US borrowing costs hit 24-year high as global bond sell-off deepens

Global bond markets came under intense pressure on Thursday as a sell-off that has been building for weeks intensified, driving US government borrowing costs to a 24-year high.

Yields on 10-year US Treasury bonds rose to their highest level in 24 years during a volatile trading session, reflecting growing investor concern about the sustainability of the US fiscal deficit. Rising yields typically signal that investors are demanding higher returns to hold government debt, often because of concerns about inflation, government borrowing levels, or future interest rate policy.

The sell-off was not confined to the United States. In the United Kingdom, yields on 30-year government bonds briefly climbed above 6% for the first time since 1998, underscoring the global nature of the pressure on sovereign debt markets.

Inflation concerns weigh on sentiment

Investors on both sides of the Atlantic have grown increasingly concerned about a renewed round of inflation, driven in part by persistently high oil costs. That concern has fuelled expectations that central banks will need to raise interest rates in the coming months to prevent price increases from becoming entrenched in the broader economy.

Higher interest rate expectations tend to push bond yields higher, since newly issued debt must offer more attractive returns to compete with rising rates elsewhere in the financial system. The combination of fiscal and inflation concerns has created what traders described as a frantic day of trading, with sharp moves across major bond markets.

The scale and speed of the sell-off has drawn comparisons to previous periods of bond market stress, though the specific triggers, persistent oil-driven inflation fears paired with deficit concerns, mark this episode as distinct. Markets are expected to continue watching central bank commentary closely in the coming weeks for signals on the pace of any rate increases.