Global bond selloff spreads as Japan's 10-year government bond yield rises to its highest since 1996.

BlockBeats news, September 24 — Japan's bond market reopened after a three-day holiday and immediately followed U.S. Treasuries in a selloff. The 10-year Japanese government bond yield rose 10 basis points on Thursday to 3.075%, hitting a new high since August 1996; the 5-year yield climbed about 9.5 basis points to 2.37%, while the 30-year yield rose to 4.134%.

UOB said the global bond selloff was mainly driven by the rebound in oil prices, stronger-than-expected U.S. PMI data, and weak demand for the $70 billion 5-year U.S. Treasury auction. The 5-year U.S. Treasury yield consequently broke above 5%, and the 10-year U.S. Treasury yield also rose to a near 19-year high, driving a repricing of long-term borrowing costs globally.

Domestic factors in Japan further amplified pressure on the bond market. The Bank of Japan raised its benchmark interest rate last Friday and hinted it may continue tightening monetary policy, but did not specify the pace of future action. In addition, the Japanese government is considering raising its medium-term defense budget target to 3.5% of GDP, intensifying market concerns about fiscal expansion and rising debt financing costs.

Analysts believe Japan has long been an important anchor for the global low-interest-rate environment. As Japanese government bond yields continue to rise, carry trades that rely on low-cost yen funding may face adjustment, potentially further exacerbating volatility in global asset prices.