 percent, its highest in more than 15 years. German bond futures fell to their lowest since 2011, and French bond futures hit a record low. The worldwide move reflects a shared worry: central banks may have to keep interest rates higher for longer while governments borrow heavily at the same time.
Pressure on mortgages and stocks
Higher yields ripple through the wider economy. Mortgage rates tend to follow the 10-year Treasury, so home borrowing becomes more expensive. Stocks also feel the pain because higher yields make future profits worth less today. Wall Street fell on Tuesday, with growth shares hit hardest, and energy was the only major sector to finish higher. The 10-year yield had been as low as about 4.2 percent earlier this year, while the two-year yield has climbed from roughly 3.5 percent at the start of 2026 to 4.35 percent. Investors now watch oil prices and the next inflation reports for clues about where yields go next.