US 30-year yield tops 5.3% as global bonds hit multi-decade highs

Global government bond yields climbed to multi-decade highs Tuesday as the U.S.-Iran naval blockade stalemate pushed oil above $90 a barrel, deepening inflation and fiscal concerns across major economies.

"It is hard to know what yield level would improve the outlook for long-duration fixed income returns," said Chris Iggo, chief investment officer at AXA IM Core at BNP Paribas Asset Management. "Only a sudden weakening in economic data or an external shock might change the situation."

The 30-year U.S. Treasury yield touched 5.32%, the highest since 2007, after climbing almost 40 basis points since the end of June. Germany's 10-year Bund yield reached 3.21%, the highest since May 2011, while France's 10-year borrowing cost hit 4.05%, its loftiest since June 2009. Japan's benchmark 10-year yield traded just below 3%, a three-decade high, and UK gilts approached 6%.

The repricing raises financing costs for governments, companies and households at a time when the U.S. national debt nears $40 trillion and the Treasury's July deficit hit a record $432 billion. Money markets now price a more than 90 percent chance the European Central Bank raises its deposit rate from 2.25 percent in September.

The selloff reflects structural forces beyond the Middle East conflict. Investors fear a more divided world order will make economies prone to supply shocks and persistent inflation, while bondholders worry governments will fail to curb spending, keeping interest rates elevated for longer. Changes in market structure and demographics are also reducing demand from traditional steady buyers.

The last time U.S. 30-year yields traded near current levels was in 2007, before the global financial crisis triggered a decade of ultra-loose policy. The reversal since then has been stark: finance ministers are shifting debt issuance toward shorter tenors with lower yields, but their room for maneuver is limited as locking in financing costs for decades at rock-bottom rates is no longer possible.

Fiscal Pressures Mount as Debt Nears $40 Trillion

The U.S. Treasury sold $25 billion of 30-year bonds Thursday at a 5.216% yield, the highest since 2001, following a $42 billion 10-year note auction that cleared at 4.683%, the steepest borrowing cost for that maturity since 2007. The July budget deficit surged $141 billion year-over-year to $432 billion, the largest July total on record, pushing the trailing 12-month deficit to $2 trillion.

Foreign demand is weakening at a sensitive time. U.S. Treasury Department data showed foreign holdings of U.S. government bonds declined in June, with Japan, Britain and China among the countries reducing their positions. Rising domestic yields could make Japanese government debt increasingly attractive to local investors — Japan is the largest foreign holder of U.S. Treasuries — potentially reducing demand for overseas assets.

AI Boom Adds to Competition for Capital

AI-focused hyperscalers have significantly increased bond issuance this year to finance their investment programs, creating additional competition for investor capital in fixed-income markets. French bonds remain under pressure, with the 10-year yield up 1.5 basis points to 4.05 percent, as investors fear the country's fiscal trajectory is unlikely to improve ahead of a presidential election scheduled for spring 2027. The yield gap between 10-year French OATs and German Bunds stood at 84 basis points, not far from its highest level since October 2025.

If elevated yields persist, the impact extends beyond sovereign markets. Higher government borrowing costs feed through to corporate loans, mortgages and other forms of credit, threatening to slow economic growth across the global economy.

This article is for informational purposes only and does not constitute investment advice.